Payroll Tax Debate Aftershocks Will Be Felt Strongly By Latinos

Congress has a lot on its agenda when it reconvenes next week. One of the most closely watched items will be the extension of the payroll tax holiday for all of 2012. Recall the pre-Christmas drama surrounding this issue: while there was bipartisan agreement to extend the stimulative tax break on payrolls through the end of 2012, there was caustic disagreement over how to pay for it. Senate Democrats pushed for a surtax on incomes in excess of $1 million, while Republicans refused to consider tax increases of any kind and wanted to realize the savings through spending cuts.

The tiniest of compromises was agreed upon in the form of a two month extension and a promise to continue the conversation this year. That debate has begun again in earnest. Politico reports that Republicans are proposing to find $24 billion in savings by changing a law that allows undocumented workers to claim the Additional Child Tax Credit. Under current tax law, workers that have an Individual Taxpayer Identification Number, but not a social security number, are allowed by the IRS to claim a tax credit for their children, who are often American citizens. This refundable tax credit is claimed by the poorest of working families: those that make about $21,000 a year.

Cutting the credit for undocumented workers may be great politics in the very short term for some in an election year, as it will allow them to look both tough on immigration and frugal, but this is terrible policy and will ultimately prove to be bad politics as well.

Why It�s Bad Policy

If the undocumented workers who claim this child credit are denied it, they will effectively see a few hundred dollars evaporate from their incomes. It is important to stress that this credit is available only to those with very low incomes who are therefore most likely to spend it. This is a group that probably does not have the luxury of saving or investing their tax refund. Consumer spending is vital to our recovery, and any clear hindrance of it will end up costing us more than it saves us.

By making paid, taxable work less appealing to families with children, we would inevitably be encouraging people to work off the books, so to speak. As it stands, this group of workers contributed $7 billion to Medicare and Social Security though payroll taxes in 2010. If these workers find no personal benefit to paying taxes, they may find it more attractive to work only for cash, and we all lose their tax dollars.

Why It�s Bad Politics

The Hispanic community is the fastest growing voting bloc in the U.S. If the GOP and a few nervous Democrats (e.g. Claire McCaskill, the Democratic Senator from Missouri who is facing a difficult re-election this year) choose to pursue policies that disproportionately hurt immigrants, they will weaken their appeal to the Hispanic community as a whole. While Hispanic voters are a reliably Democratic voting bloc (67% identify with or lean towards the Democratic Party), Republicans are foolish to ignore this large and growing group.

Every election is effected to some degree by the enthusiasm of the electorate. At the moment, Hispanic voters are not paying close attention to the race. According to Pew, 56% of them have given little or no thought to the race. If Congress strips the ACTC from poor, working Latino families, it is likely Hispanics as a whole will have reason to be more engaged in the election drama.

Although it seems that the GOP has a lot to lose by targeting immigrants with this policy change, Democrats face a perilous choice as well. If they are viewed as defending undocumented workers at a time of high unemployment, they risk alienating working class voters in general.�Despite the political risk to Democrats, however, they should still fight to keep the credit. �They may be able to attenuate the claim of being pro-illegals by claiming that they are actually pro-child and pro-family.

Finally, the savings generated from this policy change will fall squarely on the shoulders of the very children the policy was originally intended to help. We as a country do ourselves no favors by taking money away from some of the youngest, poorest Americans.

The opinions contained in this column are solely those of the writer.

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Berkshire Hathaway Shares — 3 Pros, 3 Cons

As expected, Warren Buffett had some great zingers at Berkshire Hathaway’s (NYSE:BRKA) annual shareholders meeting.� He dissed Johnson & Johnson�s (NYSE:JNJ) $21.5 billion deal for Synthes because it involved too much stock.� Oh, and Buffett said that it would be Congress� “most asinine act” if it did not raise the national debt ceiling (and yes, the institution has had many asinine acts!)

Of course, the hot topic at the event was about the controversy surrounding his former prot�g�, David Sokol, who resigned after the disclosure that he bought shares of Lubrizol (NYSE:LZ) before Berkshire announced the acquisition of the company.� Buffett said it was “inexplicable and inexcusable.�� Yet he did take some of the blame.

However, Buffett made no apologies about the performance of Berkshire.� It is one of the most financially solid companies in the world.

But what about its prospects?� Here�s a look at the pros and cons:

Pros

Buffett magic.� Yes, Warren Buffett is a financial genius.� Because of his investment prowess, he has amassed a fortune of $50 billion.� Along the way, he has made many others fabulously rich.�

While Buffett is disciplined in his approach, he realizes that he must be agile.� To this end, he has invested in highly regulated, capital-intensive businesses like utilities and railroads.� So far, the moves have been spot on.

Smart acquisitions.� With huge amounts of cash flow, Berkshire is nicely positioned for acquisitions.� A couple years ago, the company struck a $44 billion deal for Burlington Northern.� True, there was skepticism, but it has turned out to be a winner.

What�s more, Berkshire�s acquisition of Lubrizol was smart.� The company has good earnings power and a top management team.

Diverse platform.� Berkshire�s portfolio spans many key industries like food distribution, manufacturing, insurance, retail and so on.� The firm is also an all-in bet on the American economy.� And if history is any indication, it remains a good bet.

Cons

Succession. At 80 years old, Buffett still seems like he�s in his prime.� Unfortunately, there will be a time when he will no longer be at the helm.�

With the departure of Sokol, there is even more confusion as to who will eventually succeed Buffett.� At the annual meeting, he did extol his insurance maestro, Ajit Jain.� But it will be nearly impossible to replace someone like Buffett.

Losses.� Berkshire insures for catastrophic losses, such as earthquakes and hurricanes.� So long as there is strong risk management, the returns can be attractive.

But Mother Nature can be brutal.� Just look at the disaster in Japan, with its massive earthquakes and tsunami.� Because of this — as well as the storms in New Zealand — Berkshire suffered $1.67 billion in losses in the first quarter. This may be the first year that the firm will sustain underwriting losses in 10 years.

Organization.� Buffett takes a decentralized approach to managing his many far-flung businesses.� For the most part, it has worked.� But the problems with Sokol are raising concerns.� Should Berkshire have more controls?� Might there be too many potential risk exposures?

Verdict

In the financial crisis, Buffett showed his genius when he made investments in companies like General Electric (NYSE:GE) and Goldman Sachs (NYSE:GS).� The problem is that these investment opportunities are mostly gone.� Thus, over the next few years, returns are likely to be muted.

And yes, there is likely to be distraction from the Sokol affair, which may lead to changes in the organization, and there is still much lingering concern about succession.

When looking at these factors, it looks like the cons outweigh the pros on Berkshire for now.

Tom Taulli�s latest book is �All About Short Selling� and his Twitter account is @ttaulli.� He does not own a position in any of the stocks named here.

China and the death of Latin America

WASHINGTON (MarketWatch) � More than 40 years ago, I first read Eduardo Galeano�s classic, �Open Veins of Latin America.� Yes, it�s the same book that snarky Hugo Chavez presented to President Barack Obama in 2009.

The first sentences of Galeanos�s book remain as starkly comprehensive, and controversial, as ever: �The division of labor among nations is that some specialize in winning and others in losing. Our part of the world, known today as Latin America, was precocious. It has specialized in losing ever since those remote times when Renaissance Europeans ventured across the ocean and buried their teeth in the throats of the Indian civilizations.�

What is most incisive about those comments today, however, is not what they say about the past, most recently about U.S. policies, but how accurately they describe China�s current rapacious interest and plans for Latin America at the beginning of its investment curve. In 2009 some 17% of total Chinese foreign direct investment went to Latin America, 90% in raw materials.

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The growing influx of Chinese wealth has been credited with helping Latin American nations weather the recent financial crisis and expand access to global markets. China has proclaimed its trade and investment policy as an alternate strategy to alleviate poverty in the region.

In fact, China�s policies in Latin America are driven by its own industrial base, whose design is to produce more than its domestic economy can consume, so that the nation can flood the rest of the world with hard-currency-earning exports. In order to accomplish this goal, China must import raw materials.

It is the crudest of beggar-thy-neighbor mercantilism. China buys raw materials and sends them back as competitively manufactured goods. The value-added production from the raw materials extraction process, true to Galeano, is done in China.

Venezuela, Brazil, and Ecuador are positioned to export progressively more oil to China. With respect to minerals, Latin America has an estimated 25% of the world�s reserves of silver, 30% of its tin reserves, and 45% of its copper reserves. Soy, associated vegetable oils, and fishmeal exports to China are booming.

Aside from access to raw materials, China�s interest in the region appears directly to try to take advantage of the spending power of Latin America�s emerging middle class by flooding markets with cheap manufactured goods. Latin America also appears to be a wide-open market for contraband products. Pirated music, CDs, DVDs, and imitations of design clothing and footwear are notable examples.

But if we think of development as a process of diversifying an economy from concentrated assets based on primary products to a diverse set of assets based on knowledge, then China�s easy, unconditional access to Latin America�s raw materials needs to be carefully reconsidered by both the region�s leaders and its citizens.

It�s dangerous enough for Latin America�s economic development that the long-term boom in raw materials usually rewards those who own the land and the capital. This is not a good sign for trying to increase income equality.

Nor is it a healthy sign that China�s raw materials focus, when combined with the flood of cheap manufactured goods, poses other negatives. Commodity markets are notoriously volatile, and the long-term trend for prices is negative. But, most significant, Latin American industries are increasingly being out-competed by China in both Latin American export markets, as well as in Latin American regional markets.

This is the core conclusion of the vast research in �The Dragon in the Room: China and the Future of Latin American Industrialization,� by Kevin Gallagher and Roberto Porzecanski, who argue that market-by-market China�s penetration of world manufacturing markets is exceptionally faster and deeper than Latin America�s on almost any count. Latin American countries are also losing foothold in their own regions and are being all but left behind in high-tech trade in the world economy, they write.

Those trends could accentuate a pattern of specialization in Latin America that holds back the region�s longer-term prospects for any notion of balanced economic development. China�s trade and investment policy, as opposed to its own domestic policies, makes no claims to promote broad-based development. Restraints on corruption are non-existent. Chinese business practices are famous for ignoring discussions of local labor laws or sourcing locally available products.

By design, China will not contribute to knowledge-based, value-added innovation and production in Latin America. Chinese investors are perfectly happy with low levels of education among workers in raw materials industries. Liberalization of labor codes will lag. And investment in extractive industry research and development will be kept in China.

It is difficult not to believe that the Chinese have worked hard to study Chinese-language versions of Galeano�s �Open Veins.� For them the book is not commentary, but rather a �how-to� manual.

How using coupons cut everyday costs

Who wouldn’t want a discount or purchase a product that is on sale? Anyone and everyone love a discount offer, whether it’s a simple and only a small percentage when it means that you can get your favored item at a lesser value. That’s how powerful and important offered coupons are.

All companies, whether in service or product industry, utilizes coupons to generate more sales and product marketing. So, you can definitely find coupons for most of the things that you buy or avail, if not all. It will give you the opportunity to save using coupons every time to purchase or avail a service that you need.

In connection to the latter, of course you will be able to save more money if you are not spending at the usual cost. Those certain products are not in their wholesale or usually retail price making you purchase them in much lesser cost. Therefore, you can save more money.

Moreover, there are available coupons that can be used by online shoppers and there are also coupons for shoppers in stores. Many websites are now offering coupons to shoppers. However, make sure that the website is legitimate if you don’t want to have fake coupons. In addition, most establishments provide coupons to their customers so it’s not hard to get coupons for offline shopping.

Whatever type of coupon deal it may be, the most important thing is that you will save using coupons. It may even happen that when you utilized your coupons, you will only pay a very small amount of your total purchases, which is a great thing to anyone already. So, collect your coupons now!

Want to find out more about Garnier Fructis Coupons, then visit Adrian Bruce’s site on how to choose the best Garnier Nutrisse Coupons for your needs.

5 Stocks Insiders Are Bullish On

When you're analyzing a company you're thinking of investing in, you no doubt look at many different factors. One you may never have considered is insider buying. Here are five companies currently snapping up scads of their own shares, and why it matters.

What insider buying isn't
Just in case there's any confusion, insider buying is not insider trading. Insider trading involves using information not publically available to profit from a stock purchase. It's illegal and can carry a jail sentence. Just ask Martha Stewart.

Insider buying is the practice of top executives buying shares of their own companies. It's very legal, and something we as investors actually want to see corporate executives doing. And in the recent market turmoil, top executives have been on an insider-buying binge.

Shopping till they drop
After the company reported a lower-than-expected quarterly loss, and strong investment banking results helped lift revenue, CEO James Gorman bought 100,000 shares of Morgan Stanley (NYSE: MS  ) . CEO Dan Akerson recently bought 10,000 shares of General Motors (NYSE: GM  ) , demonstrating his confidence that the auto giant truly has staying power after emerging from bankruptcy.

Lou Simpson, a director of Chesapeake Energy (NYSE: CHK  ) , recently purchased 100,000 shares of Chesapeake stock for a trust. Simpson is a confidant of Warren Buffett, making this purchase significant and confidence-inspiring, if for no other reason than that.

Chairman and CEO Fernando Aguirre recently scooped up 133,000 shares of Chiquita Brands International (NYSE: CQB  ) for his family trust, although he also made much smaller sales from his own personal holdings. And Corning (NYSE: GLW  ) CFO James Flaws also got in on the insider-buy act with two recent purchases totaling 75,000 shares.

When executives purchase their own shares, they're staking their personal fortunes to that of their companies', demonstrating corporate confidence as only they can, and hoping you do the same in return.

But back to insider trading
Using insider buys as a corporate-confidence or company-health gauge could be considered the poor man's insider trading. But unlike insider trading, insider buying can be practiced without Wall Street connections and without breaking the law.

It's a given that top executives have unrivalled knowledge of their own companies, so if they're personally investing in the company it's just possible they know something you don't, something positive and actionable. In the end, you really don't need to know precisely what bit of information prompted their purchase. You just need to know they did it and then take appropriate action to benefit from it.

One more thing
Be sure to distinguish between open-market buys and scheduled buys. Many companies engage in scheduled insider buys, but what we're looking for are the open-market variety. Open-market buys signal significantly more bullish intent on the part of the buyer, which is what we're trying to get a read on here. All of the buys mentioned above were open market.

If only Martha had been more Foolish
You don't have to wait for market crises to look for instances of insider buying; it goes on all the time. To research insider buys:

• Go to the SEC's search tool for its EDGAR filing database. Be sure to click the button to include ownership forms.
• When you get into the company filings page, look for documents titled "Statement of changes in beneficial ownership of securities." Here you'll find records of all executive stock purchases and sales.
• You can also get insider buying information from Yahoo! Finance. Simply go to the ticker page of the company you're interested in, scroll down to "Ownership" in the left-hand navigation, and click on "Insider Transactions."
• For more in-depth insider-buying information, you can also subscribe to Form4Oracle.com, a pay website dedicated to the world of insider buying. It offers a two-week, free trial demo.

There's no single factor you should ever completely rely on when it comes to investing. You should always strive for a balanced analysis, vetting a potential investment from many different angles. But when you notice top executives buying shares of their own company, it's something worth paying attention to.

Add the stocks mentioned in this article to My Watchlist, a FREE service of The Motley Fool. It's an easy way to follow the stocks you're interested in. Simply click on any of the links below to get started.

• Click here to add Morgan�Stanley to My Watchlist.
• Click here to add General�Motors to My Watchlist.
• Click here to add Corning to My Watchlist.
• Click here to add Chiquita�Brands�International to My Watchlist.
• Click here to add Chesapeake�Energy to My Watchlist.

Your Fist Is Wider Than The Wellbore at Davy Jones 1

A 4 Inch Fist

 If you want to grasp the challenge of recovering a broken tool near the bottom of McMoRan and Energy XXI�s Davy Jones Gulf of Mexico Shallow Water Ultra Deep well just look at the photo of a typical fist. This one happens to be mine and it measures 4 inches across as you can see on the tape measure.

Now imagine operating a fishing expedition to recover a small part of a broken tool from inside a hole that is even smaller than your fist. The internal diameter of the pipe at Davy Jones 1 is 3 1/2�.  At Davy, the operator is trying to remove part of a broken tool more than five miles below the mud line. Just imagine trying to control this retrieval operation from the rig when the other end of the string is in a tiny hole more than five miles away from you. .  No wonder this is such a delicate operation. 

In case you are asking what a mud motor looks like, we set out in search of an image of one shown below.  The mud  enters  in one end and exits the other under pressure propelling the clean out assembly with a bit on the forward end of it .  This is used in lieu of spinning the entire drill string.   I doubt that this is exactly the design of the tool that failed but it is a typical mud motor.   

 I received the following comments from McMoRan with regard to the image shown:

�During our operation to clean out the DJ hole, the mud motor was screwed into a clean out assembly with a bit on the end (which all together measured about 4� long).  At a depth of about 23,000�, the equipment became lodged in the hole.  We successfully pulled out substantially all of the mud motor, however the small pink piece (on the far right of your picture) broke off.  As a result and as reported on Jan 5, this piece and the approximate 4 foot clean out assembly remained lodged in the hole and that is what we are in the process of retrieving.   So in summary, the entire mud motor was not in the hole when we updated the market Jan 5; just the 4� of clean out assembly and the small piece of the mud motor that broke off.� 

Typical Downhole Mud Motor

There is a huge difference beween trying to retrieve a 4 foot long object from an almost cleaned out wellbore and trying to recover more than 4,000 feet of broken drill string from an uncased hole that has had a major kick.  The delay of several months at Blackbeard East was the result of the operator needing to deal with bent and broken pipe mangled by a kick in the hole. They were successful in recovering 2/3�s of it before pushing the remainder to the bottom of the hole and bypassing it for a short distance before resuming forward drilling to the targeted depth.                         

Remember that down hole operations are conducted in an environment with temperatures in excess of 400 degrees Fahrenheit and at pressures exceeding 20,000 lbs. Therefore, it is not surprising that the mud motor came apart. Over the last two years, logging tools have burned up as MMR and partners are attempting to explore the Ultra Deep frontier. Other measurement sensors have required extensive effort to be made reliable by both Schlumberger and Cooper Cameron. Add mud motors to the future list.  The operation cannot be completed with this flotsam in the wellbore which could pose operational problems if not removed before the well is perforated. 

MMR�s Co-CEO Jim Bob Moffett always says that when there is something to report, we will all hear it from him at the same time.  Message board rumors have been remarkably incorrect in recent weeks as this well is being completed. Often posters that use public message boards are driven by their own concerns over short term option expirations and try to exploit their anonymity for near term personal gain. That can be in either direction with positive or negative comments posted depending on whether the writer owns puts or calls, is long or short this or any other stock.

Tuesday morning, January 17th, 2012 is the scheduled conference call for MMR�s Q4 earnings report. McMoRan is especially generous in answering questions on its quarterly conference calls.  Perhaps by that time, we will have good reports on progress at Davy Jones, as well as Lafitte and Blackbeard East, two other important wells nearing completion of drilling. Separately, I have been assured that the completion procedures for Davy Jones 2 are well underway and this frustrating event at DJ1 is in no way affecting that completion effort set for the second half of 2012.  

Joan E. Lappin CFA          Gramercy Capital Mgt. Corp.

Initiating Coverage Of OptimizeRx Corp. At Outperform With A $5 Price Target

We are initiating coverage of OptimizeRx Corporation (OPRX.OB) with an Outperform rating and $5.00 price target.

Business

Electronic prescriptions, or e-prescriptions (eRx), accounted for just 6% of all drug prescriptions written in 2008. By 2010 that number had grown to approximately 25%, equal to roughly 326 million prescriptions. e-prescriptions are expected to be at the top of the list in terms of growth of all electronic health applications (the broader healthcare IT market is forecasted to grow at a CAGR of 11% through at least 2015) and, according to some estimates, could account for over 90% of all drug prescriptions in just the next few years.

Fueled by recent healthcare reform legislation, the rapid growth in healthcare information technology has created new markets, facilitated growth of others and sprouted a slew of novel technologies and new companies. Allscripts, the largest electronic prescribing provider with almost 100k U.S. physicians using their service, is expected to be a direct beneficiary, as are the handful of other major e-prescribers and complementary service providers. OptimizeRx Corporation (OPRX.OB) is one such complementary service that hopes to capitalize on the swift trend towards e-prescriptions, largely through partnerships with these major e-prescribers and agreements with large drug manufacturers.

OptimizeRx's SampleMD software, which can be integrated into these major e-prescription systems, allows physicians to seamlessly provide drug manufacturer vouchers (i.e. - coupons) simultaneously with an electronic prescription. In addition to the major e-prescription providers, OptimizerRx is also targeting large health care systems (i.e. - multi-hospital/clinic systems) for integration of SampleMD into their respective electronic medical records systems. OptimizeRx generates revenue from drug manufacturers every time a physician prints a respective manufacturer's voucher as well as for every (printed) voucher that is redeemed by the patient. If generated through Allscripts, OptimizerRx passes approximately 40% on to the e-prescription provider. OptimizerRx also receives a one-time set-up fee for every drug that is promoted through SampleMD.

SampleMD may be a win-win for all participating stakeholders. Drug companies' sales representatives are increasingly being shut out of face-time with physicians (especially in closed hospital networks), reducing the opportunity for conventional "sampling" (i.e. - providing free drug samples, drug reps' ace-in-the-hole) and, as a result, severely weakening big-pharma's marketing muscle. SampleMD, essentially allows drug companies to continue to sample (i.e. - a coupon in lieu of a physical sample) to physicians without the rep face-time - the cost of SampleMD can also be significantly less than conventional sampling, an added bonus for drug companies. The patient benefits from prescription cost savings when they redeem the vouchers at their pharmacy. SampleMD gives e-prescribers (i.e. - Allscripts, et al.) a high-margin source of revenue with the added kicker of an enhancement to their product. And finally, hospitals and physician practices benefit with SampleMD as a result of helping patients lower their out-of-pocket healthcare costs without the time, hassle and expense associated with their physicians heeding drug reps' sales calls.

OptimizerRx recently entered into an agreement with Allscripts for integration of SampleMD into the e-prescriber's system - the initial version of the integrated system launched in December 2010. In addition, the company has agreements with several health care systems to integrate SampleMD into their electronic medical record (EMR) systems. OptimizerRx currently has contracts with eleven major pharmaceutical companies, covering 45 brand name drugs. OptimizeRx's near-term strategy is to further refine the software, partner with additional e-prescribers, increase the number of installations at hospitals/clinics and significantly grow the number of drugs eligible for vouchers through SampleMD. The company is also in the midst of ironing out legal and compliance hurdles which have slowed the initial launch of SampleMD.

As the SampleMD launch is still in its infancy, revenue to-date has largely been from set-up fees (voucher printing and redemption revenue has been minimal). The expectation is that sales should significantly ramp as revenue is generated from voucher printing and redemptions - which should pick up once the integration with Allscripts is completed and the installed base expands. Sales will be handled by a small internal sales team. As OptimizeRx's cost base is relatively low and largely fixed, depending on the actual rate of revenue growth, profitability could materialize fairly rapidly.

Outlook

Revenue was $200k and $594k through the first three and six months of 2011. Revenue to-date has been largely from set-up fees (voucher printing and redemption revenue has been minimal). The expectation is that sales should significantly ramp with growth in revenue from voucher printing and redemptions - which should pick as SampleMD's distribution is further expanded, especially as it relates to Allscripts' user base. Sales will be handled by a small internal sales team. OptimizeRx's cost base is relatively low and largely fixed - this coupled with what we model to be quickly ramping revenue, means profitability could materialize in short order.

OptimizeRx continues to make enhancements to the software, with their 3.0 version expected to have capabilities such as simplified access to formulary information, greater search functionality and the ability to schedule meetings with drug reps. The 3.0 version is also expected to have the ability to integrate within electronic health record and electronic medical record systems (the current version only integrates with e-prescription systems and is available as a stand-alone desktop system). While these enhancements are currently under development and not expected to be fully functional for about 6 months, OptimizeRx expects the current version to be sufficient to continue to facilitate the further roll-out of SampleMD throughout the Allscripts user base - which is by far their greatest near-term opportunity.

Revenue

Our revenue model is based on certain assumptions including the rate of growth in the number of subscribers using SampleMD, the number of drugs promoted through SampleMD and their respective aggregate prescription volumes, the number of voucher prints per physician and the rate of voucher redemptions. As SampleMD is still very much on the front of its roll-out, there is little to anchor on relative to any of these metrics which presents significant challenges in forecasting revenue.

Relative to the drugs that are being promoted through SampleMD, as OptimizeRx has not disclosed the names of these drugs, it is impossible to comfortably gauge related prescription volumes (i.e. - we do not know how if these are top-20 drugs or top-200 drugs). This makes it that much more difficult to forecast potential physician coupon print and patient redemption volumes - revenue from which is expected to account for the majority of net sales in 2012 and beyond (we model it to account for almost 100% of revenue by 2014). And even if we did know which particular drugs were being promoted, until there's some available historical information related to print and redemption rates, revenue forecasting will be tricky.

With only limited information relative to revenue driver metrics and SampleMD still on the front end of commercialization we feel it is prudent to be conservative on our model inputs. The major inputs to our model along with our assumptions are:

• SampleMD Users (i.e. - prescribers): This currently stands at about 20k. Per our discussions with the company, management expects this to grow to 200k+ over the next 12 months, largely driven by deeper penetration of Allscripts' user base and agreements with other e-prescribers for integration of SampleMD into their respective systems. We more conservatively model ~ 100k users by the end of 2012. Our model assumes SampleMD does not hit the 200k users mark until the end of 2014.
• Drugs Promoted: This currently stands at about 45 drugs. OptimizeRx hopes to have 100+ drugs onboard within the next 12 months. We more conservatively model 74 drugs at the end of 2012. Our model assumes the 100-drug mark is not reached until Q3 2014.
• Voucher Prints Per Physician: This, along with voucher redemption rates, are not only the most difficult to estimate, they are also likely the most influential driver of revenue (given that they have a significant multiplier / leverage effect). This metric could also be highly influenced by the number of drugs promoted and, more importantly, the prescription volumes (i.e. - popularity of the drug) of those particular drugs. Our model uses a potentially extremely conservative estimate relative to prints per physician. We assume initially this is only 1 coupon printed per day for every 50 physicians that have SampleMD - said another way, if 50 physicians have SampleMD, our model assumes only 1 coupon is printed among them each day. Even in later years our assumptions remain arguably very conservative. In 2014 we assume 1 coupon is printed per day for every 7 physicians. To emphasize how much leverage this metric has in our model, if we assume 1 coupon is printed per day for every 5 physicians in 2014 (instead of our currently modeled 1 for every 7), our estimated 2014 net revenue figure moves from $32.9MM to $48.3MM.
• Redemption Rate: Management has indicated that voucher redemption rates (i.e. - the % of printed vouchers that are ultimately redeemed by a patient) are running at about 20%. We more conservatively model a static (i.e. - no improvement in later years) 10% redemption rate.

Near-Term Revenue Forecast

We model little in the way of print and redemption revenue through the remainder of the current year. We look for $684k in total revenue for the second half of 2011 ($294k in Q1, $389k in Q2), with 65% of that coming from new drug set/up fees.

In 2012, with assumed deeper penetration of Allscripts' user base, new deals with other e-prescribers, a moderate number of additional drugs being promoted and a slight uptick in the voucher print rate (to 1 coupon printed per day for every 22 prescribers using SampleMD), revenue from voucher prints and redemptions should begin to become more meaningful. We model net revenue of $4.9 million in 2012, with 90% ($4.4 million) of that coming from voucher prints and redemptions. All of our net revenue figures are net of an estimated 40% royalty to Allscripts for print / redemption revenue related to vouchers originating from Allscripts' system users.

Mid-Term Revenue Forecast

In 2013 and 2014 we model revenue of $18.2 million and $32.9 million, reflecting only very modest assumptions relative to growth in the number of drugs promoted (from 74 at 2012 year end to 85 in 2013 and 105 in 2014) as well as prints per physician (from 1 for every 22 prescribers per day in 2012 to 1 for every 11 in 2013 to 1 for every 7 in 2014). We think it bears repeating that due to the leverage effect, if actual voucher print rates prove to be only very slightly better than our estimates, OptimizeRx's actual revenue (as well as net income and EPS) could be significantly greater than our estimates. We will update our model regularly as more information becomes available over the next several months.

EPS

The business model should be super scalable and as it relates to operating expenses, OptimizeRx runs fairly lean. SampleMD will continue to be enhanced with additional functionality and management indicated that they may slightly scale up marketing / sales. Slightly more capitalized web development costs will also begin to amortize going into 2012 (although amortization should remain relatively minimal as total capitalized intangibles was only about $1.4MM at 6/30/2011 with most amortizing straight-line over 17 years). While we think this may push SG&A up very modestly through 2012, based on our model, OptimizeRx could see positive net income by the end of next year. We see no reason why OptimizeRx could not continue to gain even greater operating leverage in the following years. We model EPS of ($0.10) in 2011, $0.03 in 2012, $0.22 in 2013 and $0.31 in 2014.

Valuation

As the launch of SampleMD, OptimizeRx's flagship product, is still in its infancy, using P/E ratio based on a near-term EPS estimate would unfairly penalize valuation. Instead we think it is more appropriate to use our EPS estimate for 2014, at which time SampleMD should be fully commercialized and OptimizeRx's financials should more accurately reflect the earning power of the company.

As there are no publicly traded direct competitors to OptimizeRx to use for comparable P/E multiples, we think it is appropriate to use the average valuations of a handful of indirect competitors to price OPRX. Our comparable base is represented by MDRX, MDAS, QSII, ATHN and ESRX, all of which operate in the healthcare information technology space and most of which are involved to some extent in e-prescription services or EMR / EHR.

These five companies currently trade at an average of 16.1x analysts' estimated 2014 EPS. Applying this multiple to our 2014 EPS estimate of $0.31 values OptimizeRx at almost exactly $5.00 per share. Although our valuation could change based on potential future changes to our model, as it is now, we value OPRX at $5.00 / share. Based on the discrepancy between what we calculate as fair value and OPRX's current $1.13 market price, we feel the shares are significantly undervalued and are initiating coverage with an Outperform rating.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Will Goldman Sachs Lead Again?

During the last bull market from late 2002 to late 2007, Goldman Sachs (GS) was a market leader. On most days, all you had to do was look at how Goldman was doing and you knew that the overall market would soon follow in the same direction. During the current bull market, however, Goldman has been anything but a market leader; as the months pass, Goldman's price action seems to get less and less attention.

The charts below highlight Goldman's current funk. Over the past six months, the stock has gone nowhere. Today's move lower puts it at the exact same level it was trading at last October. Over the same time period, the S&P 500 has trended nicely higher and is up 10%.

[Click to enlarge]

The relative strength chart of Goldman versus the S&P 500 going back to 2000 shows just how different the stock's action has been during the current bull market versus the last bull. When the line in the chart is rising, Goldman is outperforming the S&P 500, and vice versa for a declining line. From 2002 to 2007, the stock outperformed the market as both were rising. At the outset of the current bull market, Goldman outperformed the S&P as well, but the stock hit a wall in late 2009, and it has been underperforming ever since. Now investors are starting to wonder when or if the stock will ever be a leader again.

Big Pharma’s Emerging Markets Foray Hits Roadblocks

Large pharmaceutical companies�have�been touting the opportunities in emerging markets as the cure to offset the slower growth in Western countries, where the big drugmakers are losing patent protection on many of their blockbuster drugs. The loss of marketing exclusivity has been compounded by the well-publicized budget pressures in European countries, where governments are cutting the prices they�re willing to pay for medications.

But the heavyweights of the drug business are discovering that conquering the pharmaceutical markets in countries such as China, Russia, Brazil and Turkey isn�t easy. Just look at the results recently reported by several companies. For instance, AstraZeneca (NYSE:AZN) saw emerging market sales growth drop to 7% in the third quarter from 10% the second and 13% in the first, hit by an upset in Brazil, where generics have arrived early for key drugs Crestor and Seroquel.

And GlaxoSmithKline (NYSE:GSK) has seen its prices squeezed in Turkey and Russia, although company CEO Andrew Witty told Retuers that he remains an �extreme bull� on emerging markets. �This is a very fast-growing volume environment … (but) they are not immune from pressure,” he added.

Those pressures are coming from governments that also seek to limit spending on medications, as well as heightened scrutiny of company business practices. For instance, the U.S. Justice Department has mounted an investigation under the Foreign Corrupt Practices Act to see if drugmakers are offering overseas bribes, and Britain, too, has a new Bribery Act that covers overseas payments in a similar way.

In April, Johnson & Johnson (NYSE:JNJ) paid $70 million to settle U.S. charges that it paid bribes and kickbacks to win business in Greece, Iraq, Poland and Romania, in the first such settlement by a big drug company. AstraZeneca also is being investigated for its conduct in several countries.

Despite the obstacles, it�s clear why Big Pharma is stepping up efforts in the emerging markets. By 2015, sales in these countries are expected to account for 28% of global pharmaceuticals spending, up from 12% in 2005, while the U.S. and Europe combined will shrink to 44% from 61%, according to IMS Health.

The majority of sales in emerging markets come from so-called branded generics — off-patent medicines that cost more than those made by local companies. People are willing to pay more for these drugs because they are perceived to be of higher quality than those made by local companies.

This strategy of relying on brand names as trusted products won�t go on much longer, according to Tim Race, an industry analyst at Deutsche Bank. “It works in some markets where you’ve got pretty shoddy regulation,� Race told Reuters. ��But the Chinese and Brazilians and others are quite quickly coming online with better regulation, creating better trust in local products.”

It�s clear, however, that long-term emerging markets represent a bonanza for drug companies. That�s because one of the downsides of economic growth is an increase in disease prevalence due to people living longer and lifestyle changes. Consider China –�in that country alone, 92 million people have diabetes and 148 million have pre-diabetes, according to the New England Journal of Medicine. China also has 100 million people suffering from hypertension, and the country’s lung cancer rates are among the highest in the world.

 

LPL Restructures Debt, Will Start Paying Dividends

LPL executives celebrated their 2010 IPO.

LPL Investment Holdings Inc. (LPLA), parent company of the largest independent broker-dealer, LPL Financial, announced Monday that it has successfully refinanced its long-term debt, and that it will pay a special $2 dividend for shareholders in May, with the possibility of further dividend payments in the second half of the year. 

CFO Robert Moore said the refinancing will produce annualized savings to the company of about $10 million and “increased financial flexibility,” though he said that considering possible acquisitions is “just a portion of that flexibility,” and that the announcement is “not meant to signal that we are now in acquisition mode.”

(In January 2012, LPL announced it would acquire wealth management and reporting firm Fortigent.)

Specifically on the debt refinancing,  LPL  has established a new Term Loan A of $735 million maturing on March 29, 2017, and a new Term Loan B of $615 million maturing on March 29, 2019. It will also maintain a revolving credit facility of up to $250 million. Moore (left) said the new agreements reduce interest expenses, extends maturity dates of the debt, “including our revolver which was to expire in 2013,” and also allows for “the alteration of many covenant structures whose roots go back to 2007.” The new debt structure, he said, gives LPL the ability to continue its growth; being able to do so at a lower cost was “very compelling.”

On the dividend front, LPL will pay a special $2/share dividend, its first, on May 25, 2012 to all shareholders of record as of May 15, 2012. In addition, LPL plans to pay regular quarterly dividends, initially up to $0.12 ($0.48 annually), in the second half of 2012.  However, Moore was quick to point out that those quarterly dividends would still need to be approved by LPL’s board.

Moore said the restructuring and dividend reflected the “primary component to our capital management  strategy." That is, to “invest in organic growth of the business; provide ‘oxygen’ capital" for possible acquisitions; conduct share repurchases to offset any dilution from its option grant programs for management and advisors; debt repayment; and dividends. “We’ve become much more clear about how we use those levers,” Moore said, with Monday’s announcement marking a “key milestone in that process.” The debt restructuring and dividend payment arose out of a “fairly large balance of cash on our balance sheets” from cash flow of the business and from LPL’s IPO in November 2010, which Moore said yielded a set of tax refunds.

With the restructuring, which he characterized as a “one-for-one takeout of debt, so no incremental debt was created,” LPL decided to use "a portion of the excess cash for the $2/share dividend,” or about $230 million, which Moore said would “take free cash down to about $300 million, which is consistent with the size of our business and its cash flow needs.”

Moore concluded by saying the actions “when taken together, constitute a much more firmly established approach to our capital management effort—ability to invest in the business organically; to attract new advisors; enhance growth of existing advisors” and invest in technology.

4-Star Stocks Poised to Pop: Mattel

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, toy maker Mattel (Nasdaq: MAT  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Mattel's business and see what CAPS investors are saying about the stock right now.

Mattel facts

Headquarters (Founded)	El Segundo, Calif. (1945)
Market Cap	$11.0 billion
Industry	Leisure products
Trailing-12-Month Revenue	$6.3 billion
Management	CEO Bryan Stockton (since January 2012) CFO Kevin Farr (since February 2000)
Return on Equity (Average, Past 3 Years)	26.2%
Cash/Debt	$1.4 billion / $1.6 billion
Dividend Yield	3.9%
Competitors	Hasbro JAKKS Pacific LEGO A/S

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 87% of the 708 members who have rated Mattel believe the stock will outperform the S&P 500 going forward. ��

Earlier this week, one of those Fools, dgfsoccer, highlighted Mattel as a solid income opportunity: "Awesome dividend with several tried and true lines that are very popular with kids. Increases in net income and revenue are exciting as well as around 10% annual growth predictions for the next few years. "

Of course, despite its four-star rating, Mattel may not be your top choice. If that's the case, we've compiled a special free report for investors called "Secure Your Future With 11 Rock-Solid Dividend Stocks," which uncovers several other juicy income opportunities. The report is 100% free, but it won't be around forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the new TrackPoisedTo CAPS account.

FOMC Statement, Translated

Tickerguy's translation of the FOMC statement:

Release Date: January 27, 2010

For immediate release

Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating.

We used the crooked durable goods numbers which were later admitted to be a "statistical error", and what's better, we think that nearly a million people leaving the labor force last month was a good thing - not bad.

Don't worry, you don't need jobs - government handouts work just fine.

Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.

Households are spending the handed-out money. However, credit is and continues to contract as households are rejecting the continual bending over they're taking by the banks, especially on their credit cards.

Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls.

Businesses are buying boxes to give to their employees so they can box up their stuff as they're fired and shown the door. We count this as both "equipment" and "software".

Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth.

We buy futures in the overnight every time the market threatens to go down. Oh wait, we're not supposed to talk about that, right?

Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

You're going to take it in both holes and like it.

With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.

Deflation is winning. Rates are still zero which denotes an emergency. But after two years, saying that really pisses people off, especially when we just got skewered by Paulson in sworn testimony (that bastard!) who said we printed money.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The emergency is not over.

To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

We bought $1.25 trillion of securities in a box but when we opened it we found that it was in fact dead and decomposing fish. The old saying about "throwing good money after bad" comes to mind.

In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit wil be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.

We're shutting all the crap down - it didn't work.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.

Tom Hoenig is the only one with a brain. The rest of us like lying to the public - "its all getting better but we still have an emergency!"

Yeah.

LuxeYard, Inc. (PINK:LUXR) Wades Into Surprisingly Underserved Waters

Move over women - the men need to use the computer (or tablet) for a while. What for? To visit the e-commerce site LuxeYard, Inc. (PINK:LUXR). The website has officially added men's fashion and accessories to the menu, opening up a whole new world of revenue potential.

It's not a bad decision either. Though women's apparel makes up the bulk of fashion sales, that market is also pretty well saturated. (LUXR owns a pretty nice piece of that pie, but it's tough to grow market share.) Men's fashion, on the other hand, may be a smaller piece of pie overall, but it's a vastly underserved market... and sites like QC.com and Jos. A Bank just aren't meeting the full - and growing - need for a curated fashion experience.

LuxeYard is starting out with names like Givenchy, Yves Saint Laurent and William Rast, MB999, Joe's Jeans, Ben Sherman, Shirt by Shirt, King Baby Studio, Madisonpark Collective, Jacob Holston. More brands could be added as the traffic and demand grows.

And don't think for a minute that men aren't up for this kind experience. In March, a report from Mintel announced that 25% of men explicitly said they'd like to dress better, but these same men specficualy sais they needed guidance to do so. Male shoppers also said they struggle when choosing their own clothing themselves, with 17% of males noting their last e-commerce clothing purchase was made by someone else.

There are two take-aways from the numbers. One of them is the fact that a lot of males (more than 80%) are actually choosing their own clothing when shopping online, which means LuexeYard is taking aim at the right target market. The other take-away is simple too... men know they need help, and with LUXR streamlining their choices, this nee venue is bound to be a hit.

There's really no telling what kind of revenue this could mean for the $96 million company; luxeyard.com is still getting its bearings with women's fashion and furniture sales. It's apt to be a winner though, for the company, and by extension, for investors.

13 Companies Increasing Dividends

Things aren�t looking too good in Europe, and renewed fears over an imminent recession in the region weighed heavily on global equities this week. The euro zone debt-induced selling took domestic stock stocks down about 3% this week, as traders tried to reduce exposure to the riskiest assets affected by the region�s woes.

The gloomy skies over Europe might portend more pain for the region, but the euro zone�s looming problems didn�t stop the parade of companies spreading the wealth among shareholders. This week, we saw some very big names boosting payouts, including a home improvement giant, an athletic footwear icon and several industrial behemoths.

This week, these 13 companies made it onto our Companies Increasing Dividends list:

Biologic and medical products maker Baxter International (NYSE:BAX) gave shareholders a fresh dose of fiscal plasma, lifting its quarterly dividend to 33.5 cents per share from 31 cents. The new payout transfusion will be conducted Jan. 4 to shareholders of record as of Dec. 9. The new dividend yield, based on the Nov. 15 closing price (the day the dividend was announced) of $54.57, is 2.46%. Late last month, Baxter reported both better-than-expected revenue and earnings for the third quarter.

Brown-Forman (NYSE:BF.B) is an alcoholic beverage company that makes iconic American brands such as Jack Daniel�s and Southern Comfort. This week, the company raised its shot glass to shareholders, drinking up a new dividend of 35 cents per share vs. the 32 cents paid last quarter. The new dividend is payable Dec. 27 to shareholders of record Dec. 6. The new dividend yield, based on the Nov. 17 closing price of $74.54, is 1.88%.

Diversified insurance giant Hanover Insurance Group (NYSE:THG) moved to ensure investors of its fiscal health, raising its quarterly dividend to 30 cents per share from 27.5 cents. The increased payout will be delivered on Dec. 13 to shareholders of record as of Nov. 29. The new dividend yield, based on the Nov. 15 closing price of $37.11, is 3.23%. Earlier this month, the company posted a narrower-than-expected quarterly loss on increased policy sales.

    View All  

Mega do-it-yourself home improvement retailer Home Depot (NYSE:HD) supplied the fiscal materials to renovate shareholders� portfolios, upping its quarterly payout by four cents to 29 cents per share. The refurbished dividend will be paid on Dec. 15 to shareholders of record as of Dec. 1. The new dividend yield, based on the Nov. 15 closing price of $38.07, is 3.05%. Along with the dividend boost, Home Depot said third-quarter net income rose 12% as consumers spent more on home-improvement projects and repairs in the wake of Hurricane Irene.

Automotive and building equipment maker Johnson Controls (NYSE:JCI) turned up the meter on its quarterly dividend, boosting its payout to shareholders by 13% to 18 cents per share. The new dividend will be paid on Jan. 3 to shareholders of record as of Dec. 9. The new dividend yield, based on the Nov. 16 closing price of $31.10, is 2.32%. Last month, the company reported a 25% increase in fiscal Q4 profit to 75 cents per share; however, that number fell just shy of Wall Street expectations.

Diversified natural resource and energy company MDU Resources Group (NYSE:MDU) raised its quarterly dividend to 16.75 cents per share from 16.25 cents. The new dividend yield, based on the Nov. 17 closing price of $20.56, is 3.26%. It was the 21st consecutive year that MDU Resources has increased its common stock dividend. The company has paid dividends for 74 consecutive years going back to 1937.

Oil and gas drilling equipment maker National-Oilwell Varco (NYSE:NOV) pumped out a new quarterly dividend of 12 cents per share from 11 cents. The new payout will be made on Dec. 16 to shareholders of record as of Dec. 2. The new dividend yield, based on the Nov. 17 closing price of $67.87, is 0.71%. In October, the company reported outstanding Q3 earnings that jumped nearly 25% year-over-year on an increase in all of its oil service segments.

Footwear and sports apparel maker Nike Inc. (NYSE:NKE) laced up a 16% boost in its quarterly dividend, upping its payout to 36 cents per share. The new dividend yield, based on the Nov. 17 closing price of $91.89, is 1.57%. The new dividend swoosh will arrive in investors� accounts on Jan. 3 to shareholders of record as of Dec. 5. The increase marks the 10th straight year of dividend increases for the iconic athletic wear firm.

Regional natural gas and energy distributor New Jersey Resources (NYSE:NJR), which operates in states from the Gulf Coast to New England, pumped up its quarterly payout by 5.6% to 38 cents per share. The new dividend will be paid on Jan. 3 to shareholders of record on Dec. 15. The new dividend yield, based on the Nov. 16 closing price of $47.17, is 3.22%.

Royal Gold Inc. (NASDAQ:RGLD) is a company that owns interest in gold and precious metals mining companies. The company buffed out its quarterly payout to shareholders by increasing the shine on its dividend by 36%. The new dividend of 15 cents per share is payable Jan. 20 to shareholders of record as of Jan. 6. The new dividend yield, based on the Nov. 16 closing price of $79.61, is 0.75%. The company currently has investment and royalty interest in 37 active precious metals mines.

Sysco Corp (NYSE:SYY) is a food distributor to restaurants and hotels, but this week it provided some fiscal nourishment to shareholders. The company increased the portion size on its quarterly payout, by a penny to 27 cents per share. The new dividend is payable on Jan. 27 to shareholders of record as of Jan. 6. The new dividend yield, based on the Nov. 16 closing price of $27.52, is 3.92%. Along with the dividend increase, Sysco said it will buy back up to 20 million of its common shares. The company said it launched the share repurchase program as part of an ongoing goal to keep the number of diluted shares outstanding relatively constant. The company has an estimated 586 million shares outstanding.

The dividend train keeps on rolling for Union Pacific (NYSE:UNP) shareholders. This week, the company announced its second dividend increase this year, upping its quarterly payout by 26% to 60 cents per share. The new dividend is payable Jan. 2 to shareholders of record as of Nov. 30. The new dividend yield, based on the Nov. 17 closing price of $100.92, is 2.38%. Dividends per share in 2011 have increased a total of 58%. Union Pacific has an outstanding track record of 112 consecutive years of paying dividends.

Natural gas producer and transportation giant Williams Companies, Inc. (NYSE:WMB) expanded its pipeline to shareholders, raising its quarterly dividend by 25% to 25 cents per share. The increased payout will be made on Dec. 27 to shareholders of record as of Dec. 9. The new dividend yield, based on the Nov. 17 closing price of $30.29, is 3.3%. The new dividend is double the amount paid in December 2010. The company has paid a common stock dividend every quarter since 1974.

As of this writing, Jim Woods did not hold a position in any of the aforementioned stocks. For more payout winners, see previous weeks’ lists of Companies Increasing Dividends.

FuelCell Energy Whiffs on Revenues

FuelCell Energy (Nasdaq: FCEL  ) reported earnings on June 5. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended April 30 (Q2), FuelCell Energy whiffed on revenues and missed expectations on earnings per share.

Compared to the prior-year quarter, revenue shrank significantly and GAAP loss per share dropped.

Margins grew across the board.

Revenue details
FuelCell Energy logged revenue of $24.2 million. The three analysts polled by S&P Capital IQ predicted revenue of $33.5 million on the same basis. GAAP reported sales were 16% lower than the prior-year quarter's $28.6 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at -$0.06. The three earnings estimates compiled by S&P Capital IQ predicted -$0.05 per share. GAAP EPS were -$0.06 for Q2 compared to -$0.24 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 0.8%, 3,880 basis points better than the prior-year quarter. Operating margin was -32.1%, 3,720 basis points better than the prior-year quarter. Net margin was -34.3%, 3,550 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $44.8 million. On the bottom line, the average EPS estimate is -$0.04.

Next year's average estimate for revenue is $154.2 million. The average EPS estimate is -$0.16.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 588 members out of 713 rating the stock outperform, and 125 members rating it underperform. Among 119 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 64 give FuelCell Energy a green thumbs-up, and 55 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on FuelCell Energy is outperform, with an average price target of $2.83.

Over the decades, small-cap stocks, like FuelCell Energy have provided market-beating returns, provided they're value priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.

• Add FuelCell Energy to My Watchlist.

A Hidden Reason That the Future Looks Bright for ESCO Technologies

Here at The Motley Fool, I've long cautioned investors to keep a close eye on inventory levels. It's a part of my standard diligence when searching for the market's best stocks. I think a quarterly checkup can help you spot potential problems. For many companies, products that sit on the shelves too long can become big trouble. Stale inventory may be sold for lower prices, hurting profitability. In extreme cases, it may be written off completely and sent to the shredder.

Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized.

Is the current inventory situation at ESCO Technologies (NYSE: ESE  ) out of line? To figure that out, start by comparing the company's figures to those from peers and competitors:

Company	TTM Revenue Growth	TTM Inventory Growth
ESCO Technologies	14.2%	14.8%
Honeywell International (NYSE: HON  )	16.3%	8.5%
CLARCOR (NYSE: CLC  )	12.8%	12.5%
Chart Industries (Nasdaq: GTLS  )	39.3%	41.5%

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. TTM = trailing 12 months.

How is ESCO Technologies doing by this quick checkup? At first glance, OK, it seems. Trailing-12-month revenue increased 14.2%, and inventory increased 14.8%. Over the sequential quarterly period, the trend looks healthy. Revenue grew 8.2%, and inventory dropped 1.8%.

Advanced inventory
I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)

A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."

On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.

What's going on with the inventory at ESCO Technologies? I chart the details below for both quarterly and 12-month periods.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FQ = fiscal quarter.

Let's dig into the inventory specifics. On a trailing-12-month basis, raw materials inventory was the fastest-growing segment, up 26.9%. On a sequential-quarter basis, raw materials inventory was also the fastest-growing segment, up 2.9%. ESCO Technologies seems to be handling inventory well enough, but the individual segments don't provide a clear signal. ESCO Technologies may display positive inventory divergence, suggesting that management sees increased demand on the horizon.

Foolish bottom line
When you're doing your research, remember that aggregate numbers such as inventory balances often mask situations that are more complex than they appear. Even the detailed numbers don't give us the final word. When in doubt, listen to the conference call, or contact investor relations. What at first looks like a problem may actually signal a stock that will provide the market's best returns. And what might look hunky-dory at first glance could actually be warning you to cut your losses before the rest of the Street wises up.

I run these quick inventory checks every quarter. To stay on top of the inventory story at your favorite companies, just use the handy links below to add companies to your free watchlist, and we'll deliver our latest coverage right to your inbox.

• Add ESCO Technologies to My Watchlist.
• Add Honeywell International to My Watchlist.
• Add CLARCOR to My Watchlist.
• Add Chart Industries to My Watchlist.

Fed Comments Boost ETFs From Early Losses

Exchange traded funds trimmed earlier losses as the Federal Reserve offered upbeat comments on the U.S. economy; but major indexes remained in the red as Japan continued to struggle with nuclear and natural disasters. The Dow Jones Industrial Average finished down 1.2% Tuesday.

• Federal Reserve policymakers kept ultra-low interest rates and stimulus spending in place Tuesday amid global crises in the Middle East and Japan and on high but falling unemployment at home. The Fed held rates at historic lows and stuck to a $600 billion stimulus plan in an effort to spur growth, as it pondered events in the Arab world that have pushed up oil prices and a developing nuclear crisis in quake-hit Japan. “The economic recovery is on a firmer footing, and overall conditions in the labor market appear to be improving gradually,” the Federal Open Market Committee said in a statement. The Direxion Daily 20+ Year Treasury Bull 3x Shares ETF (TMF) rose 4.55% Tuesday.
• Asian shares tumbled Tuesday as Tokyo’s stock benchmark plunged 10.6% on selling amid worries a possible nuclear catastrophe would further complicate and endanger the nation’s recovery from its worst-ever earthquake on record. The Nikkei Stock Average finished 10.6% lower at 8,605.15 after sliding more than 14% earlier in the day, pressured by news of explosions at Fukushima Daiichi nuclear power plant’s No. 2 and No. 4 reactors, on top of previous blasts at the No. 1 and No. 3 reactors. Coming on top of a 6.2% fall Monday, the performance is the Nikkei’s worst since its Oct. 16, 2008, drop of 11.4%, in the aftermath of the global financial crisis. The iShares MSCI Japan Index ETF (EWJ) finished the day flat.
• Gold futures fell to their lowest level in nearly four weeks as most major assets — except for the U.S. dollar — were seeing red after the nuclear crisis in Japan deepened. Gold fell as stock markets from the U.S. to countries in Asia and Europe suffered heavy losses as a new blast and fire rocked a Japanese nuclear plant, where workers were already trying to avert a meltdown. The day’s broad market slump is due to “liquidation of any risk asset, and when it comes to metals, that also takes away Asian buying, a very important component” of the trade, said Bill O’Neill, a principal with Logic Advisorsin New Jersey. The Market Vectors Gold Miners ETF (GDX) was down over 2% yesterday.
• Oil futures settled lower Tuesday, their largest one-day drop since October, as Japan struggled to contain radiation from damaged reactors and most major assets traded lower. That was oil’s lowest settlement since Feb. 28, and its largest one-day percentage drop since Oct. 19. Japan is the world’s No. 2 oil importer after the U.S. and the third largest oil consumer after the U.S. and China. Oil and other energy futures added to losses after the U.S. Federal Reserve kept its key interest rates the same and vowed to continue its bond buying program, even as it described the economy as in firmer footing. To add to the day’s misery, the International Energy Agency reportedoil supplies rose to a record in February and it warned sustained high prices could dent the world economy. The ProShares UltraShort DJ-UBS Crude Oil ETF (SCO) gained almost 7.5% on Tuesday.

Gregory A. Clay contributed to this article

Apple Set To Open Cash Coffers: Potential Options

Apple (AAPL) is the largest publicly traded company in the world and has completely transformed every industry it operates in. Steve Jobs' focus on innovation has permeated the company and created a commitment to consumers that has handsomely rewarded shareholders throughout the years. I have recommended option strategies for Apple since 2010 with tremendous results (remember past results do not guarantee future results).

For reference, please view the first and other articles in the series to fully understand the strategy and its strong potential returns. In essence the investment objective is to capitalize on Apple's volatility by selling out-of-the-money options to generate weekly income without sacrificing long-term returns.

right click to enlarge

A brief recap of this week in Apple [Up $36.59 (6.7%)]:

• Mossberg: iPad "Best Tablet on the Plane" (March 15 Wall Street Journal)
• Apple Loses Final ITC Ruling Against Motorola (March 16 FOSS Patents)
• Motorola German Injunction Against Apple Upheld (March 16 FOSS Patents)
• iPad Margins Slightly Lower on Higher Costs (March 16 Apple Insider)
• Teardown of Apple's iPad (March 16 Wall Street Journal)
• This American Life Retracts Apple Story (March 16 This American Life)
• Apple Conference Call Regarding Cash Balance (March 18 Apple)

Apple is hosting a conference call at 6AM eastern to "announce the outcome of the company's discussions concerning its cash balance." The stock will be likely see record volume and will require you to adjust your option strategies accordingly.

Apple's $37 dollar surge was the largest appreciation for the company and the second highest percentage appreciation of the year. The market capitalization now sits above $545 billion and analysts have targets sitting in the $700 billion market cap range. Apple obliterated its previous all-time high as it surged to $600 on Thursday before settling around $585 for the remainder of the week. Stocks never appreciate in straight lines but it is foolish to fight the momentum that Apple has right now.

The early part of this week should have news detailing the initial success of the iPad and I personally expect sales to come in around 1.5 million, only due to shortages of the device and the difficult to manufacture screen. With this in mind, it would be prudent to take profits on some of your position near $600 especially if you are a new Apple shareholder sitting on near 50% gains from 2012 alone. As I write weekly, there are an abundance of ways to lock-in profits that I detail below in the sensitivity analysis. Here is a simplified playbook for trading Apple this week:

• Cautious Investor (Apple below $585): Sell $585 covered call
• Bullish Investor (Apple between $585-$605): Sell $600 covered call
• Gambler (Apple between $605+): Consider buying out-of-the-money "homerun" option

As investor confidence in Apple increases, so do the option premiums and covered call writers can benefit from this optimism. The time value ratio for the 585s is 2.3% while the 590s hold an above-average 2.0%. The out-of-the-money options also have tremendous value this week as the 595s and 600s are $9.75 and $8.10, respectively. I will continue to bet on selling the out-of-the-money options and pick up approximately $10 per option on both good and weeks for Apple.

The overwhelmingly positive iPad news dominated the headlines this week but Motorola (MMI) had key legal battles reaffirmed against Apple. The German injunction has relatively minor financial implications for Apple but the ITC loss could weaken Apple's position against Google's (GOOG) Android. These lawsuits can move back and forth with dizzying frequency and will likely linger for years but are important to monitor for significant developments. Personally, I think Apple's lead in the tablet space is insurmountable due to the well-established ecosystem but Google is still a formidable foe that cannot be overlooked.

Investors need to be vigilant and monitor the new products and developments from all competitors. Remember what Tim Cook said at the new iPad announcement and smile as an Apple shareholder: "Only Apple could deliver this kind of innovation in such a beautiful, integrated and easy to use way. It's what we stand for," he said of the new iPad. "And across the year, you're going to see a lot more of this kind of innovation. We are just getting started."

In closing, there has been a lot of controversy surrounding Apple and its treatment of suppliers, notably Mike Daisey's "reports" from his trip to Apple factories. This American Life tracked down Daisey's translator and did additional fact checking which essentially refutes the vast majority of his "reports". Daisey has been one of the most critical pundits against Apple and it turns out that much of his allegations were fabricated. I do not want to draw any more attention to his false claims but this is just a reminder that Apple is a high profile corporate target and you need to take all Apple news with a grain of sale, even if the source is reputable.

Below I present three possible scenarios and the potential returns for the Apple options. The first scenario represents a negative outlook for Apple while the final two scenarios are more reasonable. These scenarios are just projections and there is no guarantee that they will come to fruition. Even if you are optimistic it is important to generate both positive and negative circumstances in order to stress your assumptions.

As a general rule, selling calls with higher strike prices has greater potential return but additional risk of loss due to the lower (or lack of) downside protection. For more information on the fundamentals of covered calls, consult Investopedia.

Additionally, if you would like even more information, I have prepared a sensitivity analysis for absolute return and percent returns, respectively. After studying the information above, these two charts make it easy to pick a strike price based on where you believe Apple will close at the end of the week. Estimate where you believe Apple will close and select the strike price with the highest return.

With this information, executing a buy-write on AAPL March 23 (Monthly) 610s is the optimal risk-return strategy. I would refrain from writing any options on Monday as the stock will be extremely volatile with the Monday morning announcement. Please consult with your accountant or personal financial planner. If you are uncomfortable with this strategy I suggest a buy-write in the range of 585-615s.

Even if you are extremely bullish you can still profitably sell covered calls; Apple is volatile enough that you will have opportunities to repurchase on dips. An alternative approach is to sell out-of-the-money 585 puts and collect the premium without having to purchase the stock outright. Note that if the stock declines to the strike price, you are obligated to buy the stock (or closeout the position).

Disclosure: Author is long AAPL, GOOG, and MMI.

Disclosure: I am long AAPL, GOOG, MMI.

Apple: MacBook Air a $7B Business, Says JP Morgan

JP Morgan’s Mark Moskowitz this morning reiterates an Overweight rating on shares of Apple (AAPL), writing that the company’s “Macbook Air” laptop may turn out have much higher sales than he’d initially thought, even though he’s been enthusiastic about the business potential for some time.

Moskowitz observes that Air shipments of 923,000 were 44% higher than the prior quarter, higher than the 17% quarter-to-quarter growth in Mac units, and the fourth quarter of accelerating sales growth.

In previous reports, we had highlighted the MacBook Air as a potential $2-3 billion-plus revenue opportunity. Based on the continued momentum of the product and our conversations with industry participants, our view has become even more constructive. Over the next 12 months, we believe that the average quarterly run rate could reach 1.6M units, which implies a $7 billion-plus revenue profile.

At an average price of $1,150, the Air would produce $1.84 billion per quarter in revenue for Apple, or $7.36 billion a year, he calculates, and contribute 71 cents per share in profit annually.

Moskowitz also thinks sales to China will boost Mac growth “as the company continues to expand and deepen its market coverage” in China.

Moskowitz thinks the competing product, the “Ultrabook” laptops heavily promoted by Intel (INTC), “lacks the right blend of features and attractive price points to grab market share.”

Apple shares today are down $2.02, or half a percent, at $391.60.

Nokia posts $1.2B loss in first quarter

HELSINKI�Struggling cellphone maker Nokia said Thursday that tougher-than-expected competition pushed it to a net loss of $1.2 billion in the first quarter as sales plummeted, including for smartphones.

The loss compared with a profit of $450 million a year earlier, while revenue fell 30% to $9.7 billion from $13.6 billion in 2011.

Net sales of devices crashed 40% to $5.5 billion, with smartphone sales dropping by more than half to $2.2 billion, and the company gave a dim outlook.

It said operating margins in the second quarter would be "similar to or below the first quarter 2012 level of negative 3%," and that it would speed up a cost cutting goal of $1.3 billion by 2013.

The Finnish company said it would share "further details as quickly as possible."

CEO Stephen Elop conceded the company had faced "greater than expected competitive challenges" and some challenging markets, including Britain.

"We exceeded expectations in markets including the United States but establishing momentum in certain markets � has been more challenging," he said. "We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly."

Colin Giles, head of global sales since January 2010, will leave the company as it restructures the sales unit, "reducing a layer of sales management," a statement from Nokia said.

The company has been the leading handset maker since 1998 but after reaching a global goal of 40% market share in 2008, its share has continued to shrink.

Nokia hopes to remedy the slide with its new Windows Phone 7, which launched in October, eight months after Elop announced a partnership with Microsoft Corp.

Nokia has adopted the Windows operating system in its new phones, phasing out the MeeGo and Symbian platforms, considered clumsy by many operators.

Still, sales of smartphones dropped to 12 million in the first quarter, from 24 million a year earlier, while volume sales of cellphones fell to 83 million from 108 million in 2011.

Elop, who earlier described the first-quarter as disappointing, said Nokia had sold more than 2 million Windows-based Lumia phones in the first quarter and that it had a "clear sense of urgency to move our strategy forward even faster."

In 2011, Nokia announced more than 10,000 layoffs to lower expenses and has not ruled out more cutbacks.

The company has said it would not provide annual targets for 2012 since it was in a "year of transition."

It said operating margins in the network operations � called Nokia Siemens Networks� would "clearly improve in the second quarter 2012 compared to the first quarter 2012 level of negative 5 percent," but it gave no figures.

Last year, Nokia was still the world's top cellphone maker with annual unit sales of some 419 million devices. But in the last quarter of the year it posted a net loss of $1.4 billion, a marked reverse from the $976 million profit a year earlier, as sales slumped 21% with smartphone sales plunging 23%.

Its stock has fallen by half since Elop announced the deal with Microsoft, and it dropped to a 15-year low of $3.90 earlier this week after Moody's ratings agency downgraded its debt grade to near junk status.

On Thursday, its share price dipped only 1% to $3.93 in Helsinki, as investors had been expecting a downturn after last week's profit warning.

China May Form More Credit Ratings Agencies

U.S. Treasury Secretary Timothy Geithner (left) with Zhou Xiaochuan, China�s central bank governor. (Photo: AP)

The head of the People's Bank of China said Sunday that the financial institutions should reduce their reliance on foreign credit-rating agencies and that the nation is considering forming its own such entities which would be backed by the government. 

Zhou Xiaochuan, China’s central bank governor, made the comments in a speech at a financial forum in Beijing, according to Bloomberg news. China has been critical of the independence of the so-called "big three" ratings firms of Moody’s, Standard & Poor’s and Fitch Ratings and has questioned their independence from the firms they review. The country has sought an alternative to those firms and in September of 2010 set up its own rating company, called China Credit Rating Co., which makes investors pay for ratings rather than borrowers.

Lu Zhengwei, Shanghai-based chief economist at Industrial Bank Co.,  who was rated the nation’s best analyst in 2010 by the newspaper China Business News, was quoted by Bloomberg saying, "With the rapid expansion in China’s bond market, we need rating companies that are familiar with the Chinese situation. We see comments from rating companies during this round of the crisis have influenced the financial market to a large degree. It’s no surprise China is paying attention to them.”

The National Association of Financial Market Institutional Investors, formed by the central bank in 2007 to help develop the country’s over-the-counter financial markets, issued a draft report in July that said, in part, that overseas rating companies’ earnings models cause “a strong beneficial alliance between the issuer and the ratings agency that cannot avoid influencing the agency’s independence.”

Last week, local Chinese media reported that the State Council, China’s Cabinet, has designated the central bank to regulate the country’s credit-rating companies. That makes it the sole regulator of the industry.

Zhou also said that domestic Chinese ratings companies could be helped to grow by being required to rate a Chinese financial product if one of the international companies rates it. He also said that such firms could expand their role by researching the finances of local or municipal government, since this is a sector in which foreign companies do not have sufficient expertise.

TRW Automotive Hits a Higher Gear

TRW Automotive (TRW) shares jumped 14% this afternoon after the auto safety equipment company posted better than expected earnings despite declining margins. TRW makes airbags, seat belts and other devices and has benefited from the rebound in auto sales over the past year. EPS of $1.84 beat analysts expectations for $1.55.

Standard & Poor’s equity analyst Efraim Levy reiterated his Strong Buy recommendation on the shares following the report.

“Sales were slightly above our forecast but better gross margins were key to the outperformance. TRW should benefit from rising global automotive volume and higher demand for safety equipment in the U.S. and other markets, but weakness in the important European market should be a drag. After the reversal of its valuation allowance for deferred taxes, we expect TRW’s ’12 tax rate to rise significantly, although the company does not expect to pay U.S. cash taxes for years. Margin pressure should ease in 2013.”

Southwest Up After Besting 3Q Estimates

It looks like clear skies for Southwest Airlines (LUV). The discount carrier reported this morning a higher-than-expected quarterly profit and said bookings look strong, sending its shares up more than 4%.

At $9.11 a share, the stock climbed 40 cents a share or 4.6% during morning market action.

Excluding one-time items, profit came to $122 million, or 15 cents per share, down from a year-earlier profit of $195 million, or 26 cents a share. But analysts expected the company to earn 14 cents a share.

Quarterly revenue rose 35%�to $4.3 billion.

Performance of Annaly and MFA vs. Other Asset Classes

Due to my own cautiousness regarding the market right now, I have shifted a greater percentage of assets into mortgage REITs (mREITs). My basic thesis is that the US debt ceiling deal, coupled with eurozone problems, is going to lead to a retraction of money in the real economy that will result in interest rates remaining subdued in the US. This will make mREITs an attractive investment class. In my previous article, I noted four mREITs with significant insider buying that I particularly like, including MFA Financial (MFA).

This push into mREITs has led me to examine how well they have performed versus other asset classes in the past, particularly other dividend-paying stocks. I decided to look at the performance of Annaly Capital (NLY) and MFA Financial over a 14-year period.

The reason I chose MFA and NLY is primarily because these are the only two major mREITs I have found a lot of long-term data on. For this reason, there is some selection bias here, so it’s important to note that these two securities do not represent the performance of a broader class of mREITs. In any case, I compared both stocks to US treasury bonds, the S&P 500, the Russell 2000, gold, commercial property REITs, and utility and energy stocks over the same period of time.

My selection of stocks for this exercise includes Vornado Realty Trust (VNO), Simon Property Group (SPG), and Cousins Properties (CUZ) in the commercial REIT sector. For oil/gas/energy stocks, I took at a look at dividend-stalwart Exxon (XOM). For utilities, I examined Excelon (EXC) and NextEra Energy (NEE), which was formerly known as Florida Power & Light.

My methodology for this exercise was to assume that the investor reinvests all dividends back into the common stock at the end of each calendar year. For instance, if XYZ company pays $1.00 in dividends in 2000, and the stock sells for $10.00 on December 31, 2000, then we would buy 1/10 of a share of XYZ company at that date.

One assumption I should mention is that I calculated returns through the end of 2011, based on the assumption that current prices and dividends would hold. Quite simply it was easier to calculate 14-year returns rather than 13.58333-year returns.

The results of this exercise are summarized below:

[Click to enlarge]

The Results

While I expected NLY to perform well, I was rather surprised to see that it outperformed every other security on the list by a long shot. With a 938% compounded return, it beats out second place Simon Property Group by a considerable amount. This is not a criticism of SPG, as its performance was quite outstanding at 651%; particularly impressive given the real estate market crash.

MFA Financial, likewise, performed well with a 423% compounded total return. That puts it in fifth place on this list, only trailing NLY, SPG, EXC at 463%, and gold, which only recently passed MFA with a 464% return.

While both MFA and NLY performed relatively well, it’s important to remember that most securities on this list performed well. I’ve deliberately selected well-known companies that generally have good track records. MFA and NLY held their own against these companies.

Versus the Market Indices

During my 14-year timeframe, the S&P 500 returned a dismal 69.4%, less than the 83.5% performance of the 10-year Treasury bond. I estimated the return on the Russell 2000 to be a bit higher, around 124%.

Exxon and NextEra Energy both outperform both indexes by a considerable amount with 238% and 205% returns, respectively. So even if they are some of the lesser performers on the list, they still did phenomenally well compared to the broader market. This re-emphasizes the fact that this isn't an arbitrary group; NLY and MFA perform well against some of the best-of-the-best. Their performances look even more impressive versus the broader market indices in the same time frame.

While I do not believe you can say this represents how mREITs overall have performed (as many mREITs have gone the way of the dodo in the past few years), it does show how a well-run mREIT can create a ton of shareholder value over a long period of time.

Disclosure: I am long MFA.

Top Stocks For 3/28/2012-1

National Health Partners, Inc. (NHPR)

National Health Partners, Inc. is headquartered in Horsham, Pennsylvania. National Health Partners, Inc. Currently offer five standard CARExpress membership programs that provide benefits that range from prescription drug and vision care to comprehensive physician, hospital, vision, dental and other care.

National Health Partners, Inc. is a national healthcare savings organization that provides discount healthcare membership programs to uninsured and underinsured people through a national healthcare savings network called “CARExpress.” CARExpress is one of the largest networks of hospitals, doctors, dentists, pharmacists and other healthcare providers in the country and is comprised of over 1,000,000 medical professionals that belong to such PPOs as CareMark and Aetna. The company’s primary target customer group is the 47 million Americans who have no health insurance of any kind. The company’s secondary target customer group includes the millions of Americans who lack complete health insurance coverage.

National Health Partners, Inc. recently announced the launch of a new network marketing program by one of its strategic partners, Xpress Healthcare, LLC. Xpress Healthcare has teamed up with CARExpress in an effort to revolutionize the discount healthcare industry while at the same time bringing financial freedom to families across the nation. By the end of the second quarter of 2011, Xpress Healthcare anticipates adding over 100 new brokers both participating in and promoting National Health Partners’ CARExpress program and should enroll over 2,500 new members.

Xpress also expects its growth to accelerate in the 3rd quarter as it anticipates recruiting an additional 200 new brokers which should generate over 10,000 new CARExpress sales. According to National Health Partners, Inc.s Offering tremendous growth potential, Xpress Healthcare is well positioned to become the leading marketing arm for its CARExpress and now Strong Sales are projected for 2nd Quarter from this new strategic partnership.

The rate of increase in health care costs has held steady for the past three years, it is still nearly twice the inflation rate, and that is prompting many employers to rethink their benefit strategies. Rising costs are also shaking employers’ confidence in their ability to provide health benefits 10 years from now. Just 62% said they are very confident in their ability provide such benefits 10 years from now, down from 73% a year ago.

About two-thirds of employers, 67%, cite the poor health habits of their employees as a major challenge to their ability curbing health care cost increases, while 42% cite underuse of preventive care services, 36% attribute the problem to the high cost of catastrophic and end-of-life care and 30% blame poor employee understanding of how to use their health plans cost-effectively.

For more information about the National Health Partners, Inc. visit its website: www.nationalhealthpartners.com

Global Hunter Corp. (BOB.V)

Global Hunter exploration and development teams are on the ground rapidly advancing the La Corona de Cobre property near La Serena, Chile and the Rabbit South property in British Columbia, Canada. Either one of these projects could carry the company forward on a stand-alone basis, but together they bring the company additional stability, strength and value.

Copper is among the few metals that can be found as metallic form in nature and has high thermal and electrical conductivity and its machining and formability specifications are very good and therefore in the industry is considered as a base metal. Copper alloys, zinc, tin, aluminum, and other metals and get much higher mechanical properties than pure copper. Therefore copper alloys widely used in industry today. Copper-Aluminum and copper-zinc alloys have many applications in industry. Also copper alloys with other metals such as, silicon, Beryllium, lead, nickel have a variety of applications.

Copper minerals in nature are found in three forms that respectively as their importance are sulfides, carbonates and silicates. Metal production process divides to two overall processes; pyrometallurgy and hydrometallurgy. Except mine production, copper scrap recycling also provides an important role in copper production.

Global Hunter Corp. (BOB.V) is also pleased to announce that it has retained the services of Vicarage Capital Limited of London, England to advise it on M&A and corporate finance issues. The key objective is to secure additional financial resources to advance its Corona de Cobre project through any of the following options: negotiating a strategic alliance with a company with significant financial resources; entering into a joint venture, or negotiating a possible merger. The Company has agreed to pay Vicarage a total of $150,000 CAD over the one-year term of the contract. Vicarage may also be entitled to certain success fees subject to TSX Venture Exchange approval.

For more information please visit their website: http://www.globalhunter.ca/homeabout.html

Immersion Corporation (Nasdaq:IMMR) announced the addition of new licensees of its technology for implementation into a wide variety of markets and applications. New licensees include: GoodBetterBest Ltd.: The manufacturer of the industry-leading Giotek brand in Europe, GoodBetterBest has recently licensed Immersion’s haptic technology for use in console gaming peripherals. Giotek was recently named the UK’s top Peripheral & Accessories brand at the MCV Industry Excellence Awards.

Immersion Corporation develops, manufactures, licenses, and supports a range of hardware and software technologies and products that enhance digital devices with touch interaction.

Hawthorn Bancshares Inc. (NASDAQ:HWBK) reported consolidated financial results for the Company for the quarter ended March 31. The Company also announced a 4% stock dividend and continuation of its quarterly $0.05 per share cash dividend payable July 1, 2011 to common shareholders of record June 15, 2011.

Hawthorn Bancshares, Inc. operates as the holding company of Union State Bancshares, Inc., which provides general banking and trust products and services. It offers checking and savings accounts, Internet banking, debit cards, certificates of deposit, trust services, brokerage services, and safety deposit boxes.

Naugatuck Valley Financial Corp. (Nasdaq:NVSL) announced the receipt of conditional approval from the Office of Thrift Supervision to reorganize from the two-tier mutual holding company structure to the stock holding company structure and to commence a “second-step” stock offering of shares of common stock by the Bank’s proposed new holding company, a recently formed Maryland corporation also known as Naugatuck Valley Financial Corporation (”New Naugatuck Valley Financial Corporation”).

Naugatuck Valley Financial Corporation operates as the holding company for Naugatuck Valley Savings and Loan that provides various financial services to consumers and businesses in Connecticut.