Galaxy Vs. iPhone: Is Samsung Just Too Fragile?

A recent study by a smartphone insurer found that despite all of the upgrades, the durability of the Samsung Galaxy S4 may be an issue. As smartphones get bigger, lighter, and faster, durability remains an important concern.

In the video below, Fool.com contributor Doug Ehrman discusses the relative rank of Samsung's newest addition to the Galaxy line and how it stacks up against both its predecessors and Apple's (NASDAQ: AAPL  ) flagship iPhone 5. Even with the appeal that Google (NASDAQ: GOOG  ) Android and Microsoft (NASDAQ: MSFT  ) have garnered, durability remains an important consideration, particularly as prices continue to rise.

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

Bank of America Takes Its Foe Down to the Wire

Is Royal Dutch Shell the Cheapest Share in the FTSE 100?

LONDON -- Royal Dutch Shell  (LSE: RDSB  ) (NYSE: RDS-B  ) is the bluest of blue-chip shares. The company employs 90,000 people worldwide. It is a true global titan with over a century of history.

Today, Shell trades at the kind of valuation that one might expect from a weaker company with worse prospects. Yet, the oil giant looks as strong as ever.

Dividend yield
Shell's dividend is a thing of beauty. Year in, year out, Shell keeps paying up. In dollar terms, the dividend has not been cut since the second World War. Not only is the yield high, the cash payout is enormous. In 2011, Shell paid out more cash in dividends than any other U.K. company. It is expected to do the same again this year.

The average FTSE 100 share is forecast to yield 3.2%. This year, the market is expecting Shell to pay $1.84 in dividends. That equates to a forecast yield of 5.4%. Analysts expect Shell's dividend to increase 4.3% in 2014.

Only a handful of shares could likely yield more in 2013.

Price-to-earnings ratio
Today, Shell trades on just nine times last year's earnings per share. With 8.4% of earnings growth forecast for 2013, the P/E for this year is 8.3 times expected earnings.

The average FTSE 100 company trades on a historic P/E of 16.7. Average forecast earnings growth is slightly higher among other FTSE 100 constituents, at 9.5%. While Shell is cheaper than nearly all FTSE 100 companies, it is expected to grow more slowly than most.

This perception could be a result of recent falls in the price of crude oil. In the last three months, crude prices have fallen by around 9%. In that time, shares in Shell are off by 3%. While the price of oil will affect Shell's earnings, it has historically had little correlation with the company's share price.

Even if Shell is the cheapest share in the FTSE 100 today, that doesn't mean that the shares will go on to post huge rises. Our analysts here at the Motley Fool believe that they have found a better growth prospect. Like Shell, their top pick has a long history and is a dominant player in its markets. If you want to learn all about the opportunity that our team's top growth pick presents, get the free Motley Fool report, "The Motley Fool's Top Growth Share For 2013." This reserach is completely free and will be delivered to your inbox immediately. Just click here to get your copy today.

Dow Continues Its Climb, With Boost From Tech Sector

The tone has been set for a week of heavy economic data releases, with news this morning reviving some spirits and sending the Dow Jones Industrial Average (DJINDICES: ^DJI  ) 64 points higher so far this morning. With news from Europe that a long-standing problem has been resolved, and new data showing that an integral part of the U.S. economy is still forging ahead, the index may be set for further gains this afternoon. Not to mention the solid gains by the Dow's tech stock components this morning, which have helped boost the index even further.

Good news comes in threes
Italy has finally resolved its governmental stalemate, with the swearing-in of a new prime minister and supporting government. The last two months within the government were troubling for the European Union, which feared that a nonoperational government would lead to further financial troubles within the country. Those fears spread to the U.S., with investors aware that the global economy is still on weak footing.

Pending sales for existing homes rose in the month of March, giving more backing to the continued rise of the housing market. With the 1.5% increase last month, the rate of pending home sales is at a three-year high. With home values continuing to rise, more people may be enticed to put their houses on the market, which will relieve a tightening supply of existing homes as demand rises largely due to the historically low interest rates.

New data from the Commerce Department showed that personal income rose 0.2%, which correlated to a 0.2% rise in consumer spending last month. With consumer spending on trend to grow, the economy has a better chance of a swifter recovery -- though there's no saying what other influences will come along.

Tech is on the move
Leading the way this morning is Microsoft (NASDAQ: MSFT  ) , with a 1.95% gain as of 11 a.m. EDT. Mr. Softy is taking its design of the next generation of Xboxes seriously. With a newly revealed projector called IllumiRoom, Microsoft envisions an added feature to the new console that will project a field of vision around the television screen to enhance playing and allow gamers to develop code to modify their gaming experience. The newest version of the Xbox will be revealed next month, with many gamers and investors looking forward to the newest developments.

IBM (NYSE: IBM  ) is in a close second to Microsoft with a 1.81% rise this morning. The company is currently hosting the 2013 IBM Impact conference in Las Vegas, scheduled to run through May 2, with plenty of new developments being demonstrated via partnerships. First up is Neebula, which is scheduled to demonstrate the benefits of integration with IBM's Tivoli Service Management Software. The partnership allows customers to quickly and easily view the impacts of common IT incident reporting and alerts. But perhaps the most exciting for customers is the partnership between IBM and CEDRUS, which announced the new DreamFace for IBM BPM application. The new software will allow customers to develop rich user interfaces for browsers and mobile devices directly into the browsers -- no code, and cloud-based.

Intel (NASDAQ: INTC  ) is also in the news this morning, with a 1.18% gain following the confirmation that its new Haswell processors will be featured in the newest line of Apple MacBook Pro laptops. The new line will be presented at Apple's WWDC conference next month. Intel also plans on launching the Haswell line of processors during the Computex IT show in June. This gives the chip maker and its partners plenty of time to update new products with the processors before the back-to-school push begins in late summer.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

The Lesson of Netflix and Reed Hastings

Netflix (NASDAQ: NFLX  ) is the best performing stock on the S&P 500 in 2013 -- up more than 135% in four months. It's a different story from a year ago, and the complete opposite of what was happening around summer 2011. Coming up on two years since the complete disaster that was Netflix's policy changes and DVD spinoff, the company has now soared to new heights and is likely to be bound for more. While it was not the actions of any one party, there is an important lesson for businesses and investors to learn. As demonstrated by Reed Hastings, here is how to make a full recovery from a serious case of business idiocy.

Dream come true
For the value-conscious and technological skeptics among us, it was a joyous time when Netflix plunged from its $300-per-share days to near $50.

"We told you! Sky-high valuations have no place in the reality of investing."

The thing is, it wasn't a market correction of Netflix's valuation and an understanding that paying 100 times earnings for a company is completely absurd. It was punishment. When Reed Hastings decided to shed the company's DVD delivery business and push up prices on streaming, nearly everybody got ticked off. Eight hundred thousand subscribers fled in the fourth quarter of 2011, according to a recent New York Times article. It wasn't a quick lashing, either, as the stock shed value for more than a year and Hastings was lambasted again and again for poor leadership skills. He took the criticism graciously and admitted quickly the errors of his ways. That was step one.

Step 2
Admitting failure is, for some, an already impossible task. And the worst part is, it's not nearly enough when you run one of the most closely followed tech companies in history. But Hastings didn't stop at "I'm sorry." He embarked on a multi-year mission to regain his disenchanted customers. With 2 million new subscribers in the first quarter of this year, we know now that it worked.

Netflix quickly reversed course on the Qwikster move, even if long-term it was probably the right thing to do. But, again, that wasn't enough of an effort. The company needed to show us it was worth redemption. The best example of doing so, in my opinion, was the original series House of Cards. Not only did it bring in millions of customers and help it pass HBO in subscriber count, but it also showed us that Netflix was actually a really cool, adaptive company. Content costs are a tremendous cash-suck for Netflix and cable operators alike. A rational response is to make your own content. House of Cards, though, was anything but a conventional show. It had the writing, violence, and sex of an HBO series, and the watchability of West Wing. It opened the company up and showed investors, analysts, and, most importantly, customers, that its ability goes far beyond streaming nature documentaries and past seasons of 30 Rock.

A buy?
Now that I've stroked Hastings' ego and laid my coat in a puddle for Netflix to step on, I'll go ahead and say buying the stock is not a good idea. My reason is not because of Hastings, content costs, competitors, or any complaint about the business. It's my original complaint -- valuation. Netflix is trading at 70 times this year's projected earnings. If you were to buy a taxicab that generated $10,000 a year in revenue, would you pay $700,000 for it? If you were in New York, probably, but that's not the point. Ever the penny-pincher, I can't stomach paying 70 times anything.

Reed Hastings and Netflix have shown something rare in the corporate world -- the ability to say "I'm sorry," and the talent to move forward. Expect bigger and better things from this company, but don't pay Rolling Stones scalper ticket prices for it.

The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.

 

 

 

Does Coca-Cola Pass Buffett's Test?

We'd all like to invest like the legendary Warren Buffett, turning thousands into millions or more. Buffett analyzes companies by calculating return on invested capital, or ROIC, to help determine whether a company has an economic moat -- the ability to earn returns on its money above that money's cost.

In this series, we examine several companies in a single industry to determine their ROIC. Let's take a look at Coca-Cola (NYSE: KO  ) and three of its industry peers to see how efficiently they use cash.

Of course, it's not the only metric in value investing, but ROIC may be the most important one. By determining a company's ROIC, you can see how well it's using the cash you entrust to it and whether it's actually creating value for you. Simply put, it divides a company's operating profit by how much investment it took to get that profit. The formula is:

ROIC = net operating profit after taxes / Invested capital

(Get further detail on the nuances of the formula.)

This one-size-fits-all calculation cuts out many of the legal accounting tricks (such as excessive debt) that managers use to boost earnings numbers, and it provides you with an apples-to-apples way to evaluate businesses, even across industries. The higher the ROIC, the more efficiently the company uses capital.

Ultimately, we're looking for companies that can invest their money at rates that are higher than the cost of capital, which for most businesses is between 8% and 12%. Ideally, we want to see ROIC above 12%, at a minimum, and a history of increasing returns, or at least steady returns, which indicate some durability to the company's economic moat.

Here are the ROIC figures for Coca-Cola and three industry peers over a few periods.

Company

TTM

1 Year Ago

3 Years Ago

5 Years Ago

Coca-Cola	14.3%	14.4%	21.2%	18.6%
PepsiCo (NYSE: PEP  )	12.3%	12.7%	12.4%	21.4%
Dr Pepper Snapple (NYSE: DPS  )	9.2%	8.7%	7.9%	6.2%
SodaStream International (NASDAQ: SODA  )	20.4%	16.9%	23.5%	2.7%

Source: S&P Capital IQ. TTM=trailing 12 months.

Coca-Cola's returns on invested capital are around the lowest they have been in the past five years, as are Pepsico's. While Dr Pepper Snapple has the lowest returns on invested capital of the listed companies, it managed to gradually grow its returns over the past five years. SodaStream has the highest returns of the listed companies, but its current returns are about 3 percentage points lower than they were three years ago. Still, their high level suggests the company is maintaining its competitive advantage.

All of these companies have struggled to deal with the slow-growing soft-drink market in the U.S. Larger companies like Coca-Cola and Pepsi have tried to fill this void by expanding into emerging markets like China and India, which have a growing middle class that can spare the change for affordable luxuries like soft drinks. While Coke has benefited from its powerful brand, it still suffered a 4% sales volume decline at the end of 2012 while Pepsi managed to seize some market share.

Also, Coke and Pepsi continue to face domestic competition from smaller players like SodaStream and Dr Pepper Snapple. In particular, they should pay attention to SodaStream's ability to form strategic partnerships with much larger companies that are in a strong position to help the company promote its products.

Businesses with consistently high ROIC show that they're efficiently using capital. They also have the ability to treat shareholders well because they can then use their extra cash to pay out dividends to us, buy back shares, or further invest in their franchise. And healthy and growing dividends are something that Warren Buffett has long loved.

Profiting from our increasingly global economy can be as easy as investing in your own backyard. The Motley Fool's free report "3 American Companies Set to Dominate the World" shows you how. Click here to get your free copy before it's gone.

Economic Gains May Not Help Democrats Much in 2014

WASHINGTON (AP) -- Presidents like to take credit for economic recoveries, just as President Barack Obama is angling to do now.

He and his allies in Congress have "walked the economy back from the brink," his new 2014 federal budget blueprint asserts. And Democrats hope these improvements, while still slow and uneven, will give them at least a small boost in 2014's midterm races.

That's a big order, considering:

Presidential claims of responsibility for economic gains rarely win plaudits from voters, yet presidents nearly always get blamed when things get worse. The historical odds for midterm gains in Congress by the in-power party are slim at best. Since World War II, the president's party has lost an average of 26 seats in midterm elections and gained seats only twice -- Democrats in 1998 under President Bill Clinton and Republicans in 2002 with George W. Bush in the Oval Office. Presidential elections are often referendums on the economy. That applies less often to midterms.

Still, the health of the economy "is going to be an important factor" in 2014 races, said Democratic pollster and strategist Mark Mellman. "What matters most is changes in the amount of money people have in their pockets. It's very hard to tell people they're better off than they feel."

"But we're still quite a ways from November 2014," he added.

Right now, surveys and reports show that the recovery is continuing, although more slowly than most, despite continued high unemployment and an environment of modest economic growth and inflation. Home prices are on the rise, manufacturing is slowly improving.

The government reported Friday that economic growth accelerated to an annual rate of 2.5 percent from January through March, helped by the strongest consumer spending in more than two years. But federal spending fell, and tax increases and Washington's budget cuts could slow growth later this year.

The report showed the economy was getting stronger after nearly stalling late last year, when it grew just 0.4 percent in the final three months of 2012.

"It's hard to do victory laps in the climate of slow growth and continued high unemployment," said historian Douglas Brinkley of Rice University.

"A president's job is to rebuild the psyche of the nation," Brinkley said. "And there has been a feeling of incremental improvement after Obama's first term in office. That's the key word, incremental. Presidents have to make the people believe that things are getting better every month.

"A lot of what I'm talking about is the optics of the situation. When Obama came in, things were rotten and then it got better. There is no longer that sense of panic going on."

Obama's efforts have been overshadowed somewhat by several noneconomic issues: the congressional battles over gun safety and immigration and the deadly Boston Marathon bombings.

What steps can Obama rightfully claim that have helped spur economic improvement?

His $830 billion stimulus program of 2009, for one. The White House also cites two other major emergency programs -- the auto and financial industry bailouts. Both were started under President George W. Bush and expanded by Obama.

The White House suggests Obama's anti-recessionary programs helped nurture the creation of more than 6 million new jobs since the economy bottomed in 2010. Republicans voice skepticism but mainstream economists generally cite substantial gains from the federal efforts in the range of 3 million or more jobs.

The bank bailout, or Troubled Asset Relief Program, turned out to be politically radioactive for many who supported it. But economists generally agree it helped avert a national financial meltdown. And it wound up yielding investment returns to taxpayers of most of the original $700 billion-plus cost.

Obama can't claim credit for some of the biggest contributors to walking the economy back from the brink: actions by the semi-autonomous Federal Reserve, under Chairman Ben Bernanke, to hold down interest rates and lubricate the financial system by injecting around $3 trillion in newly printed money over the past five years.

While the Fed's program could still ignite inflation, so far it has helped encourage business and consumer spending and housing purchases and has helped lift stocks, with the Dow industrials roughly doubling since Obama took office.

Trying to take credit for economic gains can backfire on a president, analysts in both parties agree.

Democratic strategists James Carville, Stan Greenberg, and Erica Seifert concluded from focus-group sessions with both Democratic and Republican audiences that Obama fares far better in speeches when he highlights economic progress without taking credit.

People "are very much on edge financially ... because they live it every day. Every speech needs to start from a place that understands this is not theoretical or ideological," they wrote in a policy memo. Obama must "thread a very careful needle," they concluded.

Republican consultant Rich Galen said presidents in general -- and Obama in particular -- tend to take disproportionate responsibility for economic advances. "Although we know from the data that the economy is creaking ahead, it certainly isn't booming -- with so many people who continue to be out of work. Everybody knows somebody who doesn't have a job," Galen said.

Americans don't like it when presidents pound their own chests rhetorically or talk up their accomplishments, says Ross Baker, a political science professor at Rutgers University. "Americans would say, 'Well, that's our judgment to make, whether you're doing a good job or not.'"

"Facts speak for themselves," Baker said. "If things are good, you don't really need to make any extraordinary claims. Nobody notices a sunny day. But when it rains, you've got to get an umbrella, put on a raincoat. Psychologically, it's a very different kind of situation."

Obama also believes his major health insurance overhaul, now known by opponents and supporters alike as "Obamacare," will keep down health care costs in the years ahead. Republicans disagree.

Ann Taylor Is a Green Mother and a Profits Monster

On Earth Day 2013, Ann Taylor parent company Ann Inc. (NYSE: ANN  ) announced that across nearly 400 stores in North America, it had cut its "carbon footprint" by 20% -- twice its objective, and more than two years ahead of schedule.

But this company's not only doing its part to save the Earth -- it's also saving money on energy costs, boosting earnings and and helping to create for itself a very attractive P/E multiple. Fool contributor Rich Smith explains how Ann Inc. is doing well by doing good -- and could be good for your portfolio.

There are many different ways to play the energy sector, and The Motley Fool's analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations and is poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this company before the market does. Click here to access your report -- it's totally free.

Are You Missing Something Easy at Ansys?

Margins matter. The more Ansys (Nasdaq: ANSS  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Ansys's competitive position could be.

Here's the current margin snapshot for Ansys over the trailing 12 months: Gross margin is 87.6%, while operating margin is 37.0% and net margin is 25.5%.

Unfortunately, a look at the most recent numbers doesn't tell us much about where Ansys has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for Ansys over the past few years.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

Here's how the stats break down:

Over the past five years, gross margin peaked at 88.3% and averaged 87.7%. Operating margin peaked at 38.7% and averaged 37.0%. Net margin peaked at 26.4% and averaged 24.8%. TTM gross margin is 87.6%, 10 basis points worse than the five-year average. TTM operating margin is 37.0%, about the same as the five-year average. TTM net margin is 25.5%, 70 basis points better than the five-year average.

With recent TTM operating margins exceeding historical averages, Ansys looks like it is doing fine.

Software and computerized services are being consumed in radically different ways, on new and increasingly mobile devices. Many old leaders will be left behind. Whether or not Ansys makes the coming cut, you should check out the company that Motley Fool analysts expect to lead the pack in "The Next Trillion-dollar Revolution." Click here for instant access to this free report.

Add Ansys to My Watchlist.

Asia Stocks Near Two-Year High as Investors Weigh Results

Asian stocks rose, with the regional benchmark index touching the highest intraday level since May 2011, as investors weighed earnings reports and energy shares led gains.

China Petroleum & Chemical (386) Corp., the nation's largest refiner, increased 2.2 percent after Morgan Stanley said China's cut in fuel prices will benefit the company. Nippon Electric Glass. Co. led gains among Japanese glass makers after industry bellwether Corning Inc. forecast growth. Nintendo Co., the world's biggest maker of game machines, slumped 5.9 percent in Osaka after missing sales targets for its consoles.

The MSCI Asia Pacific Index added 0.8 percent to 140.02 at 3:53 p.m. in Tokyo, with about five shares rising for every three that fell. The gauge is headed for its highest close since May 2, 2011.

"We have to look at earnings and wait to see if the first- quarter earnings are really good or bad," said Grace Tam, Hong Kong-based global market strategist at JPMorgan Asset Management Ltd., which oversees about $1.3 trillion globally. "In Asia, we don't have an inflation threat. Inflation has been pretty benign and this is a positive factor for Asian equities because Asian economies are net importers of oil."

The MSCI Asia Pacific Index gained 7.4 percent this year through yesterday amid optimism Japan will deploy more measures to beat deflation and that policy makers in the U.S. and China remain on standby to support growth. The Asian benchmark traded at 14.1 times estimated earnings yesterday, compared with 14.3 times for the S&P 500 and 12.8 times for the Stoxx Europe 600 Index.

Nikkei, Kospi

Japan's Nikkei 225 Stock Average climbed 0.6 percent after slipping 0.1 percent, and the broader Topix Index added 0.7 percent, while data showed foreign investors were net sellers of the nation's equities last week. The Kospi Index (KOSPI) increased 0.8 percent as South Korea's economy grew the most in two years in the first quarter. Markets in Australia and New Zealand were closed for a public holiday.

Hong Kong's Hang Seng Index (HSI) climbed 1.1 percent and China's Shanghai Composite Index declined 0.8 percent. Taiwan's Taiex Index was little changed.

More than 60 companies on the MSCI gauge are scheduled to report earnings today, according to data compiled by Bloomberg. Of the 75 firms which have reported quarterly results since April 1, and for which Bloomberg has estimates, 49 percent have exceeded profit forecasts and 49 percent have missed estimates.

Investors are weighing how the yen's decline will improve the earnings outlook for Japanese exporters.

Yen, BOJ

The yen has declined against all 16 of its major counterparts since April 4, when the Bank of Japan (8301) said it will double the amount of money circulating in the economy by the end of 2014 by buying government bonds, its boldest round of quantitative easing. The BOJ will convene tomorrow.

"A weaker yen is helping Japanese companies, but you need to look at each stock to figure out if the yen's drop is coming on top of a company's solid business or it's being overshadowed by poor performance," said Toshihiko Matsuno, a strategist at Tokyo-based SMBC Friend Securities Co., a unit of Sumitomo Mitsui Financial Group Inc., Japan's second-biggest lender by market value.

Futures on the Standard & Poor's 500 Index (SPXL1) were little changed today. The index rose just 0.01 point yesterday in New York, as investors weighed quarterly earnings.

China, the world's second-biggest oil consumer, cut gasoline and diesel prices today after crude declined earlier this month. Retail gasoline falls by 395 yuan ($64) a metric ton and diesel by 400 yuan, the National Development and Reform Commission, the country's top economic planner, said on its website yesterday.

Sinopec, Cnooc

China Petroleum & Chemical known as Sinopec rose 2.2 percent to HK$8.54. Cnooc Ltd., China's biggest offshore oil producer, gained 2.6 percent to HK$14.40. PetroChina Co., the nation's largest energy producer and Asia's No. 1 company by value, advanced 2.1 percent to HK$9.76.

Japanese glassmakers gained after Corning, a leading maker of glass for flat-panel televisions, phones and tablets, forecast growth in its telecommunications products as it benefits from surging sales of smartphones and tablets. Nippon Electric Glass, Japan's second-biggest glassmaker by market value, soared 7.1 percent to 525 yen. Asahi Glass Co., the largest, advanced 2.9 percent to 793 yen.

Among stocks that fell, Nintendo dropped 5.9 percent to 11,240 yen after saying it sold 3.45 million of its Wii U game machines in the fiscal year ended March 31, below a 4 million- unit target it set in January and an initial projection of 5.5 million.

Canon Inc. (7751), the world's biggest camera maker, slid 6.4 percent to 3,595 yen after its profit forecast missed analyst estimates on slumping demand for compact models. Net income will probably be 290 billion yen in 2013, the Tokyo-based company said in a statement yesterday, missing the 308 billion-yen average of 20 analyst estimates compiled by Bloomberg.

The Day the Great Depression Ended

On this day in economic and business history ...

In most respects, April 28, 1942, was much like any other day of the Great Depression era for American markets. "The stock market lacked buying confidence today and leading issues retreated fractions of a point or more," wrote Associated Press journalist Bernard S. O'Hara. President Franklin D. Roosevelt's plan to limit personal incomes to an upper ceiling of $25,000 was greeted with a ho-hum response. When asked for his opinion, one stockbroker told The New York Times that "the President's message had just about the same effect as another sinking off the Atlantic Coast. Bad news has been discounted. Investment demand continues where it was, poor but reasonably steady."

No one knew it then, but that day was the last day of the longest, deepest slide in American market history. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) finished April 28, 1942, at a closing value of 92.92 points. It was still 75% below an all-time high reached in the fall of 1929. At no time in those 13 years had the Dow reclaimed more than half the value it had lost from its 1929 peak of 381.17. But the very next day, the Dow began its recovery, and within weeks it had left single-digit territory behind for good.

The road back to a new peak would take years longer, as investors were forced to wait out the successful resolution of World War II, and the post-war spending recession besides. The Dow climbed on, through the remainder of the 1940s -- interrupted by a shallow bear market after the war's end -- and into the 1950s, when it finally broke through to a new high in 1954. From the first peak to the final deep valley, the Great Depression had ruined investors for more than a decade, and from that valley to a new peak it took more than a decade more. Markets eventually recover, but no one knows when.

We didn't really like you guys, anyway
Comcast (NASDAQ: CMCSA  ) walked away from an industry-shaking hostile bid to buy Disney (NYSE: DIS  ) on April 28, 2004. Originally valued at $66 billion when announced in February, the all-stock deal had dwindled to $48 billion by the time Comcast backed away. It was a long shot to begin with, as Disney's market cap, despite falling through the period from offer to withdrawal, was rarely below the value of Comcast's bid. Even on April 28, Disney was worth a hair more than $48 billion. Comcast blamed its retraction on Disney management. Could you blame them? Who in his right mind would sell the world's most famous entertainment company at less than market value?

The failed deal was a death knell to the tenure of Disney CEO Michael Eisner, already under fire from the Disney board over his bungling of a critical relationship with animation studio Pixar. Eisner had already lost his post as chairman of Disney's board, and he would leave the executive office in 2005. The deal would have created the world's largest entertainment company by a long shot, worth nearly $120 billion together by the time it was called off. However, neither party suffered much from the deal's failure -- in the nine years that followed, Disney's market cap more than doubled, and Comcast's rose by 60%. The two companies continue to battle for the title of "world's largest media company," with Disney in a very narrow lead at the nine-year mark. Both companies are worth roughly $110 billion, nearly as much as their proposed combined value in 2004. In some cases, failure can produce better results than success.

It's easy to forget that Walt Disney is more than just the House of Mouse. True, Disney amusement parks around the world hosted more than 121 million guests in 2011. But from its vast catalog of characters to its monster collection of media networks, much of Disney's allure for investors lies in its diversity, and The Motley Fool's premium research report lays out the case for investing in Disney today. This report includes the key items investors must watch as well as the opportunities and threats the company faces going forward. So don't miss out -- simply click here now to claim your copy today.

How to Find the Best Place to Retire

Everyone looks forward to the freedom that retirement living offers. But with the financial realities of living on a fixed income, how can you make your savings go further? The choice of where you want to live in retirement will affect not just your lifestyle but also your finances.

In the following video, Motley Fool investment-planning editor Lauren Kuczala talks with longtime Fool contributor and retirement expert Dan Caplinger about deciding the best place to live when you retire. Dan notes that while there are obvious non-financial considerations, cost of living, taxes, and available benefits make a big difference for retirees trying to make ends meet. He notes that for those with substantial savings, looking for low-cost states without an income tax is often the best way to minimize taxes on investment income. Yet for those who want to live in higher-cost states, Dan has suggestions that can help you reduce taxes to the fullest extent possible.

Retirees often seek income for their portfolios, and midstream operator Kinder Morgan has enormous potential for profits. In The Motley Fool's premium research report on Kinder Morgan, we break down the company's growing opportunity -- as well as the risks to watch out for -- to uncover whether it's a buy or a sell. To determine whether this dividend giant is right for your portfolio, simply click here now to claim your copy of this invaluable investor's resource.

Will the Next Oil Boom Come Out of Africa?

There is a lot of buzz over recent energy activity in Sub-Saharan Africa. With Anadarko Petroleum (NYSE: APC  ) and Eni (NYSE: E  ) making large gas finds off the coast of Mozambique, several majors are now looking to get in the game as well. BP plans to spend $540 million over the next five years to develop a part of this gas field that could hold well over 100 trillion cubic feet. 

Better drilling technology and relative political stability in the region have allowed several companies to start investing money in the region, and if some of these plays hit paydirt, some companies could be in for big paydays. In this video, Fool.com contributor Tyler Crowe talks with Aimee Duffy about some of the hot energy plays on the African continent and what we should expect from this region in the years to come.  

With more than 94% of its capital investments coming in the international markets for 2013, National Oilwell Varco is positioning itself to be the leader in oil services around the world. To help determine whether it could be a good fit for your portfolio, you're invited to check out The Motley Fool's premium research report featuring in-depth analysis on whether NOV is a buy today. For instant access to this valuable investor's resource, simply click here now to claim your copy.

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How This Big Pharma Is Staging a Big Comeback

It was a big day for investors watching the race to create the next generation of hepatitis-C drug cocktails. Most of the major players released data for the European Association for the Study of the Liver conference today.

In the following video segment, health-care analyst David Williamson explains why former front-runner Bristol-Myers Squibb may have returned from the wilderness of a big drug failure to launch a second effort at claiming the crown for treating this disease. Watch and find out how Bristol matches up with its two biggest competitors, Gilead and AbbVie. Both have treatments in phase 3 trials, and Gilead recently submitted an application for approval of its cornerstone drug sofosbuvir earlier in the month. Provided no hiccups, Gilead should be able to commercialize the drug within a year, if the FDA sticks to its first-quarter 2014 deadline.

Editor's note: This video incorrectly states that Gilead's drug sofosbuvir would be available commercially by the end of the year. Given the FDA's timeline, if approved, a 2014 launch is more likely.

What macro trend was Warren Buffett referring to when he said "this is the tapeworm that's eating at American competitiveness"? Find out in our free report: What's Really Eating at America's Competitiveness. You'll also discover an idea to profit as companies work to eradicate this efficiency-sucking tapeworm. Just click here for free, immediate access.

Why Baidu Is Poised to Bounce Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Chinese search giant Baidu.com (NASDAQ: BIDU  ) has earned a respected four-star ranking.

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

Baidu facts

Headquarters (founded)	Beijing (2000)
Market Cap	$30.0 billion
Industry	Internet information providers
Trailing-12-Month Revenue	$3.6 billion
Management	Co-Founder/Chairman/CEO Yanhong Li CFO Jennifer Li
Return on Equity (average, past 3 years)	51.6%
Cash/Debt	$5.2 billion / $1.9 billion
Competitors	SINA  Sohu.com

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

On CAPS, 89% of the 5,372 members who have rated Baidu believe the stock will outperform the S&P 500 going forward.   

Just yesterday, fellow Fool Simon Erickson (TMFInnovator) summed up the Baidu bull case for our community:

- Success begets success. Baidu is the dominant search engine in China, with nearly 3/4 of unique search visits. As Google proved in the US, users will gravitate to the most efficient product that provides the best search results. This, in turn, attracts more advertising revenue. The network effect, in full effect.

- Baidu has had a successful initial campaign into mobile, accounting for ~50% of mobile search in China. They are investing heavily in this platform, trying to maximize user experience. Deals with China Telecom and China Unicom have been negotiated for Baidu to be the default search provider.

Risks include potential up-and-coming search competitors. ... A friend of mine living in China said that [Baidu] was the more "formal" search engine, but that there were in fact others that users would sometimes go to instead (the example he gave was to find pirated mp3s). From at least this one perspective, it seems that Baidu has a strong business reputation for search in China.

Consensus estimates for 2013 earnings are $5.34, which puts Baidu's forward P/E at only 16. But this is a growth company with tons of potential ways to monetize (optionality), and I believe the valuation to be far too low.    

Regardless of your short-term view on the Chinese economy, there may be opportunity in Baidu (aka the "Chinese Google"). Our brand-new premium report breaks down the dominant Chinese search provider's strengths and weaknesses. Just click here to access it now.

Why Solar Stocks Were on Fire This Week

Solar stocks were on fire this week, soaring double digits on a variety of positive news items. China continues to support a few specific players, major projects are now under way, and analysts are starting to buy into the solar industry.

FSLR Total Return Price data by YCharts

These factors have helped solar this week, so here's what investors need to know.

China continues to prop up solar
Suntech Power and LDK Solar (NYSE: LDK  ) have both defaulted on loans, but that doesn't appear to be a clear sign that China is willing to let its solar industry consolidate. These two companies along with countless others would be bankrupt in the U.S. or Europe but investments from state-owned entities and loans from state-owned banks have propped up the entire industry.

This week, LDK Solar received a cash infusion of $25.8 million when Fulai Investments agreed to buy 25 million shares. This is the second investment by the company and may help LDK pay back loans it defaulted on last week.  

Yingli Green Energy (NYSE: YGE  ) was also the beneficiary of a $165 million loan agreement with the China Development Bank, which is owned by the Chinese government. This includes a one-year, $110 million loan and a three-year, $55 million loan for working capital needs. Yingli is one of the most indebted companies in the industry, but the government doesn't look like it is willing to let it fail.  

The reason China is propping up solar is simple. It sees the industry as a key employer and an industry that can grow exports. The government is willing to put billions of dollars behind manufacturers and even solar installations to make sure the industry survives. It's less clear what that means for U.S. investors. Will debt holders eventually hold all of these companies, which are effectively insolvent anyway? There's little equity value unless these companies are propped up indefinitely and can grow out of their debt obligations. With losses growing and the next generation of solar products on its way, I don't see China being a good investment for U.S. investors, even if these companies do survive.

Utility projects get under way
A number of major utility projects marked milestones this week. NRG Energy's (NYSE: NRG  ) 26 MW Solar Borrego I Project had its ribbon-cutting and is now producing at full capacity. The company announced a milestone for its electric vehicle to grid, or eV2g, project. The PJM Interconnection will now be a resource for the project in the hopes of making electric vehicles a backup power source for the grid. This has been an academic idea for a while, and now there's hope it will become an economic reality.

SunEdison, a subsidiary of MEMC Electronic Materials (NYSE: WFR  ) , announced an agreement with Fox Energy, a subsidiary of Foxconn Technology, to manufacture 350 MW of solar modules. This is part of a virtual integration plan where SunEdison will have agreements with outside suppliers to provide product, allowing the company to focus on project installations.

Finally, the world's largest solar power plant is under construction. The 579 MW Antelope Valley Solar Projects are under way and will be built over the next three years. Berkshire Hathaway subsidiary MidAmerican Solar owns the project after a $2.5 billion acquisition earlier this year.

One of the only ways to play solar
Investors and bystanders alike have been shocked by First Solar's precipitous drop over the past two years. The stakes have never been higher for the company: Is it done for good, or ready for a rebound? If you're looking for continuing updates and guidance on the company whenever news breaks, The Motley Fool has created a brand-new report that details every must know side of this stock. To get started, simply click here now.

Who Will Revolutionize the TV Market First: Apple or Google?

The smart-TV market could be a $100 billion opportunity for such tech companies as Apple and Google. In this video, Andrew Tonner looks at both companies and what they may roll out in the future.

Apple is likely to introduce its iTV first, Andrew says. The company has brand strength and premium pricing abilities, so this could be the next chapter of innovative (and profitable) products Apple is known for. A successful launch wouldn't hurt the stock price, either. Google, meanwhile, will probably roll out a low-cost alternative based on its Android system after Apple rolls out iTV. 

Another interesting development is Google's slow but relentless expansion of its fiber technology around the country. The continuing rollout could dovetail with its smart-TV offering and challenge the iTV. Andrew says both companies will almost certainly bring disruptive technology to the TV market and reward investors accordingly.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

My Abusive Marriage Destroyed Me -- and My Finances

1 Reason Corning Stock Doesn't Look So Hot

Corning (NYSE: GLW  ) recently released its first-quarter results and although earnings were higher than expected, revenues fell short. The company is in a solid position in the display technology field and enjoys some hefty margins in the sector, but the glaring problem for Corning is its lack of materialized potential and its overdependence on display technologies.

It's not bad, but it's not great
All right, so knocking a company that's been around since 1851, built the glass for Edison's light bulb, and invented the first commercially viable optical fiber may seem a little brash. But the fact is that the company has recently failed to deliver investor gains on great technologies like Gorilla Glass. The glass is used in about 1.5 billion devices in more than 33 brands around the world, and it's the glass that's unofficially used in Apple's (NASDAQ: AAPL  ) iPhone and iPads. According to Steve Jobs' biographer, Walter Isaacson, Corning began mass-producing Gorilla Glass at the suggestion of Jobs for the first iPhone.

Willow Glass. Source: Corning. 

Gorilla Glass is part of Corning's specialty materials unit, but its display technology division is the one that makes up the vast majority of net profits. Being so dependent on one segment isn't reassuring for investors. Revenue has been mostly flat since 2012, although profits have been stable, but its wholly owned display division saw an 8% revenue decline this past quarter year over year.

Even its joint display venture with Samsung, called Samsung Corning Precision, is expected to have flat production through the coming year, despite the partnership making up more than half of the glass panel market. TVs simply don't excite consumers like smartphones do. No one is waiting in long lines for the newest television release, but they will for a smartphone.

That's why Willows Glass could be the company's night in shining armor, when it becomes available for consumer electronics in 2016. Willow has the potential to usher in a new breed of consumer products like wearable computing, and some have speculated that a possible Apple iWatch would be a prime candidate for the new glass.

But it's hard to make a bet on Corning at this point just on Willow Glass' potential. Many investors made the same bet when Gorilla Glass was first introduced and although it's become widely used in the mobile industry, Corning still relies too heavily on its television and computer screen display segment. At this point, investors may want to wait and see if Willow Glass will revolutionize the consumer electronics industry like some think it will. Buying Corning's stock right now and waiting for Willow to bring big gains seems too much like a repeat of Gorilla's path.

With the explosive growth of smartphones worldwide, many investors thought they would ride Corning's dominant cover glass to massive investment returns. That hasn't played out yet, as mobile growth has failed to offset declines in the company's core business. In this brand-new premium research report on Corning, our analyst walks through the business as well as the key opportunities and risks facing it today. Click here to claim your copy.

 

Evidence That the Economy Is Healing Barely Fuels Stocks

Blue-chip stocks are narrowly holding onto gains this afternoon following a big week for earnings, and a critical announcement about the health of the economy. With less than an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up by 10 points, or 0.07%.

Fueling the market today was an announcement from the Commerce Department that GDP grew by 2.5% in the first three months of the year. As my colleague John Divine discussed earlier this morning, the economy was aided by an uptick in personal consumption expenditures, which improved by 3.2% in the quarter. Growth was nevertheless weighed down by a decrease in government spending, which shrank by 8.4% over the same time period.

All in all, as the market's reaction demonstrates, the news was positive. It was a dramatic improvement, for instance, over the fourth quarter of last year, during which real GDP grew at an annual rate of only 0.4%. However, it's always important to remember that the first estimate of GDP is just that -- an estimate. To John's point, revisions typically differ from advance estimates by half a percentage point.

In terms of individual stocks, shares of Chevron (NYSE: CVX  ) are headed higher in afternoon trading after the oil giant reported first-quarter earnings (link opens PDF) before the bell. While the oil giant saw its revenue and net income decline by 6.4% and 4.5%, respectively, its earnings per share managed to come in ahead of estimates. For the three months ended March 31, the company earned $3.31 per share compared to the consensus estimate of $3.09 per share. Like ExxonMobil, which reported yesterday, Chevron's top and bottom lines were the latest victims of falling global oil prices.

Also headed higher today are shares of Boeing (NYSE: BA  ) , which are currently up by 1.4%. The move comes on the heels of Japan's announcement that the company's flagship 787 Dreamliner should soon be cleared to fly again, after its battery fix was approved by regulators in that country. On its conference call two days ago, Boeing's CEO expressed optimism that the problem will soon be in the rearview mirror, and that 787 deliveries will begin again in May.

Meanwhile, shares of Hewlett-Packard (NYSE: HPQ  ) are leading the Dow higher, up 3.1% at the time of writing. There doesn't seem to be any specific impetus for the move, and volume is in line with the average. Bloomberg News published an interesting article on the company this morning, noting that it published a list of the 195 smelters that supply materials for HP computers. As the news agency pointed, out, this is a rare occurrence given that the smelting stage is "where some of the most abhorrent labor violations and corrupt business activity can take place." To read more about this, click here.

Alternatively, shares of 3M (NYSE: MMM  ) continue to drag on the blue-chip index. The industrial conglomerate reported its earnings yesterday, sending shares in the company down nearly 3%. Like many of its peers on the Dow, 3M saw its revenue decline on a year-over-year basis, and felt compelled to lower its forward earnings guidance for the remainder of the year.

More expert advice from The Motley Fool
With over 50,000 products, 3M plays a role in making everything from computers to power cables. A long history of invention and innovation has driven the company to its wide reach, but a focus on operational efficiency may be hurting the creative culture that once created Scotch Tape and the Post-It Note. A new leader has taken over and vows to return innovation to the forefront. Does this mean the stock will become more than a dividend, returning to its former glory as a growth stock once again? Find out whether 3M has what it takes to pull it off in The Motley Fool's comprehensive new research report on the company. Simply click here now to claim your copy today.

What Netflix Has in Common With Pandora

Do All Roads Lead to Intel Atom?

Intel (NASDAQ: INTC  ) talks a big game about its future, promising to make its way into nearly every computing device imaginable. Whether it's PCs, tablets, smartphones, or other computing devices, Intel wants its processors to power the future of computing. To date, Intel hasn't been very successful in delivering on its promise, given that the world has embraced mobile computing faster than Intel can keep up with.

For Intel to remain relevant in the world of mobile computing, it needs to deliver a highly efficient yet powerful mobile computing solution that outperforms the sea of ARM Holdings (NASDAQ: ARMH  ) designs. Moreover, it should probably get used to the fact that it won't be able to command the premiums it's grown accustomed to in the PC world.

To pull off this foray into mobile computing, Intel is banking on its leading-edge capacity to carry the weight of its ambitions, which bears the lowest unit cost, offers the highest performance, and consumes the lowest power. In other words, after a complete makeover, Intel Atom will hopefully become Intel's knight in shining armor on nearly all computing fronts.

Threats on threats
Considering how data needs have effectively exploded in recent years thanks to the rise of cloud computing and always-connected devices, you would think that Intel's data-center group has been consistently booming quarter after quarter. However, last quarter, Intel's data-center group experienced a 6.9% sequential decline in revenue, indicating that despite growing data needs across the world, the data-center industry appears to be shifting away from the server monolith model.

In an effort to move away from the server monolith, Facebook (NASDAQ: FB  ) founded The Open Compute Project, which deconstructs the server monolith to be more modular in design. Not only does this approach save on costs, but it also increases the lifecycle of components. The end result speaks for itself, which has allowed Facebook to create a server that's 38% more efficient and 24% cheaper to build than today's state-of-the-art monoliths.

Now, if you couple this growing movement with the fact that high-density, low-power server clusters are on the rise at cloud-based companies, it becomes easy to see how Intel's data-center business, which is heavily reliant on selling server monoliths, could become disrupted.

High replacement value
Low-power server clusters utilize tens of thousands of low-power processors to execute tasks and work especially well for cloud-based services. To boot, these outfits are constantly looking to keep a lid on energy costs associated with data centers, while still being able to scale performance.

If the low-power server market grows larger than the 6% to 10% that Intel currently estimates it to be, the presumed erosion of Intel's Xeon line of server processors may be replaced with Intel's upcoming line of Avoton Atom processors. Naturally, it's going to take multiple Avoton processors to match the power of a single Xeon processor, not to mention that Intel's peak profitability was reached during the 2009 to 2010 Intel Atom heydays.

The road ahead
Considering Intel currently trades at a 35% discount to the S&P 500, investors aren't necessarily getting their hopes up that Intel will successfully capture new market share. However, if the server industry continues shifting toward more efficient power designs, Intel Atom may be able to increase its market share, which could translate into increased profitability for the company.

Between smartphones, tablets, and now servers, there's no denying that Intel has put a serious amount of faith in its Atom processor.

When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel finds itself in a precarious situation longer term if it doesn't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Click here now to learn more.

More Bullish Signs for Deepwater Drilling

3 Killer Features Apple Should Release in 2013

With the iPhone 5 that was launched last September, there really was no "killer" feature that Apple (NASDAQ: AAPL  ) introduced with the device.

The Mac maker became a map maker with the release of Apple Maps, but we know that transition didn't go so well. Besides, Apple Maps was made available for numerous older devices, so it couldn't provide incentive to upgrade even if it proved to be a smashing success. It was the first LTE-equipped iPhone, but that was mostly table stakes by late 2012.

What killer features can Apple release this year to spark a fresh upgrade cycle?

1. iWallet
Apple has been notably silent amid a broader push toward mobile payments. Google (NASDAQ: GOOG  ) Wallet was launched nearly two years ago, leveraging near-field communications, or NFC. Wireless carriers had already put aside their differences to create the ISIS mobile commerce platform, which was announced in 2010.

All the while, Apple has sat by twiddling its aluminum thumbs, even as it sits on 500 million active iTunes accounts in 155 countries with credit card numbers on file. Thus far, Apple's only wallet-esque move has been to release Passbook in iOS 6, which does wallet tasks other than payment.

Passbook. Source: Apple.

While Apple has downplayed NFC in the past because of the chicken-and-egg problem that the technology faces, the iPhone maker has also filed numerous patent applications related to NFC payments.

Security will probably be incorporated into a fingerprint sensor built into the home button, leveraging the AuthenTec acquisition last year. Since a mobile payment service using a fingerprint sensor includes a hardware element, users might be compelled to upgrade their devices if the service is unique, boosting unit sales in the process.

2. iRadio
The music industry is in the midst of a transition toward streaming access models, and as a dominant force in digital music, Apple must inevitably respond in kind. Even though iTunes isn't a major profit center for Apple, the company has always been passionate about music and complementary content sales strengthen its ecosystem by raising switching costs.

Since Apple has such a dominant position in digital music sales, it has another method to monetize a streaming service. Recent data shows that streaming listeners are more likely to purchase music, so Apple could send interested listeners to iTunes to buy content, which could help cover operating costs and royalties on the streaming side. Many existing services already include iTunes referrals, but Apple could do it better since it owns iTunes in the first place.

Add in some iAds, and offering an integrated music streaming service exclusive to iOS that's free to users is within reach.

3. Siri
I know what you're thinking: "Siri came out over 18 months ago! What are you talking about, Fool?" Hear me out.

Even though Siri is mostly software-based, it was launched as a feature exclusive to the iPhone 4S. I say "mostly" because there was technically a hardware element, too. The iPhone 4S had an improved version of Audience's (NASDAQ: ADNC  ) background noise filtering technology integrated directly into the processor, whereas the previous iPhone featured a discrete hardware chip from Audience. Hackers were still able to get Siri to run fine on the older hardware, so Apple's rationale for the exclusivity was only partially valid.

Siri. Source: Apple.

More importantly, Siri is still technically in beta and has yet to see an official stable release. While Siri has yet to shed its effective "work-in-progress" label, Apple has continued to add new features and services to the virtual assistant. The bad news is that Siri is mostly considered a novelty instead of the revolutionary feature it was initially billed as (I'm guilty as charged). A year ago at D10, Tim Cook said that Apple was "doubling down" on Siri, saying a slew of new features were en route. Retrieving sports scores are hardly what I'd consider "doubling down," and Apple has been hiring engineers to teach the assistant new tricks. In its job listings, Apple described Siri as an "entire miniature OS within the OS," showing how ambitious its plans are. So far, Siri seems like unrealized potential.

In many ways, Google Now is everything Siri wants to be. Google has some advantages in data though, since it can incorporate many more sources for predictive purposes, such as flight and traffic data. Siri could potentially be one area where Apple could grow its integration ties with Yahoo! (NASDAQ: YHOO  ) . CEO Marissa Mayer has put a big emphasis on mobile, including acquiring numerous iOS app start-ups. Scoring an Apple partnership to serve up Yahoo!'s data and content within Siri could be a big win for both companies while putting heat on a mutual rival.

A dramatically improved Siri could easily be a killer feature.

Apple could easily launch none, one, or all of these possible features to spark iPhone sales. Or perhaps it has something entirely new up its sleeve that no one is expecting. Either way, Apple still has plenty of iPhone opportunities around the world just waiting to be tapped. Read more in The Motley Fool's new premium research service on Apple, which now includes several bonus reports that are specialized for various topics. Get started by clicking here.

Caterpillar: 'Screaming buy'

One undervalued stock, which I believe is a screaming buy, is Caterpillar (CAT), the well-known global maker of construction, earthmoving and mining equipment.

This company has been going strong for over 85 years and isn't going anywhere. They currently have hundreds of sites around the world, including Antarctica.

Despite market averages being at record highs, Caterpillar is trading in the low $80's compared to $116 in 2011. What might be the reason Caterpillar is moving in such a different direction as the market?

It certainly isn't because anything is wrong with the fundamentals of the company. It is still the same solid company that it has always been and is expected to have record earnings in 2014.

It is not because the company is overvalued. Caterpillar has a price/earnings ratio considerably below both its own average and that of the market in general.

I believe the reason for the stock being at a low is psychological. Crowd psychology is over reacting to current economic problems.

Lately the market averages have hit all time highs, but remember market averages are just that. It's not one size fits all. They are simply overall averages, which do not apply to all of the approximately 5,000 companies that are traded.

Throughout my career, I have invested in all types of markets and there have always been pockets of both undervalued and overvalued stocks.

A major advantage we have as long-term investors is that if the fundamentals of a good company hold up, crowd psychology usually changes to a  more positive outlook.

No one knows how long it takes for a stock value to change, but you get an above average dividend while you are waiting for Caterpillar's stock to rise.

Chiquita Picks a New CFO

Charlotte, N.C.-based Chiquita Brands (NYSE: CQB  ) will soon have a new chief financial officer -- and a new chief operating officer, too. Sort of.

On Wednesday, the banana producer announced that its current CFO, Brian W. Kocher, will be laterally promoted to COO upon filing of the company's Q1 earnings report next month and that new hire, Rick Frier, will replace him in the CFO's post. Frier, previously CFO of privately held Catalina Marketing Corp., is described as having "a strong finance and operational background" and "experience in leading organizations through turnaround situations."

That's good news for Chiquita, which posted only 2% sales growth last quarter and remains unprofitable.

Chiquita did not disclose all the details on its new CFO's compensation plan, but says in an SEC filing that it plans to award Frier $900,000 worth of restricted stock, vesting over four years, as part of his compensation.

Chiquita shares are not reacting particularly positively to news of the new hire, however. Shares are currently trading down 0.4% at $8.50. 

Should You Buy Stock in Amgen After the Q1 Results Pullback?

When it comes to biotechs, Amgen (NASDAQ: AMGN  ) qualifies for the senior citizen discount. The company, founded way back in 1980, ranks as one of the pioneers of the industry.

Amgen announced its latest quarterly results after the market close on Tuesday. Investors were clearly disappointed, with shares falling 6% in after-hours trading. Should you buy stock in Amgen after this pullback -- or is this oldie no longer a goodie?

Crunching the numbers
Amgen announced adjusted earnings of $1.96 per share, a 22% increase year-over-year. This easily beat analyst estimates of $1.84 per share.

GAAP earnings per share numbers also looked solid, coming in at $1.88 per share. That reflects an increase of 27% over 2012 first quarter's GAAP earnings of $1.48 per share.

With good earnings results, why did shares drop so much in trading after the market close? One answer comes from the top line. Amgen reported revenue of $4.2 billion in the first quarter, up 5% from the same period in 2012. However, this total missed the consensus analyst expectation of $4.37 billion.

Also, part of the improvement in adjusted earnings stemmed from tax benefits and share buybacks. That makes the earnings growth somewhat less impressive. Amgen's adjusted net income for the quarter still grew 16% compared to 2012, though.

The biotech also provided earnings guidance for full-year 2013 above the midpoint of the range from $7.05 to $7.35 per share. This projection comes in near or perhaps higher than the $7.21 per share average analyst estimate.

On revenue, though, Amgen reiterated previous guidance of $17.8 billion to $18.2 billion. Analysts expect revenue of $18.07 billion.

Looking ahead
If shares stay down 6% or so after these quarterly results, is Amgen a buy? I think so.

Enbrel still runs behind AbbVie's (NYSE: ABBV  ) Humira in the rheumatoid arthritis market. Humira chalked up 2012 sales of $9.3 billion, while Amgen made $4.2 billion from Enbrel. Pfizer (NYSE: PFE  ) , Amgen's partner with the drug, recorded $3.7 billion revenue for Enbrel.

However, Enbrel is still showing solid growth with first quarter 2013 sales up 11% year-over-year. Amgen stands to benefit beginning later this year as Pfizer yields its royalties for the North American sales.

Also, while AbbVie loses patent exclusivity for Humira at the end of 2016, Amgen received patent approval in 2011 that should give Enbrel protection through 2028. This could allow Amgen to gain the lead in the rheumatoid arthritis market, although the competition should continue to be fierce.

The real key for Amgen's long-term health will be in replacing lost revenue from its Neulasta/Neupogen franchise. Teva Pharmaceuticals (NYSE: TEVA  ) reached an agreement with Amgen in 2011 that allows marketing of a biosimilar in the U.S. beginning this November. Teva already competes against Neupogen in Europe with its Neutroval biosimilar.Sales for Neulasta/Neupogen were flat in the first quarter, but don't expect that to hold up for much longer.

Several of Amgen's products are on the move, though. For example, Xgeva/Prolia sales jumped 51% in the first quarter of 2013 and now total $365 million. Expectations are for the franchise to reach $1 billion or more in peak annual sales.

The biotech should report news later this year on several other promising drugs in its pipeline. Amgen plans to discuss additional findings from a phase 3 study of Talimogene laherparepvec near the end of the year. Results from a late-stage study of Trebananib in treating ovarian cancer are expected for mid-2013.

Plenty of kick left
I suspect that this pullback will only be temporary. The first-quarter results weren't that bad, even with disappointing revenue figures. Amgen might be something of an old codger in the biotech world, but I think it has plenty of kick left. This stock remains a buy in my view.

While you can certainly make huge gains in biotech and pharmaceuticals, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Tennant Misses on the Top and Bottom Lines

Tennant (NYSE: TNC  ) reported earnings on April 22. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), Tennant missed estimates on revenues and missed estimates on earnings per share.

Compared to the prior-year quarter, revenue contracted. Non-GAAP earnings per share expanded. GAAP earnings per share dropped.

Margins dropped across the board.

Revenue details
Tennant tallied revenue of $168.1 million. The four analysts polled by S&P Capital IQ looked for sales of $174.7 million on the same basis. GAAP reported sales were the same as the prior-year quarter's.

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 $0.29. The four earnings estimates compiled by S&P Capital IQ anticipated $0.36 per share. Non-GAAP EPS of $0.29 for Q1 were 3.6% higher than the prior-year quarter's $0.28 per share. GAAP EPS of $0.27 for Q1 were 3.6% lower than the prior-year quarter's $0.28 per share.

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 43.1%, 30 basis points worse than the prior-year quarter. Operating margin was 4.1%, 70 basis points worse than the prior-year quarter. Net margin was 3.0%, 10 basis points worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $200.6 million. On the bottom line, the average EPS estimate is $0.75.

Next year's average estimate for revenue is $760.4 million. The average EPS estimate is $2.39.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 139 members out of 148 rating the stock outperform, and nine members rating it underperform. Among 41 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 40 give Tennant a green thumbs-up, and one give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Tennant is outperform, with an average price target of $51.67.

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Has Caterpillar Finally Cleaned out Its Closet?

1 Potential Roadblock for the Merck Stock Run-up

If you own Merck (NYSE: MRK  ) stock, you likely enjoyed the past couple of months. Shares were on a downward trajectory in late 2012 and into early 2013, but the past couple of months are looking much better.

MRK data by YCharts.

Since February, Merck stock has jumped nearly 14%. Will this nice stock run continue -- or is a roadblock right around the corner?

Potential obstacles
It won't be hard to identify potential obstacles. One that especially stands out is declining revenue from several high-dollar drugs.

Singulair stands at the top of this list. Merck lost U.S. patent protection for the asthma drug in August. Sales for Singulair fell by 67% in the fourth quarter. Merck lost European patent protection for the drug in February, so these numbers will undoubtedly worsen.

Migraine drug Maxalt went off patent in the U.S. in December and loses European market exclusivity in August of this year. Male pattern hair loss drug Propecia also faces generic rivals in 2013. These two drugs combined for more than $1 billion in 2012 sales.

Merck also continues to see lower sales from Remicade and Simponi, which brought in a combined $2.4 billion in 2012. The company reached an agreement with Johnson & Johnson (NYSE: JNJ  ) in 2011 to relinquish rights to market the anti-inflammatory drugs in several regions. Under the deal, J&J gained distribution for Remicade and Simponi in Canada, Latin America, the Middle East, Africa, and Asia Pacific. These territories represent about 30% of Merck's 2010 revenue for the drugs.

The good news for Merck is that diabetes drugs Januvia and Janumet continue to show strong growth. Potential rivals really haven't mounted a significant threat so far. Lilly's (NYSE: LLY  ) diabetes drug Tradjenta was approved in 2011 with some thinking that it could rapidly gain market share However, the launch for the drug got off to a relatively sluggish start. Boehringer Ingelheim, Lilly's partner for Tradjenta, cited an "economic headwind" in Europe and the U.S. that affected sales in 2012.

Most likely to succeed?
While there are several potential roadblocks for sustained stock success, probably the most likely to make a difference in the coming months is a failure in Merck's pipeline. Another experience like Merck had with Tredaptive could easily stop the stock's upward trajectory.

In January, the company pulled the plug on the cholesterol drug after Tredaptive failed to reduce heart problems and safety concerns arose in a large-scale clinical study. While the drug was not yet approved in the U.S., it had received approval in around 70 other countries. Merck subsequently pulled Tredaptive from those markets.

It seems unlikely that history would repeat itself with another drug in Merck's pipeline so soon after this failure, but anything is possible. The company has three drugs under review by the Food and Drug Administration and one under review by European regulators. Any negative news could send Merck stock downward.

I suspect that the drugs being reviewed by the FDA are more likely than not to receive approval. Merck and partner Endocyte (NASDAQ: ECYT  ) are seeking European approval for ovarian cancer drug vintafolide based on early stage and mid-stage clinical trials only. While the drug shows considerable promise, there is always a risk that authorization could be denied.

Perhaps the larger risk stems from the 16 drugs in phase 3 clinical studies. While a small number of failures in these studies probably wouldn't materially impact Merck over the long run, any bad news could take a toll on the stock in the short term.

When, not if
Overall, Merck is doing well despite declining revenue from Singulair and other drugs. I like the company's pipeline potential, especially for insomnia drug suvorexant.

The reality, though, is that the Merck stock run as of late will end at some point. It's a matter of when it will do so -- not if it will. I still like this big pharma over the long run -- the run that counts the most.

Can Merck beat the patent cliff?
This titan of the pharmaceutical industry stumbled into 2013 and continues to battle patent expirations and pipeline problems. Is Merck still a solid dividend play, or should investors be looking elsewhere? In a new premium research report on Merck, The Fool tackles all of the company's moving parts, its major market opportunities, and reasons to both buy and sell. To find out more click here to claim your copy today.

Woodward Beats Analyst Estimates on EPS

Woodward (Nasdaq: WWD  ) reported earnings on April 22. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q2), Woodward missed estimates on revenues and beat slightly on earnings per share.

Compared to the prior-year quarter, revenue expanded. GAAP earnings per share grew.

Gross margins dropped, operating margins dropped, net margins grew.

Revenue details
Woodward chalked up revenue of $485.5 million. The eight analysts polled by S&P Capital IQ wanted to see revenue of $500.1 million on the same basis. GAAP reported sales were the same as the prior-year quarter's.

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 $0.61. The eight earnings estimates compiled by S&P Capital IQ averaged $0.60 per share. GAAP EPS of $0.61 for Q2 were 11% higher than the prior-year quarter's $0.55 per share.

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 28.3%, 290 basis points worse than the prior-year quarter. Operating margin was 11.8%, 100 basis points worse than the prior-year quarter. Net margin was 8.7%, 40 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $500.3 million. On the bottom line, the average EPS estimate is $0.57.

Next year's average estimate for revenue is $1.96 billion. The average EPS estimate is $2.26.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 535 members out of 546 rating the stock outperform, and 11 members rating it underperform. Among 97 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 97 give Woodward a green thumbs-up, and give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Woodward is outperform, with an average price target of $43.14.

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Survey: Budget Cuts Not Hurting U.S. Businesses

Gerry Broome/APBusiness owners, such as Tom Raper, owner of Bragg Pawn Shop near Fort Bragg in North Carolina, wonder how budget cuts will effect business. More than 8,500 civilian employees on the military base will be furloughed one day a week starting this month. NEW YORK -- Washington's budget tightening is having a minimal effect on businesses, a survey of business economists released Monday shows.

The National Association for Business Economics survey asks how higher taxes and lower government spending affected businesses in the first three months of 2013.

Ninety-three percent of respondents say the political developments had no effect on employment levels in the first quarter, and 95 percent say they had no impact on capital spending plans.

Overall, the results paint a picture of businesses feeling better than they were in the fourth quarter, but not as good as they were a year ago.

The NABE did caution, however, that businesses might have already accounted for the higher taxes and lower government spending in the fourth quarter, and adjusted their hiring and spending plans before the end of 2012.

The NABE surveyed a small sample, 58 members, between March 19 and April 2. They represent a variety of sectors, including finance, transportation, health care and manufacturing.

Among the results: Fifty-five percent of respondents reported rising sales -- up from 37 percent in the fourth quarter, but down from 60 percent a year ago. Twenty-nine percent reported rising profit margins -- up from 25 percent in the fourth quarter, but down from 40 percent a year ago. Thirty-one percent said wages and salaries are rising -- up from 27 percent in the fourth quarter, but down from 44 percent a year ago. The improving quarter hasn't translated into more jobs. Only 22 percent said they added employees. That was down from 25 percent in the fourth quarter, and 28 percent a year ago.

Expectations for the future followed a pattern similar to many of the other results -- better than the fourth quarter, worse than a year ago. Sixty-five percent said they expect the economy to grow by more than 2 percent over the next year, up from 50 percent in the fourth quarter but down from 78 percent a year ago.

Overall, they listed global economic conditions, the possibility of further government spending cuts and the "regulatory environment" as their biggest concerns for the next three months. The services industry, including retail, health care and restaurants, was most concerned with the possibility of further government spending cuts. The finance industry and goods producers, such as manufacturing and construction companies, were most concerned by global economic conditions.

JPMorgan's Divided Board? Bring It On!

How is Jamie Dimon responding to increasing shareholder pressure to divide the CEO and chairman roles at JPMorgan Chase (NYSE: JPM  ) ? With implicit threats that, well, aren't very threatening.

Jamie Dimon has made it clear he's not thrilled with a shareholder proposal calling for the separation of the CEO and chairman roles at JPMorgan. In February, he toldinvestors that he wouldn't have taken his previous job at Bank One if he weren't allowed to serve as both CEO and chairman, saying, "Troubled company, big turnaround, divided board. Not me. Life is too short."

While some have argued that we should heed this threat, I believe it should only strengthen shareholders' resolve to oust Dimon as chairman. And if he resigns from his position as CEO? Well, bonus!

Divided bjoard
It's no surprise that Dimon doesn't want a divided board. Personally, he has every reason to prefer a board filled with directors who are united in support of him despite his serious missteps.

But united boards aren't always good for shareholders.

For example, while Aubrey McClendon certainly appreciated having a board that thought his decision to take out $1.1 billion in loans against his stake in company-owned wells posed no conflicts of interest. Chesapeake (NYSE: CHK  ) shareholders felt differently, as demonstrated by the declinein its stock price once McClendon's actions were exposed.

Not surprisingly, McClendon experienced "philosophical differences" with the new board after he lost his chairmanship and when four new directors, selected by activist shareholders Carl Icahn and Southeastern Asset Management, replaced four previous board members.

As I argued here and here, Dimon and his board have also given us plenty of reasons to question their judgment and candor. Key problems include:

The company's decision to deal with risk limit breaches by ignoring them and by altering risk models to obscure risky investments. Dimon's dismissal of concerns about the London Whale trades, calling the threat a "tempest in a teapot," despite the fact that he allegedly knew about the size and complexity of the trades and the losses that already incurred because of them. Dimon's irresponsible certification of a deeply flawed internal controls process. The board's lax oversight of Dimon and the internal-audit and finance functions.

Granted, these problems could be characterized as mistakes rather than the misuse of company resources for personal gain that we saw at Chesapeake. However, whether these missteps resulted from incompetence or an intentional abuse of power, I believe the bottom line is that the behavior of Dimon and his board demonstrate that they are untrustworthy.

In short, I don't think Dimon's "unified" board shouldn't inspire much trust among shareholders. In cases like this, I submit that a divided board, in which questionable decisions like these are challenged before scandals arise because of them, is just what the doctor ordered.

With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal, or whether finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!

3 Apple Plays That Tanked Last Week

Intel's First-Quarter Net Income Tumbles as PC-Makers Struggle

Justin Sullivan, Getty Images

Intel forecast June-quarter revenue in line with expectations and trimmed its capital spending plans as the personal computer industry grapples with falling sales and a shift toward tablets and smartphones.

Intel Corp. (INTC) and personal computer makers are struggling to stop a decline in shipments as consumers hold off on buying new laptops in favor of more nimble mobile gadgets.

"These numbers are not very solid, but the second-quarter guidance is better than feared. Conditions are probably not as bad as industry reports have suggested recently," said Doug Freedman, an analyst at RBC Capital.

Under pressure, Intel also said in its quarterly news release on Tuesday that it was reducing 2013 capital spending from $13 billion to $12 billion, plus or minus $500 million.

Intel held firm on its previous forecast that revenue would grow by a low single-digit percentage this year, a target some analysts believe is becoming more difficult to hit.

"That scares the hell out of me. They are holding to the same ultra-bullish forecast they gave before," said Stacy Rasgon, an analyst at Bernstein Research. "They are presumably pretty bullish on the new products they are planning."

Intel said its first-quarter revenue was $12.58 billion, down from $12.91 billion in the year-ago quarter.

The world's largest chipmaker forecast June-quarter revenue of $12.9 billion, plus or minus $500 million.

Analysts had expected $12.588 billion in revenue for the first quarter and $12.854 billion for the June quarter, according to Thomson Reuters I/B/E/S.

Intel posted first-quarter net income of $2.04 billion, or 40 cents a share, down from $2.74 billion, or 55 cents a share, in the year-ago period. Analysts on average had expected 41 cents per share.

Shares of Intel rose 0.5 percent in extended trade after closing up 2.50 percent at $21.91 on Nasdaq.

The Mystery of Groceries: Do All Brands Come From the Same Place?

Ruffles, or Lays? Life Cereal, or Cap'n Crunch? SoBe Lifewater, or Aquafina?

When you visit the grocery store with those choices on your mind, you may think you're choosing among different brands, but in fact, you're just choosing between various flavors of gigantic snacks and drinks maker PepsiCo  (NYSE: PEP  ) .

Pepsi, you see, owns all these brands. Just like Kraft  (NASDAQ: KRFT  )  owns both Oscar Mayer and Polly O. Like Johnson & Johnson  (NYSE: JNJ  )  owns Lubriderm and Aveeno, Coca-Cola  (NYSE: KO  )  owns Coke and Dasani, and Procter & Gamble  (NYSE: PG  )  owns Dawn, Downy ... and Iams dog food.

Fact is, out of the dozens -- scores, hundreds -- of brands you browse every day in the grocery store, the vast majority of them are owned by just 10 multinational megaconglomerates, as laid out in this graphic from the folks at NaturalNewsBuzz:

Source: imgur.com.

These include the five companies I named, plus Nestle, General Mills, Kellogg, Mars, and Unilever besides.

If you can't beat 'em, buy 'em
How is it that these 10 companies control so much of what we eat, drink, and wash up with after eating and drinking? In some cases, they did it through sheer, unadulterated, purely American genius -- inventing great products to improve people's lives, marketing them brilliantly, and reaping the rewards.

Johnson & Johnson, for example, invented the Band-Aid bandage back in 1920 and has been patching up boo-boos and ouchies with it ever since. Coca-Cola, whose history dates to a Confederate Army officer and amateur confectioner back in the mid-1800s, was a company literally built up around the name of its signature product.

More frequently, though, as time has gone by, these companies have acquired their brands by buying up the companies built by more creative people -- such as when bleach behemoth Clorox (NYSE: CLX  ) spent $925 million to acquire up-and-comer natural-lip-balm maker Burt's Bees in 2007. Or when ConAgra shelled out nearly $5 billion to acquire private-label foodmaker Ralcorp earlier this year.

Necessity is the mother of acquisition
Why do these companies buy competing brands rather than just building a better mousetrap of their own? Here's why.

When you're already a big business, like Coke, which sells $48 billion worth of carbonated sugar water (and corollary brands) annually, it's awful hard to get customers to drink more of your product, year after year, and thus keep those profits growing at the 9% annually or so that Wall Street demands. (If you're PepsiCo, already at $65.5 billion in annual sales, it's even harder.)

Sure, you can try to grow sales by inventing other, newer, and better products to improve customers' lives -- but that's hard work, and no sure thing at all. (Cough, "New Coke," cough-cough, "Crystal Pepsi.")

Often, if you want to keep sales and profits growing, the better and surer bet is to just go out and buy a known, good thing, rather than sink millions of dollars into trying to invent a better thing.

That's what these companies have done, therefore. That's what they're still doing. And that's why. the next time you head to the grocery store, no matter how much you buy, chances are good that your shopping dollars will all wind up in the bank accounts of only 10 companies.

Is having only 10 companies to choose from actually such a bad thing? For investors, it may not be, because it means pofiting from our increasingly global economy can be as easy as investing in your own backyard. The Motley Fool's free report "3 American Companies Set to Dominate the World" shows you how. Click here to get your free copy before it's gone.