Best Mortgage Insurance 2013: May 2014

Saturday, May 31, 2014

Should You Start Buying Argentinean Utilities?

For over 10 years, Argentina's government has held inconsistent energy policies in place. Residential and industrial electric and gas prices were well below marginal costs. As a result, companies such as Edenor (EDN) and its parent, the diversified energy holding Pampa Energia (PAM), lost millions. Low tariffs were simply not high enough to cover total operational costs.

But the outlook seems to be changing. After losing primary parliamentary elections about a month ago, the party that has been the major political force in Argentina since 2003 is preparing itself to leave the government as soon as 2015, when presidential elections are to be held. Moreover, the presidential candidates with real chances for 2015 are far more market-friendly than the current administration. Hence, energy policies should turn for the best, and companies such as Edenor, Pampa and even Transportadora de Gas del Sur (TGS), which is still making money despite low tariffs, should soar.

The question is: Should you go long now?

The Ultimate Argentinean Electricity Holding

Pampa Energia owns 51.5% of Edenor, the largest distributor of electricity in Argentina, with more than 2.7 million customers. Pampa also participates in the electricity generation business (with assets such as Central Loma de la Lata) and controls the transmission business in the country through its controlling stake in Transener, which transports 95% of electricity in Argentina.

Under current conditions, Pampa's results have been consistently poor. Second quarter results are a good example of this. With revenues at around $300 million for the six months ended in June (taking into account the blue chip swap exchange rate), the company produced negative EBITDA results of about $30 million. Even with the stock up by 26% year-to-date, the company trades at 37% its book value. Some investment houses such as Ruane Cunniff have already seen value in the stock and hold it in their portfolio.

Edenor, which is held by Renaissan! ce Technologies, is my favorite play among Argentinean electricity assets. The reason is simple: I always rather own pure plays to diversified holdings such as Pampa Energia. During the second quarter, the company could slightly re-negotiate electricity tariffs with the federal government in order to increase its top line by as much as 15%. That said, Edenor still suffered an operating loss for the quarter of $45 million. Nevertheless, the government has been partially recognizing the losses the company has been suffering through periodical transfers of funds. This is the reason to explain Edenor's highly positive net income figure for the second quarter – Edenor reported a net income gain of $194 million. Edenor, which is up by 48% ytd, trades at 39% of its book value and should soar in price as soon as sustainable energy policies come back to Argentina.

Bottom Line

Clearly, the situation in Argentinean utilities is unsustainable over time. Utility companies should always produce predictable earnings in order to incentivize necessary infrastructure investments. When the current government came into power in 2003, Argentina, a resource-rich country, was self-sufficient in oil, gas and electricity. As a result of poor policies, the country is today a net importer of oil, gas and electricity. Naturally, at the currently negative rates of return, no company is ready to invest as much as necessary to bring the country back to self-sufficiency. My bet is that a new administration will make the necessary changes in order to produce the much-needed investments.

Let's Eat! Why we're obsessed with Wegmans

FAIRFAX, VA – It's not even noon on a Friday, but Wegmans is teeming. Customers push their carts past an abundance of fresh produce and just-baked bread that's still so warm the loaves are steaming their plastic wrapping.

Displays of crisp vegetables – lettuce, carrots, broccoli, eggplant – take up an entire wall of the store's entrance, immediately giving customers a colorful welcome. It may be the Friday before Memorial Day weekend, but the manager of the perishables section tells me the number of customers shopping right now is typical.

And at an average of 120,000 square feet, Wegmans can afford to draw large crowds. Wegmans stores are three times the size of a typical grocery store. And that means they can fit three times as much stuff, making room for a cheese selection that spans 700 varieties, a kosher deli, enough bulk candy to make anyone squeal and a vast collection of wine.

This is my first visit to the chain that was honored as the country's favorite in a survey by Consumer Reports earlier this year. I'm here to find out where the rave reviews come from. After getting a tour and interviewing shoppers, I've come up with five reasons why Wegmans is considered the best.

• Produce: This is the first section customers see when they walk through the doors, and the most vibrant. Deep pink raspberries, rich strawberries, locally grown tomatoes and an entire wall overflowing with green leafy lettuce and royal purple eggplant. And I've never seen such a large selection of mushrooms. For the high rollers, Wegmans even has truffles in a locked case, at $1,000 a pound (OK, $999.99).

• Cheese: Who doesn't want access to 700 varieties of cheese? Employees are slicing massive rounds of Jarlsberg into more manageable wedges and giving out samples of Wegmans' exclusives, like a French cow's milk cheese wrapped in a brandy-soaked chestnut leaf.

• Wine: Forget Trader Joe's. When it comes to wine, the selection at Wegmans is hard to top in the grocery store wo! rld. Plus you can mix and match craft brews to create your own six-pack. Want a taste first? Go ahead. Wegmans even samples gluten-free beers.

• Pastries: Head to the pastry section to waft in the scent of sugar that permeates the air as cookies, cupcakes and pies are pulled from the ovens. Once you can't hold back any longer, make a to-go box of your favorite treats, like chocolate chip walnut cookies, miniature lemon tarts and sugar cookies dipped in rainbow sprinkles.

• Prepared food: After all that shopping, you've probably worked up an appetite. But you don't have to grab fried chicken and potato wedges from the deli on your rush out the door. Take a breather in the prepared foods section, where you can take your pick between a salad bar, Asian bar, Indian bar, sushi, soup and pizza. Wegmans sent its culinary team to Asia in order to properly learn how to prepare the continent's many cuisines. You can even enjoy a glass of wine at the bar-top and watch chefs prepare spicy tuna rolls and sashimi.

Friday, May 30, 2014

Abraxas Petroleum: Undervalued with Strong Growth Potential

Abraxas Petroleum Corporation (AXAS) is a small cap exploration and production company based in San Antonio, Texas. The company has a market cap of $472 million and has been trending higher since last year in terms of stock price. The company is currently trading at a price of $5 and this article discusses why the upside will continue.

EBITDA Expansion from Change in Production Mix

Over the last 18 months, the company has strategically shifted its focus to core assets. Last year, it sold its non-operating assets in Bakken and Wyoming. The proceeds were used to buy core assets in Eagle Ford and to repay debt. The positive impact is evident in the company's balance sheet with the leverage (debt/EBITDA) declining from 18x in 2012 to 1x in 2013.

	2013	2012
Debt	43.9	124.8
EBITDA	41.5	6.7
Debt/EBITDA	1.0	18.6

In addition to this there has been a change in the product mix, which has impacted margins. Abraxas has been increasing its oil and liquid production as a percentage of total production. There has been a 63% rise in the oil and liquid production since first quarter 2012 and this has resulted in an EBITDA margin expansion of 1500 basis points. With this trend expected to continue, the company is well positioned to generate robust EBITDA and further increase its operating margin.

	1Q14	1Q12
EBITDA	14.9	7.0
Revenue	25.9	16.3
EBITDA margin	58%	43%

Capital Expenditure to Translate Into Robust Growth

The company has an approved capital budget of $105 million for fiscal 2014 with 40% allocated for the development and completion of well drilling in Eagle Ford and 51% is allocated for the development of their wells in Bakken Shale.

The current capital expenditure program is focused on two key assets, which can yield strong results in terms of production upside. The potential of the assets is evident from the fact that Abraxas has 9901 net acres of assets in Eagle Ford with a majority of its assets in Jourdanton. The company has 100% working interest in Jourdanton with a potential of 90+ wells. As these wells are drilled, production upside is imminent.

This capital expenditure programme of the company suggests that Abraxas plans to add more rig units and hence de-risk more assets. It is estimated that with a capital investment of $95 million in these assets, production growth could potentially be 24% for fiscal2014. This implies that the company is well set for robust growth in the current financial year. This should help the stock to sustain its upside over the medium-term.

Source: Company Presentation

Attractive Valuations

Considering the above factors, the company is well placed to grow in terms of production and this will translate into healthy revenue and EBITDA growth. The undervaluation is clear considering the fact that the company is currently trading at a PE of 11.2 with an estimated earnings growth for fiscal 2014 and fiscal 2015 at 215% and 29% respectively. This would result in a considerably low PEG, and hence suggests the company is grossly undervalued with respect to the future earnings potential.

Conclusion

Abraxas Petroleum Corporation has robust growth lined up for the next two years. The company's stock has trended higher over the last year, discounting the positives in the foreseeable future. However, PEG valuation still suggests that the company has more upside. Investors can consider the stock with a medium-term time horizon.

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Best International Companies To Own For 2015

For almost two years now, the market has been range bound, oscillating between the 17,000 to 20,000 points range. Just when it looks like the shackles are lifting comes the turnaround and just as investors start fearing an imminent crash, the index manages a recovery and rebounds. Consequently, most investors are in a dilemma and quite don� know how to play out this situation. While some have preferred to wait out the volatility by staying out of the market, others are indulging in chasing returns by dabbling heavily in gold, silver and other commodities. Yet others are gung-ho on FMPs and fixed deposits where in some cases the returns on offer are in the region of 10% p.a..

However, the truth is there is no reason for investors to get antsy. While desiring a good return is fine, having a rational perspective is crucial. Commodity prices were in a speculative bubble and when international commodity exchange officials raised margin requirements, prices have started going into a free fall. Similarly, in an effort to earn 10% p.a., one could run the risk of losing 100% in no time! Chasing returns is risky and its best to avoid greed. Like I said, its time to take a step back get a perspective. Towards, this end, this week I am going to review some of the lessons that one learns along one� journey as an investor. Some of these lessons emanate out of personal experience, some out of the experience of others and some is wisdom provided by those who have been fairly successful investors themselves.

Best International Companies To Own For 2015: Timios National Corp (HOMS)

Timios National Corporation, formerly Homeland Security Capital Corporation, incorporated on August 12, 1997, provides radiological, nuclear, environmental, disaster relief and electronic security solutions to government and commercial customers. The Company is engaged in the strategic acquisition, operation, development and consolidation of companies operating in the chemical, biological, radiological, nuclear and explosive, (CBRNE), incident response and security marketplaces within the homeland security industry. It is building consolidated enterprises (platform companies) through the acquisition and integration of businesses in the homeland security industry, particularly businesses focused on CBRNE incident response. In August 2011, the Company sold its Nexus Technologies Group. In October 2011, the Company sold its Safety and Ecology Holding Corporation subsidiary to Perma-Fix Environmental Services, Inc. In May 2012, the Company announced the acquisition by its subsidiary Timios, Inc. of Glenn County Title Company. In June 2013, Timios National Corp announced that it has completed the purchase of Glenn County Title Company (GCTC). In September 2013, Timios National Corp announced that it had executed a purchase agreement for the assets of Adobe Title, LLC.

The Company offers a range of management and operational services to each of its subsidiaries through a team of dedicated professionals. Its subsidiaries compensate its holding company for such services. Its core services include environmental remediation and restoration, regulatory compliance, facilities management, facility deactivation, decommissioning and demolition, emergency response, design and construction services and security integration to the United States government agencies, such as the Department of Energy (DOE), the Department of Defense (DoD), the Environmental Protection Agency (EPA), the Federal Emergency Management Agency (FEMA), the United states Army Corps of Engineers and the National Aeronautics and Space ! Administration (NASA). It conducts its operations through Safety & Ecology Holdings Corporation (Safety), its wholly owned subsidiary; Nexus Technologies Group, Inc. (Nexus), its 93% owned subsidiary, and Polimatrix, Inc. (PMX), its joint venture. Safety is an international provider of environmental, nuclear and radiological infrastructure remediation, disaster relief solutions and advanced construction services. Nexus designs, develops and installs integrated security systems for government and commercial clients. PMX markets, sells and distributes radiological detection equipment.

Safety & Ecology Holdings Corporation

Safety is a provider of global environmental, hazardous and radiological infrastructure remediation, upgrades and nuclear services in the United States and the United Kingdom. Safety�� main business areas and service offerings include decommissioning and remediation environmental and remedial consultancy services; environmental and consultancy services; nuclear energy design, build, refurbishment and operational support services, and instrumentation and measurement technologies. Safety offers a range of services that include characterization, decontamination, decommissioning of facilities, soil and groundwater remediation, infrastructure reduction and demolition, site preparation, excavation, and remedial system construction; underground and overhead utility installation; electrical and mechanical installation; security fencing and device installation and upgrades; building renovation; piping; roadways, parking lots, and drainage system construction/repair, and landfill remediation and capping.

Safety engages in facility deactivation, demolition and closure solutions, including project investigation; radiological pre-engineering; demolition planning; removing above ground structures and structural components; storing, testing, certifying, processing and shipping nuclear waste, and abatement of hazardous materials. Safety focuses its service offe! ring on t! he application and integration of health physics, industrial hygiene, hazardous material consultancy and safety and health. In addition, Safety couples its technology with its instrumentation offering, on-site radiological laboratory capabilities and mobile radiological materials license to provide radiological services and consultation. Safety provides integrated services to the nuclear energy industry. Safety provides specialized services to a customer base, including government agencies, commercial customers and major engineering and construction companies around the world that are focused in the nuclear new plant deployment initiative, facility operation, decommissioning and refurbishment. The elements of Safety�� technology offering are instrumentation services and instrumentation technology, both of which are targeted to field investigations, characterizations of contaminants and clean-up and material management and disposal solutions.

The Company competes with Stoller, Cabrera, Portage, LATA Northwind, Demco, Eagle, Pro2Serv, PMTech, Navarro, Energy Solutions, the Washington Group, Tetra Tech, Shaw Environmental and C2HM Hill.

Nexus Technologies Group, Inc.

Nexus is a mid-Atlantic security integrator for the corporate and governmental security markets that specializes in the engineering and installation of custom designed integrated electronic security solutions, including access control, alarm, closed circuit television (CCTV), video, communication, perimeter protection and bomb and metal detection security systems. Nexus provides solutions to protect people, property and assets. As a systems integrator, Nexus designs, customizes, installs, integrates and maintains closed CCTV, access control, video and communication systems for its customers. Nexus has undertaken projects in a range of markets, including financial services, corporate and commercial, healthcare, government, nuclear utility services, public transportation, airports, industrial complexes,! museums,! prisons, higher education and data centers. As a provider of custom engineered integrated security solutions, including access control, alarm/intrusion, CCTV, communication, perimeter protection and bomb and metal detection security systems, Nexus is aligned with original equipment manufacturers (OEMs). Nexus has focused on five sectors in which it intends to expand, both vertically and horizontally. These sectors are Financial Institutions, Infrastructure Security, Government Facilities, Education Facilities and Corporate Markets.

Financial Institutions include banks, brokerage facilities, trading facilities and foreign currency exchange centers. Infrastructure Security include nuclear power generating facilities, water processing facilities, electricity generating facilities, power transfer stations and transportation centers, which include highway, bridge, tunnel, airport, rail and port security. Government Facilities include federal, state and local government buildings and offices, domestic and foreign embassies, military installations and police and fire department operations centers. Education Facilities include grammar, high school and college buildings, dorms and campuses, satellite learning centers and daycare centers. Corporate Markets include office buildings and grounds, parking lots, garages, retail locations, warehouses and apartment and condominium complexes.

The Company competes with Henry Brothers Electronics, Inc., Diebold, Inc. and ADT.

POLIMATRIX, INC.

PMX is a total solutions provider delivering radiation and nuclear protection and detection services through several engineered portable and stationary devices. PMX�� business plan is the development and marketing of radiological detection products and services. PMX has developed a range of domestic and international marketing initiative in Washington, DC, Virginia and Illinois. These states have used the PMX detection devices for a range of detection, prevention and first respon! der activ! ities. PMX�� product line of portable detection devices are designed to detect potential threats and can be positioned along transportation routes or carried by nuclear power generating facility security personnel. It operates PMX with the assistance of Safety�� personal.

The Company competes with Thermo Scientific and Canberra.

Advisors' Opinion:

[By Peter Graham]
Small cap stocks Timios National Corp (OTCMKTS: HOMS) and Lattice Inc (OTCMKTS: LTTC) surged 54.29% and 20.83%, respectively, while Unique Pizza & Subs Corp (OTCMKTS: UPZS) sank 27.27% last Friday. But today is a new trading week with the last two trading days for the year. So what will these three small caps do today, tomorrow and after New Years�� Here is a closer look:
[By Peter Graham]
However, there have been no further updates since then. A quick look on both Google Finance and Yahoo! Finance reveals the latest financials date from the end of September 2012 ��meaning its investor beware.
Timios National Corp (OTCMKTS: HOMS) Has No News Beyond Filings
Small cap Timios National Corp is involved in the strategic acquisition, development and consolidation of real estate service businesses. Former Maryland Congressman C. Thomas McMillen, who served three consecutive terms in the U.S. House of Representatives from the 4th Congressional District of Maryland, heads the company. On Friday, Timios National Corp sank 32.28% to $1.28 for a market cap of $3.01 million plus HOMS is up 54.2% over the past year and up 1,013% over the past five years according to Google Finance.

Best International Companies To Own For 2015: Acme United Corp (ACU)

Acme United Corporation, incorporated in 1882, is a worldwide supplier of cutting, measuring and safety products to the school, home, office, hardware and industrial markets. It markets and sells under five main brands - Westcott, Clauss, Camillus, PhysiciansCare and Pac-Kit. The Company has grouped its operations into three segments based on the Company's geographical organization and structure: United States, which includes its Asian operations; Canada and Europe. On February 28, 2011, the Company purchased all of the assets of The Pac-Kit Safety Equipment Company, which is a manufacturer of first aid kits for the industrial, safety, transportation and marine markets. In June 2012, the Company acquired selected assets of The C-Thru Ruler Company. In August 2013, the Company purchased a manufacturing and distribution center in Rocky Mount, North Carolina.

The Company's operations are in the United States, Canada, Europe (located in Germany) and Asia (located in Hong Kong and China). The operations in the United States, Canada and Europe are primarily engaged in product development, marketing, sales, administrative and distribution activities. The operations in Asia consist of sourcing, product development, production planning, quality control and sales activities.

Cutting

Principal products within the cutting device category are scissors, shears, guillotine paper trimmers, rotary paper trimmers, rotary cutters, knives, hobby knives and blades, utility knives, pruners, loppers, saws, manicure products, medical cutting instruments and pencil sharpeners. During the year ended December 31, 2011, products introduced included an expanded line of heavy duty school and office iPoint pencil sharpeners. Other recent product introductions included Westcott TrimAir paper trimmers with patented titanium coating and a blade change system for rotary and personal trimmers, Westcott Ultra Soft Handle scissors with anti-microbial product protection, True Professional sewing shear! s, as well as a line of iPoint pencil sharpeners utilizing the Company's non-stick coating. The Company also added to its KleenEarth family of recycled products by modifying the production process to allow for multi-colored products as opposed to the traditional black. During 2011, Clauss introduced the AirShoc line of titanium coated non stick garden tools.

Measuring

Principal products within the measuring instrument category are rulers, and math tools. During 2011, product introductions included Westcott branded compasses, protractors, rulers and math kits with anti-microbial product protection.

Safety

Principal products within the safety product category are first aid kits, personal protection products and over-the-counter medication refills. The Company markets these products under the PhysiciansCare brand.

The Company competes with Fiskars Corporation, Helix International Ltd. and Johnson and Johnson.

Advisors' Opinion:

[By Bristol Voss]
Acme United (NYSE: ACU) is a global supplier of cutting, measuring and safety products to consumer and industrial markets. It has neatly tracked the S&P small-cap index and shown the least volatility of the three stocks. While its $43.7 million market cap is the lowest of the three, its nearly $14 share price is the highest. It has a forward P/E of 9.2, and its dividend yield is the best of the three at 2.3%. In its most recent quarter, Acme posted a 7% increase in net income and a 3% rise in earnings.

Hot Solar Stocks To Buy Right Now: Consolidated Graphics Inc. (CGX)

Consolidated Graphics, Inc., together with its subsidiaries, provides general commercial printing and print-related services in the United States and internationally. The company�s services include traditional print services, such as electronic prepress, digital and offset printing, finishing, and storage and delivery of custom manufactured printed documents; and fulfillment and mailing services for such printed materials. It also offers technology solutions that enable its customers to procure and manage printed materials and/or design, procure, distribute, track, and analyze results of printing-based marketing programs and activities; and multi-media capabilities, which allow customers to supplement the message of their printed materials through other media, such as the Internet, email, or text messaging. The company prints multi-color marketing materials, product and capability brochures, point-of-purchase displays, packaging, direct mail pieces, shareholder communicat ions, trading cards, calendars, and photo books, as well as customized materials for the financial services, insurance, healthcare, and other industries. In addition, it offers e-commerce software solutions and other print-related services. The company�s customers include national and local corporations operating in a range of industries, as well as advertising agencies, graphic design firms, catalog retailers, direct mail marketers, state and local governments and quasi-governmental agencies, educational institutions, not-for-profit associations, and political campaign organizations. Consolidated Graphics, Inc. was founded in 1985 and is headquartered in Houston, Texas.

Advisors' Opinion:

[By Monica Gerson]
Breaking news
Starwood Hotels & Resorts Worldwide (NYSE: HOT) reported a gain in its third-quarter core earnings and lifted its full-year earnings forecast. To read the full news, click here. Procera Networks (NASDAQ: PKT) and Skyfire, a fully-owned subsidiary of Opera Software, today announced a joint solution and partnership to tackle the rapid growth of video traffic on global mobile networks, based on an open, scalable ICAP architecture. To read the full news, click here. R. R. Donnelley & Sons Company (NASDAQ: RRD) and Consolidated Graphics (NYSE: CGX) jointly announced today that they have signed a definitive agreement by which RR Donnelley will acquire Consolidated Graphics, a provider of digital and commercial printing, fulfillment services, print management and proprietary Internet-based technology solutions. To read the full news, click here. Dunkin' Brands Group (NASDAQ: DNKN) reported a 36% rise in its third-quarter income. To read the full news, click here.
Posted-In: Jobless Claims JP Morgan US Stock FuturesNews Eurozone Futures Global Pre-Market Outlook Markets

Best International Companies To Own For 2015: Medley Capital Corporation (MCC)

Medley Capital Corporation is a business development company. The fund seeks to invest in privately negotiated debt and equity securities of small and middle market companies. It targets private debt transactions ranging in size from $10 million to $50 million to borrowers principally located in North America. It structures its investments as first lien senior secured loans, second lien senior secured loans, senior secured notes, senior subordinated notes, unitranche loans, and seeks warrants or other equity participation. The fund may take a board seat on its investee companies and exits its investments between three years and seven years.

Advisors' Opinion:

[By Nathan Slaughter]
All of this is to say that while I strive to hunt down and recommend attractive securities with double-digit yields -- and own a few, like Medley Capital Corp. (NYSE: MCC) -- they are the exception in this environment, not the rule.

Best International Companies To Own For 2015: Vonage Holdings Corp.(VG)

Vonage Holdings Corp. provides broadband communication services in the United States, Canada, and the United Kingdom. The company offers voice and messaging services through session initiation protocol (SIP) based voice over Internet protocol network. The company?s primary product offering is Vonage World, a residential plan with unlimited calling domestically and to approximately 60 countries, including India, Mexico, and China for a flat monthly rate. It also provides broadband telephone replacement services to residential, small office, and home office customers through various service plans with a range of basic features, including call waiting, caller ID with name, call forwarding, and voicemail. In addition, the company offers mobile services through mobile applications that can be downloaded for iPhone, iPad, iPod touch, and Android OS devices. Further, the company provides Vonage Mobile, a free downloadable mobile application that provides free calling and messagi ng between users who have the application, as well as traditional paid international calling to any other phone. It markets its services through in-bound telemarketing and online direct sales, as well as through regional and national retailers. As of December 31, 2011, the company had approximately 2.4 million subscriber lines. Vonage Holdings Corp. was incorporated in 2000 and is headquartered in Holmdel, New Jersey.

Advisors' Opinion:

[By Alex Planes]
Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Vonage Holdings (NYSE: VG ) fit the bill? Let's take a look at what its recent results tell us about its potential for future gains.
[By Tim Beyers]
If Vonage (NYSE: VG ) has its way, the days of AT&T (NYSE: T ) , Verizon (NYSE: VZ ) , and their big-carrier peers controlling the way area codes are assigned are coming to an end.

Best International Companies To Own For 2015: Sotherly Hotels Inc (SOHO)

SoTHERLY Hotels Inc., formerly MHI Hospitality Corporation, incorporated on August 2004, is a self-managed and self-administered real estate investment trust (REIT) that was formed to own, acquire, renovate and reposition primary full-service upper upscale and upscale hotel properties located in primary markets in the Mid-Atlantic and Southern United States. The Company conducts its business through MHI Hospitality, L.P., its operating partnership, of which the Company is the general partner. As of December 31, 2011, the Company owned approximately 77% of the partnership units in its operating partnership. In November 2013, SoTHERLY Hotels Inc announced that it has acquired the entity which owns the Crowne Plaza Houston Downtown Hotel, a 259-room, upscale, full-service hotel located in downtown Houston, Texas.

As of March 1, 2012, the Company�� portfolio consisted of 10 primarily full-service up-scale and upper up-scale hotels located in seven states with an aggregate of 2,424 rooms and approximately 120,200 square feet of meeting space. Nine of these hotels are wholly owned by subsidiaries of its operating partnership and operate under the Hilton Worldwide, InterContinental Hotels Group and Starwood Hotels and Resorts brands and are managed on a day to day basis by MHI Hotels Services, LLC (MHI Hotels Services). It also owns a 25% indirect non-controlling interest in the Crowne Plaza Hollywood Beach Resort through a joint venture with Carlyle.

The Company leases its hotel properties to MHI Hospitality TRS, LLC (its TRS Lessee), which in turn has engaged MHI Hotels Services, an independent management company, to manage its hotels. Its TRS Lessee is a wholly owned subsidiary of MHI Hospitality TRS Holding, Inc. (MHI Holding, and collectively, MHI TRS). As of March 1, 2012, the Company�� portfolio consisted of the properties, including Crowne Plaza Hampton Marina, Crowne Plaza Tampa Westshore , Crowne Plaza Jacksonville Riverfront , Crowne Plaza Jacksonville Riverfront , ! DoubleTree by Hilton Brownstone - University and Holiday Inn Laurel West. As of December 31, 2011, the Company owns two leasehold interests in the Shell Island Resort, a 160-unit condominium resort property in Wrightsville Beach, North Carolina

Advisors' Opinion:

[By Marc Bastow]
Upscale hotel property real estate investment trust Sotherby (SOHO) raised its quarterly dividend 12.5% to 4.5 cents per share, payable on Jan. 1, 2014 to shareholders of record as of Dec. 13.
SOHO Dividend Yield:�3.87%
[By George Putnam]
Steve Halpern: Now, another pick that you have is Sotherly Hotels (SOHO). Could you tell us about that company?

George Putnam: Sure. This is a small-cap name. Like many others in the industry, it had to struggle a bit from 2008 and has devoted most of its attention to getting its balance sheet back in order, and some of its existing hotels fixed-up and repositioned.

Best International Companies To Own For 2015: EchoStar Corporation(SATS)

EchoStar Corporation, together with its subsidiaries, engages in the design, development, and distribution of digital set-top boxes and related products. The company?s EchoStar Technologies segment designs, develops, and distributes digital set-top boxes and related products and technology, including Slingbox placeshifting technology primarily for satellite television (TV) service providers, and telecommunication and cable companies that allow consumers to watch and control their home digital video and audio content through a broadband Internet connection; and Slingboxes for consumers through retail outlets. This segment also provides digital broadcast operations comprising satellite uplinking/downlinking, transmission services, signal processing, conditional access management, and other services primarily to DISH Network. Its EchoStar Satellite Services segment offers capacity leasing on a full-time and occasional-use basis primarily to DISH Network, as well as to Dish M exico, the U.S. government service providers, state agencies, Internet service providers, broadcast news organizations, programmers, and private enterprise customers through its 10 owned and leased in-orbit satellites and related Federal Communications Commission licenses. The company?s Hughes segment provides satellite broadband Internet access to consumers in North America; broadband network services and systems to the domestic and international enterprise markets; managed services and equipment to enterprises; turnkey satellite ground segment systems to mobile system operators; and microwave radio network systems for cellular backhaul and broadband wireless access. It has operations in North America, Asia, Africa, Australia, Europe, South America, and the Middle East. EchoStar Corporation was founded in 2007 and is headquartered in Englewood, Colorado.

Advisors' Opinion:

[By James Miller Phd]
The company has a current ratio of 13.05% which is higher than the one registered by Charter Communications Inc. (CHTR), Digital Globe Inc. (DGI), EchoStar Corp (SATS), Gilat Satellite Networks Ltd. (GILT) and Intelsat SA (I).

Best International Companies To Own For 2015: China Fund Inc (CHN)

The China Fund, Inc. (the Fund), incorporated on April 28, 1992, is a non-diversified, closed-end management investment company. The Fund�� investment objective is to achieve long-term capital appreciation through investment in companies and other entities with significant assets, investments, production activities, trading or other business interests in the People�� Republic of China, or which derive a significant part of their revenue from the People�� Republic of China.

The China Fund, Inc. may invest in equity-linked securities, such as linked participation notes, equity swaps and zero-strike options, and securities warrants collectively referred to as Access Products. The Fund invests various sectors, including industrials, consumer discretionary, energy, information technology, financials, consumer staples, materials, utilities, healthcare and telecommunications. Martin Currie Inc. serves as the investment manager for the Fund's listed assets. Asian Direct Capital Management is the investment manager for the Fund's assets allocated to direct investments.

Advisors' Opinion:

[By Stephen Leeb, Founder and Research Chairman, Leeb Group]
Healthy economic data, coupled with low inflation, make Chinese stocks attractive as well. Our first choice here is the China Fund (CHN). It holds a diverse portfolio of stocks primarily focused on the Chinese domestic market.

Thursday, May 29, 2014

The Seed Segment: Monsanto vs. Syngenta

The battle on the field continues. Monsanto (MON) and Syngenta (SYT) are expected to enter the seed business with a strong bid. Both companies stand at the top of the agricultural inputs industry, and continue to look for ways to improve performance. Let us see what some gurus think about their future prospects, and if they see them fit for a long term investment.

Research over Legal Battles

Monsanto is the largest crop protection and seed producer in the industry with a market cap of more than $54 million. The company has recently made the news in association to a hay producer who was denied the right of export due to genetic contamination. Stock price, however, remains on a steep climb and operations continue as normal.

Results for the last quarter were strong thanks to a higher demand for corn in Latin America and Eastern Europe. In line, earnings and revenues displayed noticeable improvements year-over-year that helped increase cash volumes. The success on performance allows the company to continue feeding its research and development pipeline in the short term. Also, the firm is well known for introducing products to help farmers improve yields and reduce production costs. Hence, the business created an important economic moat for itself.

For the long run, Monsanto needs to develop a new strategy to ease the negative impact from currency fluctuations. Also, a keen eye will have to watch over the research and development pipeline as this is the lifeline for the business. GM seeds already brought many legal battles to the firm´s doors, prompting the company much unwanted publicity. In India, for example, the legal rumbles derived in massive protests asking government officials to ban the company altogether.

Financially, Monsanto is impeccable with a strong revenue, growing cash, and high operating margin. Gurus have seen the potential for growth but also the risks associated with the stock. For example, Steve Mandel of Lone Pine Capital, the largest guru holding the ! stock, has reduced his position by 20%. Opposite, Andreas Halvorsen of Viking Global Investors increased his position by 747% turning into the third largest guru. I share Halvorsen's bullish sentiment because the company has experience concerning legal battles, and growing demand for food products guarantees a strong pool of clients for the long haul.

Keeping Up with the Competition

Syngenta is half the size of Monsanto when measured by market cap. Its strength lies in crop protection, but its efforts are now focused on catching up with the competition in the GM seeds segment. In line, the company has recently made the news when making public a strong commitment to develop new wheat strings. More, the firm expects its products to have a great impact in overall yield in the coming years.

In the short run, Syngenta is improving its cost structure and the results have reflected upon higher earnings and revenues. Efforts have also been driven towards catching up with competitors in the seeds segment. Growing demand for farm products and higher yields will serve for an incentive to the firm in its search for glory in the seeds segment. Also, margins tend to be wider in the seed segment. Hence, the firm faces the challenge of replicating success stories researching for the crop protection segment in a new segment.

A great disadvantage that Syngenta faces is Monsanto's decision to also focus in the same segment. So, both giants will collide head-to-head in a very profitable segment. The fate of both will be decided by its R&D success. Given its size, Syngenta will have to place a greater effort into developing assuming the risk that much of its revenues will be affected to that end alone. Additionally, finances will come under extra pressure as patents from the crop protection segment begin to drop.

Financially, Syngenta is also strong, but indicators have not improved much lately. Gurus have not moved much about this stock. Noticeable is Steven Cohen's decision to opt out c! ompletely! , and the lack of position increments by Ken Fisher and Jim Simons, the largest gurus holding shares. I remain bearish about the stock given the great dependence on R&D for the new segment, where it will meet head on with Monsanto.

Conclusion

I prefer Monsanto to Syngenta due to its market position and size. Also, Monsanto can exert price leverage in the crop protection segment limiting revenues for Syngenta. In turn, Syngenta will have less cash to invest in R&D and its future can be greatly jeopardized.

Disclosure: Vanina Egea holds no position in the mentioned stocks.

Wednesday, May 28, 2014

Rieder: Time to pass shield law for journalists

Last summer, supporters were confident that at long last the federal shield law for journalists would be enacted.

After a number of false starts, they were convinced that the stars were aligned and that a measure to ensure that journalists wouldn't have to choose between protecting confidential sources and going to jail would make it over the finish line.

The key factor was widespread revulsion at the Obama administration's treatment of journalists in overly zealous leak investigations. In September, by a 13-5 vote, the bill was approved by the Senate Judiciary Committee.

Since then, nothing. And news media organizations and First Amendment groups backing the bill fear the momentum of the summer of 2013 may have waned.

That would be bad. It's an important piece of legislation that's vital not only to journalists but, more important, to American citizens.

Confidential sources can be problematic. The transparency of attaching a name to information is obviously preferable. But in some cases, when sources may put their lives in jeopardy or risk losing their jobs by revealing information that's critical to the public interest, anonymity is a defensible cost of doing business. And a journalist should be able to protect that confidentiality without heading to the slammer.

REM RIEDER: Drop effort to make Times reporter testify

This is hardly an academic debate. Last July, the U.S. Court of Appeals for the 4th Circuit ruled that New York Times reporter James Risen would have to testify in the prosecution of former CIA analyst Jeffrey Sterling. If the U.S. Supreme Court rejects Risen's appeal, which would hardly come as a shock, the journalist will have to pick between giving up the source or heading to prison, as then-New York Times reporter Judith Miller did for 85 days in 2005.

Last July, Senate Judiciary Committee Chairman Charles Schumer, D-N.Y., assured me that the measure would "become law relatively quickly, by congressional standards." When I asked Schu! mer spokesman Matt House on Wednesday if his boss was still "confident," he responded, "We remain hopeful it will pass this year." Which is not quite the same thing.

He said he wasn't sure when the bill would be taken up. "Senate Republicans have been blocking bipartisan bills over non-related issues, but we're hopeful that won't happen with the media shield bill," House said.

Everyone seems to agree that more than 50 senators, a majority, are in favor. The problem, as Kevin Goldberg, legal counsel for the American Society of News Editors, points out, is that's not good enough these days. You need 60 votes to cut off debate if opponents try to block a measure.

Goldberg says the leadership wants to make sure those 60 votes are there. But finding out has been a challenge. (ASNE is a key part of the coalition of groups pushing the shield law).

It's the old chicken and egg conundrum. When you ask some senators if they will back the bill, they respond that they'll focus on it when it's heading for the floor. But Senate leaders, who don't want to see the bill tie up the world's greatest deliberative body, are reluctant to give it the green light until they are sure those 60 votes are locked up, Goldberg says.

Support tends to crest when something happens that underscores the urgency of the measure, as was the case last summer. But with time that support ebbs. That's why quick action at a flashpoint is key. The next such moment may come if the Supreme Court rejects Risen's appeal.

It's not like this is a radical idea. Forty-eight states and the District of Columbia have similar protection for journalists.

It's hardly a get-out-of-jail-free card. The law includes a balancing test, which means in some instances national security concerns will trump the shield law and a journalist will be required to testify.

And the Judiciary Committee did a good job of sorting out who is covered, a thorny issue in an era in which traditional journalists are hardly the only peopl! e carryin! g out the craft.

So let's stop fooling around. It's time for both houses of Congress to pass the law.

GM unveils all-new Tahoe, Suburban and Yukon SUVs

Inside the all new Suburban and Tahoe NEW YORK (CNNMoney) General Motors unveiled all-new versions of its full-sized GMC Yukon, Chevrolet Tahoe and Suburban SUVs on Thursday.

These SUVs are a big deal for GM (GM, Fortune 500) because, although full-sized SUVs make up a small slice of the overall passenger vehicle market, GM sells the majority of them. Of all the full-sized non-luxury SUVs sold in the U.S. last year, three out of four were made by GM, according to data from LMC Automotive.

"This is an important and profitable segment and we have set the bar high to ensure we provide our customers with great quality and performance they expect and deserve," GM's Chief Financial Officer, Dan Ammann, said in a statement.

Besides new, more angular, body styles the new 2015 SUVs feature a number of improvements. There's more rear seat legroom and the third row seats actually fold down flat, as they do in other SUVs. In current versions, those seats fold down but have to be removed in order to get the most space.

Related - Six-wheeled Mercedes monster truck among Frankfurt debuts

GM also promises better fuel economy, although exact fuel economy estimates are not yet available. The SUVs will be available with an improved 5.3-liter V8 engine which will include high-tech features like cylinder deactivation in which half the engine's cylinders are shut off when full power isn't needed. The engine will also have direct fuel injection and continuously variable valve timing. The SUVs will also be equipped with a new six-speed transmission.

Higher-end models will also have the latest version of GM's adaptive suspension system which continuously responds to road surface changes to provide the best possible combination of ride and handling, according to GM.

Big SUVs are a shrinking market segment, though. Full-sized non-luxury SUVs represent just 1.6% of the passenger vehicle market, according to data from industry analysts at RL Polk. That's down from 2.7% in 2008. The Tahoe and Yukon were last redesigned for the 2007 model year.

These new vehicles remain body-on-frame SUVs, a type that the industry has been moving away from for a long time. Body-on-frame vehicles are usually heavier and not as fuel efficient as unibody, or car-based crossover SUVs, but they're generally better for towing and hauling heavy loads.

GM also sells the V6-powered Chevrolet Traverse and GMC Acadia crossover SUVs which get better gas mileage than the present Tahoe and Yukon. The crossover vehicles also have similar passenger space with even move luggage space.

Related - 8 small cars: Cargo space vs. parking space

Tahoe and Yukon buyers might simply be attached to the idea of driving a truck-like vehicle, said Tom Libby, an auto sales analyst with RL Polk, rather than crossover SUVs which some feel are too reminiscent of minivans.

Inside the brand new Corvette Stingray

The Tahoe and Yukon also come in extra-large variants for those who really need a lot of space. (The Suburban, for instance, is really a stretched-out version of the Tahoe.)

A large percentage of Tahoe and Yukon buyers are corporate fleets. So far this year, about half of Tahoes sold were purchased for fleets, according to KBB.com.

The SUVs will be built in GM's Arlington, Tex., assembly plant and will go on sale early next year. Pricing has not yet been announced. Their redesign follows the recent introduction of GM's redesigned pick-ups which share much of the same engineering.

Tuesday, May 27, 2014

Replace Social Security or Fix It?

Investment advisors are familiar with the idea that past performance is not indicative of future returns.

And so it is in the realm of retirement income, according to financial economist Larry Kotlikoff, who argues that that a Social Security system that has by and large worked should not lead complacent Americans to assume its future viability.

That is one of the takeaway points from an online debate last week hosted by the National Academy of Social Insurance (NASI), a Washington, DC –based nonpartisan institute conducting research related to income security.

Both Kotlikoff and his opponent, Larry Thompson, a NASI founding board member, agree on the importance of social insurance (Kotlikoff is an academy member).

Indeed, Kotlikoff, the maverick Boston University economist who in 2012 sought the presidency on the Internet-based third party Americans Elect platform attests that Social Security represents a majority (55%) of the annual income of households headed by those 65 and older.

But Kotlikoff argues that Social Security is in “grave financial trouble,” worse than in 1983 when the Greenspan Commission reformed the system’s finances — indeed, “in worse shape than Detroit’s two pension systems, taken together,” Kotlikoff writes.

That is because the system is 32% underfunded, despite its nearly $3 trillion trust fund.

“In short, an immediate and permanent 32% hike in the Social Security payroll tax rate (from 12.4% to 16.4%, forever) is needed to pay the existing benefits. Alternatively, an immediate and permanent 23% cut in all OASDI benefits would provide long-term solvency,” Kotlikoff writes.

And while he does not think such drastic hikes or cuts are politically feasible, he argues that Social Security’s finances are just part of the system’s problems:

“Its Handbook has 2,728 complex rules, and its Program Operating Manual has thousands of even more complex rules to explain the Handbook's rules,” he writes.

This complexity, together with rising federal income taxes on Social Security benefits (which he attributes to a lack of inflation indexation), contribute to Americans’ confusion about the benefits to which they are entitled and age at which they should take them, thus possibly overestimating their retirement income.

And beyond solvency and complexity issues, Kotlikoff sees issues of inequity and inefficiency:

“Thanks to the system's spousal and survivor benefits, millions of workers pay Social Security taxes year after year and end up with no extra benefits. Indeed, a working spouse can end up with lower benefits than a spouse who never worked,” he adds, referring readers to a more detailed policy proposal he drafted as part of his 2012 campaign.

That proposal for replacing the U.S. pay-as-you-go Social Security system with individual contributions financed by mandatory contributions elicited skepticism from Larry Thompson, who argues that even Chile, which takes a similar approach, has recently modified its system away from exclusive reliance on private accounts.

Thompson argues that the key distinction between the current system and the one that Kotlikoff proposes is the former’s reliance on labor markets versus the latter’s dependence on capital markets.

“The major difference between the two approaches is that one sets pensions with reference to wage levels prevailing at retirement whereas the other establishes retirement incomes based on capital market returns over the course of the working life,” Thompson writes.

Noting that U.S. workers do rely on capital markets, to some extent, in their private IRAs, 401(k)s and the like, Thompson argues against forcing “everybody to put all of their retirement income eggs into the capital market basket.”

The NASI board member warns that the cost of transitioning Social Security to a private account system makes such a move impracticable.

For that reason, he challenges Kotlikoff and other critics of Social Security to instead turn their attention to underlying problems in our current system: “that workers (and/or their employers) are not contributing enough to their defined contribution accounts and that investment returns in these accounts underperform broad market averages due to high administrative charges and poor individual investment decisions.”

Reached by ThinkAdvisor, Kotlikoff demurred, arguing that all available evidence suggests Americans won’t voluntarily increase their savings to the extent needed to purchase income security in their retirement years.

“My plan forces people to save in the global financial system, but at no cost,” he says noting that the mandated 8% of income he advocates would be managed in a type of index fund whose expenses the government would alone bear.

“So I'm not leaving it up to workers to save on their own,” Kotlikoff says. Thompson could not be reached for comment.

---

Related on ThinkAdvisor:

Top computer hacker gets leniency

NEW YORK — A top computer hacker who helped investigators disrupt at least 300 cyberattacks on targets ranging from the U.S. armed forces and Congress to a TV network and a video game maker was spared additional prison time Monday after prosecutors argued for leniency.

Hector Xavier Monsegur could have faced more than 26 years behind bars for his confessed cyberattacks as a former member of the Anonymous and LulzSec hacking collectives.

But U.S. District Judge Loretta Preska imposed a term of seven months behind bars — the exact equivalent of what he'd already served — which means Monsegur was a free man after his sentencing hearing in Manhattan federal court.

Federal prosecutors argued Monsegur merited the far lesser punishment because he "was an extremely valuable and productive cooperator" whose help led to the arrest and conviction of eight co-conspirators.

They did not specifically name the targets saved from potentially crippling cyberattacks as the result of Monsegur's cooperation. But they estimated in a government sentencing memorandum filed Friday that his actions "prevented at least millions of dollars in loss to these victims."

"Monsegur's cooperation was complex and sophisticated, and the investigations in which he participated required close and precise coordination with law enforcement officers in several locations," Manhattan Assistant U.S. Attorney James Pastore wrote in the memo.

Among other specifics, Pastore credited Monsegur's assistance in the 2012 arrest of Jeremy Hammond, who at the time was the FBI's number one cybercriminal target. Hammond pleaded guilty and was sentenced to a 120-month prison term in November 2013.

Monsegur's assistance was invaluable because he was a trusted member of hacking groups involved in numerous hacking episodes. Using the online alias "Sabu," he was known for analyzing computer code for vulnerabilities that could be exploited, Pastore wrote.

Some of those cyberattacks listed in the sentencing memo ! included the hack that compromised the database of the Fox reality TV show X-Factor, and attacks on PBS, Sony Pictures, Nintendo and Infragard Unveillance, an FBI affiliate in Atlanta.

Monsegur pleaded guilty to computer-hacking crimes in August 2011 as part of a government cooperation deal after FBI agents confronted him about his online activities. He served the seven months imprisonment because the government moved to revoke his bail in 2012 after he made unauthorized online postings.

Under federal sentencing guidelines, Monsegur could have faced 259 months to 317 months imprisonment. But the U.S. Probation Office recommended in a pre-sentence report that he not spend additional time behind bars.

5 Ways to Watch NFL Games Without Paying for Cable

Sports Guys 05 Getty Images On Monday, CBS and Time Warner Cable finally ended their contract dispute, restoring CBS' networks to subscribers in New York, Dallas and Los Angeles after a monthlong blackout. For football fans in those markets, the decision came just in time: The NFL season officially kicks off this week, and CBS carries many of the games. I'm a football fan in New York, but the decision didn't really affect me, as I'm not a Time Warner subscriber. In fact, I don't subscribe to any cable provider: When I moved into my latest apartment I decided to "cut the cord" and go without cable. It's a decision that's saved me a substantial amount of money on monthly bills, and I've managed to get by with a Netflix subscription and other streaming options. But there's one very big downside of cord-cutting: You can't watch live sports. And now that football season is upon us, I'm weighing the options to determine the most cost-effective strategy for watching football without cable. Option 1: Watch at a friend's apartment. I call this the "freeloader" option. But it's not exactly free. Because I don't want to be the guy who just mooches off his friends' cable subscriptions, I do feel an obligation to bring over a six-pack of beer or some snacks for every game. That's going to run me in the vicinity of $10 for every weekend, which adds up to about $40 a month -- around what I'd be paying for a shared cable subscription. Still, that's not a big downside: Even if I were watching at home, it's likely that I'd be snacking and having a couple beers. At least this way I'm doing it with friends. But it's not a consistent option. Not all of my friends are going to be planted on the couch at home every Sunday, and even when they are, they don't necessarily want to have guests. So I'd like to find a way that I can watch at home. Option 2: Get an antenna. Unlike baseball, which is typically carried by regional cable sports networks, most football games are carried on the networks: CBS or Fox for the Sunday games during the day, and NBC for the Sunday Night Game. That means you can get them over the air with a digital antenna that can get an HD signal, most of which will run you in the $35 to $60 range. That comes to about $10 per month of football, though the actual per-use cost is much lower if you're going to use it for subsequent seasons (and for watching non-football network television). One downside is that you don't get cable channels, which means you can't watch Monday Night Football (which switched from ABC to ESPN in 2006). And another issue is that the signal is inconsistent -- when Consumer Reports tested 10 antennas in July, it found that it couldn't even rank them because each model's performance varied so much. Antenna technology has a come a long way, but like the rabbit ears of old, they're still prone to giving you static at crucial moments. Option 3: Subscribe to Aereo. During the CBS blackout, Aereo got some attention as an antenna alternative. The service works by receiving network signals at a remote location and then beaming those signals to subscribers, allowing you to get network channels over an Internet connection. Assuming you have a consistent Internet connection, it's less prone to signal disruptions than an antenna in your living room or on your roof. And it also has DVR options, allowing you to pause, rewind and even record the game for later viewing. I enjoyed using Aereo when I used the free trial month to watch the Stanley Cup Finals earlier this year. And it's reasonably priced at $8 a month, which comes to just $2 per weekend of football. But if you don't mind the lack of DVR functionality and the occasional signal disruption, it's clear that the ordinary antenna is still the more cost-effective investment over the long-term. If I'm going to be without cable for years, it makes more sense to make a one-time antenna purchase for $40 than to continue paying $8 a month every football season. Option 4: Get NFL Sunday Ticket (without a subscription!). The options above all share one very big weakness: They don't actually allow me to watch my hometown team. I live in New York, but I'm a New England native, and most New England Patriots games aren't going to be on network TV here. Looking at the schedule, I count five games that are guaranteed to be on the networks in New York -- two against the New York Jets, and three Sunday night games. That's more than displaced fans of most teams can expect, but I still have another 11 games or so where even my friends' cable subscriptions won't let me watch my favorite team. The only way to get out-of-market games is to subscribe to NFL Sunday Ticket, which costs $225 per season. Unfortunately, you can only get it if you subscribe to DirecTV, and even if I could get satellite dish reception at my apartment, paying for both cable and the football package would be cost-prohibitive. There are rumors that Google could buy the rights to stream it as a stand-alone service, but for now that's only a distant dream. But this year, there's a workaround that lets you get Sunday Ticket without signing up for DirecTV. If you buy the anniversary edition of "Madden 25" on Amazon, you'll get a code granting you access to a full season of Sunday Ticket, accessible through your computer or mobile device. For just $99, that's a stellar deal; if you're not interested in the video game, you could even trade it in at a local used game store to get some of your money back. There are a limited number of units available, but for now it's still in stock. Option 5: Watch at a bar. If I don't go with the "Madden 25" deal, I have one other option for watching out-of-market games: Going to watch at a sports bar. But that doesn't come cheap -- while it's free to watch, you basically have to pay "rent" in the form of ordering drinks. In all likelihood, I'm probably spending at least $20 on beer just for the privilege of watching the game. Over the course of a season, that adds up. So what's the best bet? For many games, I'll go to a friend's place to watch. I'll probably also watch a few at local sports bars, because my friends have various rooting interests and we'd like to be able to watch multiple games at once. As for watching at home, I'm still weighing my options. I may just invest in an antenna for my TV, though Aereo may be the better option if I decide that I want to DVR some network TV shows this fall. And that "Madden 25" deal is very enticing. Which option would work best for you depends a lot on your personal circumstances: Whether you have friends with cable, whether there are good sports bars in the area, and whether you root for an out-of-market team. But know that there are a lot of good options that don't require you to pay for cable.

Monday, May 26, 2014

How celebrity hacker 'Sabu' helped feds thwart 300 cyber-attacks

Watch a hacker steal encrypted passwords NEW YORK (CNNMoney) The celebrity hacker "Sabu" helped the FBI imprison his friends and stop more than 300 cyber-attacks in the three years since he betrayed several major hacking groups.

That's according to new U.S. government documents that for the first time provide extensive detail about what they call the "extremely valuable and productive" undercover cooperation of Hector Monsegur.

Monsegur used the Sabu moniker online, where he was a member of the hacking collectives Anonymous and LulzSec.

He pleaded guilty to charges including identity theft and credit card fraud and is set to be sentenced on Tuesday.

He would face up to 26 years in prison for the $2.5 million in losses connected to his hacks, but the government is seeking leniency -- perhaps no additional prison time beyond seven months he already served.

Prosecutors said his work on behalf of the FBI helped thwart attacks on websites belonging to the U.S. military, NASA and media companies, among others. The FBI relocated him and his family because he received threats for his cooperation, the court documents say.

Monsegur was part of a group of hackers that became notorious in 2011 for breaking into or disabling U.S. government and corporate websites. The Anonymous-affiliated groups LulzSec and Internet Feds targeted sites including PBS, Fox Television, Nintendo and Sony Pictures. Their public boasts on Twitter and elsewhere on the Internet drew them instant celebrity as so-called hacktivists, because they often claimed to make a political point in their activities.

The documents show that in June 2011, FBI agents visited Monsegur's apartment in a public housing project in Manhattan's lower east side. They confronted him about his activities and he immediately agreed to become an informant.

He agreed to a guilty plea, returned to his apartment and was back online in hours -- this time, working for the FBI.

His assistance helped the FBI investigate and net LulzSec and Internet Feds members, including the FBI's most-wanted cybercriminal, Jeremy Hammond, who is serving a 10-year prison sentence, prosecutors said in court documents.

"Working sometimes literally around the clock, at the direction of law enforcement, Monsegur engaged his co-conspirators in online chats that were critical to confirming their identities and whereabouts," p! rosecutors said. "During some of the online chats, at the direction of law enforcement, Monsegur convinced LulzSec members to provide him digital evidence of the hacking activities they claimed to have previously engaged in, such as logs regarding particular criminal hacks."

His quick cooperation was key, according to the documents, because LulzSec had established a protocol to destroy computer evidence if any of their members went missing or was arrested.

"Monsegur admitted to engaging in hacking activities about which the government had not previously developed evidence," prosecutors said. He hacked thousands of computers, at first in a bid to build a legitimate computer security company and then to steal and pay his bills, prosecutors said.

Monsegur's cooperation with the FBI became public when he was arrested in 2012 for making unauthorized online postings, violating his cooperation agreement.

Upon the news, Anonymous members hacked a computer-security website and posted an open letter to Sabu. It read: "Sabu snitched on us. As usually happens FBI menaced him to take his sons away. We understand, but we were your family too (remember what you liked to say?) It's sad and we can't imagine how it feels having to look at the mirror each morning and see there the guy who shopped their friends to [the] police."

Will This Idea From Amazon Prove Beneficial for Investors?

Recently Amazon (AMZN) announced that the company is expanding its Amazon Fresh grocery delivery service to Los Angeles. The service, which has existed for a few years solely in Seattle, carries an annual fee of $299 and free shipping on qualified orders. Amazon has been slow to expand the service, learning from the mistakes of failed grocery delivery companies of the past. Amazon plans to expand the service to San Francisco later this year to around 20 more markets by the end of 2014.

What does this expansion mean for Amazon, and what does it mean for companies like Wal-Mart, Whole Foods, and Costco?

What Amazon Fresh means for Amazon

Amazon's quest to grow revenue and ignore profits continues. The grocery delivery business is a graveyard of failed companies, with margins razor-thin and competition fierce. But if any company is capable of delivering groceries in a sustainable way, it's Amazon.

Amazon has been extremely slow and cautious with the expansion of Amazon Fresh, largely due to the tough economics of the business. In the short-term and intermediate-term Amazon Fresh will have little effect on the company's results due to the limited footprint, but if new markets prove successful Amazon Fresh could eventually bring in billions of dollars in revenue.

The problem is that Amazon Fresh only makes sense for people who can afford to not only pay more for their groceries but also the $299 annual fee. This excludes, I think, a significant fraction of the American population. And considering that Amazon Fresh only makes sense in densely populated areas, there's a limit on how expansive the service can become.

Just running a grocery delivery service at break-even is extremely difficult, so it's unlikely that Amazon will derive much profit at all from Amazon Fresh, now or in the future. The return on investment here is terrible, and investors should be concerned.

What Amazon Fresh means for Wal-Mart

I think it's safe to say that people who grocery shop at Wal-Mart do so because of the low prices. Wal-Mart uses its grocery business to give shoppers a reason to visit its stores more often, leading them to buy other higher-margin goods. Wal-Mart has taken a big chunk of the grocery market from traditional grocery stores and is unlikely to lose that share to a grocery delivery service.

Many people can't afford to pay $299 for access to a grocery delivery service which then costs more than brick and mortar groceries. There is likely no overlap at all between Wal-Mart shoppers and possible Amazon Fresh members, so even if Amazon Fresh becomes widespread Wal-Mart will not be affected.

What Amazon Fresh means for Whole Foods

Whole Foods carries the most risk of losing customers to Amazon Fresh, given its high prices and upscale products. But going to Whole Foods is an experience, one which many shoppers wouldn't want to give up for convenience. In Austin, TX, where the flagship Whole Foods store is located, Whole Foods is a tourist destination. Many people go there for lunch at the cafe or get take-out from the buffet-style prepared food selection. Calling Whole Foods a grocery store is a vast understatement.

Whole Foods could lose some customers to Amazon Fresh, but I think the losses will be minimal. The idea of having meat left outside your door is a little strange, and most people prefer to choose their own produce at the store. Grocery delivery may be appealing for some types of items, but I doubt Whole Foods will be greatly affected.

What Amazon Fresh means for Costco

Costco's business model is vastly different than its competitors. The company charges an annual membership, about $55, and then prices its products around 15% above cost. Almost all of Costco's profits come from the membership fees, and this allows Costco to have extremely low prices.

You could argue that Amazon is attempting the same type of model with Amazon Fresh, but that would require the service itself to at least break even. This is unlikely given the delivery overhead, something that Costco doesn't have to deal with.

To some degree Costco is an experience, although not to the same degree as Whole Foods. People like shopping at Costco, something that is rarely said of traditional supermarkets. The low prices pay for the membership very quickly, and socially conscious shoppers appreciate that Costco pays high wages to its employees. And with a high membership renewal rate a Costco membership is extremely sticky. Amazon Fresh will not put a dent in the Costco Juggernaut.

The bottom line

Grocery delivery is a strange business. The market seems small, as people who shop at traditional grocery stores or chains like Wal-Mart care more about price than convenience. The target market appears to be the higher-end shopper who frequents Whole Foods or privately held Trader Joe's, but it's questionable whether or not convenience would trump the benefits that these types of stores offer. And environmentally it seems that door-to-door grocery delivery has a much larger carbon footprint than other options, potentially turning people off from the service. I don't think that Amazon Fresh will revolutionize anything, instead being just another profitless business for Amazon.

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Saturday, May 24, 2014

The World According to Southern Company

It has been a turbulent year to be a Southern Company (NYSE: SO) shareholder, given cost overruns on the firm's nuclear and coal plant initiatives, higher debt and equity issuance, volatile earnings, and the prospect of costly emissions regulation on coal.

Only last October, Utility Forecaster downgraded the stock to "hold" as a result of these challenges. By March, however, the clouds seemed to lift over the Atlanta, Georgia-based utility, and UF restored the firm to a "buy."

And while on balance we are pleased to have Southern Company in the portfolio again, there are some lingering concerns.

To be sure, there has been progress on multiple fronts, including various performance metrics that had been down by double digits have since turned double-digit positive in the last 6 months (See Chart A).

At the same time, we're troubled that the company reported additional cost overruns in its first-quarter earnings release, as well as the delay of the Kemper integrated gasification combined cycle (IGCC) plant's in-service date until 2015.

But this concern has been balanced by encouraging growth in revenue and earnings, with solid sales numbers across Southern's four-state territory, along with a 3.4 percent dividend increase. We also liked that the Vogtle nuclear project is back on track, as well as the US Department of Energy's decision to guarantee $6.5 billion in loans for its construction.

Chart A: Southern Company Has Delivered Major Improvements to Earnings

2014-05-20-U&I-Chart A

Created with YCharts

In order to get a better perspective on the firm and perhaps allay our most recent concerns, last week your correspondent attended the 2014 Deloitte Energy Conference, held in Washington, D.C., and had ! a front-row seat for Southern Company CEO Thomas A. Fanning's presentation of the challenges his company and the industry face, and what he's doing to deliver future value to shareholders.

Before He Was a Caesar

In my former life as the editor of the industry journal Public Utilities Fortnightly, I had the privilege of interviewing Fanning on many occasions, even before he became CEO of Southern.

In fact, ironically, back in 2003, I once hosted Fanning and Southern Company's entire investor relations team in the living room of my hotel suite, when we couldn't find a suitable alternate location for the interview.

On that occasion, Fanning, who was Southern's CFO at that point, lauded the traditional vertically integrated model, offering what he described as Southern's strategic philosophy. "Do you know the old Sun Tzu saying, 'Know yourself, know your enemy?'" he asked, quoting from the famed treatise on strategy and combat, Sun Tzu's "The Art of War."

Fanning was quoting chapter and verse of the corporate philosophy spearheaded by the firm's CEO at the time. "We like to say we're genetically conservative. We like the low-risk end of the spectrum. We talk about our strategy in the super Southeast being the business we know, with the customers we know, in the place we know."

But fast-forward 11 years, and Southern's present-day initiatives seem at odds with this philosophy. Indeed, the firm has made high-risk, multi-billion-dollar bets on various technologies whose future is now in question, namely coal and nuclear, due to proposed CO2 regulations and low natural gas prices.

Then, there's the company's "All of the Above" strategy, as described by Fanning at the conference, which refers to President Obama's past comments on promoting all energy resources. Southern's CEO talked of researching and investing in a full portfolio of resources, whether in storage, solar or other renewable technologies, while adding many mor! e natural! gas installations, which has already moved the firm's resource orientation toward natural gas.

"Southern Company is the only company in America, I'm proud to say, engaging in the full portfolio. We're building new nuclear. We're building 21st century coal. We made an enormous shift in natural gas. We are the fifth-largest solar company. We do wind. We run the largest biomass plant. And we're a leader in energy efficiency," Fanning said.

But some have argued a more "genetically conservative" approach would have been to drop the riskier projects and make more focused bets. Beyond that, some industry veterans have observed that the risk-averse utility culture puts executives at a disadvantage when making such high-risk bets, since their relative inexperience managing such ventures increases the odds of failure.

Of course, one could also argue that a "genetically conservative" strategy means a company that spreads its bets across as many technologies as possible, assuming it has the resources to do so.

And Southern Company certainly does have significant resources. Nevertheless, any venture capitalist will tell you that barely two in 10 technology investments ever truly succeed, and these odds do not change much whether you're in Silicon Valley or Atlanta.

So how should we reconcile Southern's seemingly high-risk technology bets with its conservative culture, and investor concern over more cost overruns?

Having observed Thomas Fanning's thinking for more than a decade, and understanding how utilities work, the "All of the Above" strategy is a more nuanced approach than it seems on the surface. The CEO's intent is to give Southern an advantage in different market price and regulatory scenarios, a concept known as optionality.

The Strategy of Optionality

As he stood before the conference audience last week, about to give his speech, something about Fanning's demeanor had noticeably changed since I first met him those many yea! rs ago as! a CFO. Perhaps it's the weight of the responsibility he now carries, but he wears a new intensity on his face that has replaced the relatively carefree but nonetheless driven CFO of years ago.

In listening to his speech, I heard him argue from a number of different positions, which suggests he is speaking to various constituencies within his firm as well as on the outside. Although the arguments sometimes seemed contradictory on their face, they did converge in one clear direction once it became apparent that the business model he's advocating is one of optionality rather than the any particular technology. And knowing that can give investors some confidence that the company won't bet the farm on any one technology.

And while there's no doubt he is a big supporter of new nuclear and IGCC coal technologies, the Vogtle and Kemper projects, respectively, were on the drawing board before he became CEO. Although he inherited these legacy projects from his predecessors, he's still obligated to execute on them.

The fact that Fanning is having Southern's in-house research team focus on technologies such as energy storage, as well as continuing to push the firm in various other technology directions, reinforces the idea that though he still advocates for nuclear and coal, he is becoming more agnostic on which technology will prevail.

Whether this more muscular agnostic view was born over the last year from the intense scrutiny the firm has faced–due to the cost overruns and delays–would be anyone's guess. But I'm sure Fanning would say diversity has been the plan all along, but has been overshadowed by the problems with Vogtle and Kemper.

But we would hope that once the troubling situations with the new nuclear and coal plants are contained, the optionality approach, or greater diversification in resources, will start to help Southern Company's valuation improve against its peers.

Chart B: Betting on the Comeback Kid's Long-Term Strategy

Created with YCharts

Moreover, we're encouraged by this stronger emphasis on neutrality. Perhaps it also means that if cost overruns or other financial detriments resulting from the aforementioned plants exceeded certain thresholds, he would finally pull the plug on these projects.

As previously noted, Fanning's energy technology agnosticism, as he described it, has been seemingly driven by the benefits of optionality: "Six years ago, [Southern] produced about 70 percent of [its] energy from coal; two years ago [Southern] shed that to about 35 percent from coal. Six years ago, 16 percent was produced from natural gas; two years ago, roughly 48 percent was produced from natural gas."

He continued, "We have taken this aircraft carrier and moved it in a big way. And not only has that shift created optionality. We can swing gas production from 35 percent to 55 percent of our energy production, and coal from 25 percent to 45 percent based on what the markets will deliver."

For example, Fanning detailed how customers enjoyed $100 million in fuel savings during the polar vortex this past winter by using his coal plants when natural gas prices spiked.

Furthermore, his strong view on technology neutrality was seemingly unshaken even when looking at technologies with different costs. Although the Southern CEO believes central station power is more efficient, he does not believe that rooftop solar is disruptive. Taking what he described as a customer-centric view, he said that Southern Company ought to put solar on rooftops if customers want them, regardless of the economics.

Interestingly, natural gas is the one area where he believes caution is warranted. Of course, Fanning noted the irony, given the fact that Southern has already made a big bet on natural gas and is moving the company away from! coal.

Nevertheless, he said there are a number of reasons why the industry should be cautious. For example, Fanning pointed out:

We don’t yet know the ultimate environmental consequences of fracking.There still isn't enough infrastructure to support the shale revolution.It’s unclear how unfettered energy exports will affect price volatility.We don't know whether natural gas will be dominated by manufacturing and transportation.Utilities have only recently started to grapple with how to manage price volatility.

But that being said, Fanning reiterated his answer to the question of what he believes will be the winning future utility resource mix, "It is natural gas. It is renewables. It is energy efficiency. It is 21st century coal. It is nuclear. All of these things, every one of them has a place in the portfolio. This is the dominant solution."

While we'll continue to monitor Southern's progress with its Vogtle and Kemper projects, the firm's strong recent earnings performance, as well as the CEO's greater emphasis on resource diversity, suggest the company has turned the corner and is poised to deliver significant shareholder value in the coming years.