In The $$$MONEY$$$


Re: I Am In The $$$MONEY$$$

So far so good...

.VRUS? - Pharmasset, Inc. (NASDAQ)?
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125.03 +8.18? (7.00%?) Aug 12 4:00pm ET
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Re: I Am In The $$$MONEY$$$

All these things sound like Chinese to me. :p

You and me both, Reinheart. I just invest in exchange traded funds which follow an index. I'm smart enough to know I'm not smart enough to play the market. My current retirement fund allocations follow these indexes:

1) Standard & Poor’s 500 Stock Index (20% of my investment)
2) Dow Jones U.S. Completion TSM Index (40%)
3) Morgan Stanley Capital International EAFE Stock Index (40%)

And with all the current volatility in the market, I think the "Deer in the Headlights" strategy is best for me. I ain't gonna do nothing. If shit goes in the toilet, well fuck it, I just won't retire. No big deal if you're just sitting at a desk all day reviewing papers, proposals, and contracts anyways.
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Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

Pearls Of Wisdom From The Warren Buffetts Next Door
Pearls Of Wisdom From The Warren Buffetts Next Door - Forbes

In my book The Warren Buffetts Next Door: The World’s Greatest Investors You’ve Never Heard Of And What You Can Learn From Them, I conducted lengthy interviews with 10 outstanding individual investors. Each had a proven long-term track record of consistent investment success. Many have become millionaires and some were able to retire early. These men are risk takers, and have all lost money making mistakes along the way. However, their overall success record puts them in a league with the best hedge fund managers.

During my reporting, I noticed some common threads of wisdom from the Warren Buffetts Next Door that I have summarized below. Not surprisingly many of these pearls are similar to what you might hear from a professional investors. That’s because these successful individual investors strive to emulate the strategies of great investors they read about in books or online or in the financial news. They study the strategies of the greats like Warren Buffett and John Templeton and then incorporate them into their own investing methodologies.

Here is some of their wisdom:

1. Look for market anomalies or “disconnects.”

Many of the best investors hunt for special situation stocks where the market is either ignoring some important development or is overreacting to some news. Sacramento engineer Mike Koza pounced on a select group of financial stocks during the financial meltdown on the theory that the market was overreacting, punishing all financial stocks too severely. In the summer of 2008 he bought the stock of Radian Group (RDN), a mortgage insurance company that had dropped to as low as a dollar.

He pored through RDN’s financials, listened to management conference calls and determined that the stock was worth at least $20. He eventually sold the stock at $12 earning more that a 1,000% return. Koza calls these instances where a stock’s price appeared to be completely out of whack, “disconnects.”

Advice: Keep an eye on the day’s top gainers and losers. Stocks often swing wildly when the market over-reacts to a piece of news. It is a can be a good starting point for ideas that need more investigating.

2) Don’t obsess about diversification.

Many financial advisors will harp on you about keeping your portfolios widely diversified. It falls under the “don’t put all your eggs in one basket,” adage and it’s touted as a great way to minimize risk. What most advisors don’t stress is that being widely diversified can also kill your chances at having outsized returns. And remember, even “widely” diversified portfolios were flattened during the financial meltdown of 2008.

I found that the 10 Warren Buffetts Next Door often allocated disproportionate amounts of capital to stocks they were convinced were deeply undervalued–where their chances of high returns far outweighed the downside risk they estimated. Their portfolios ranged in size from 10 to 40 stocks. However at certain times, they would make big bets on a few equities. In the case of Alan Hill, a retired education executive from New Mexico, his big investment in a single stock, Bancolombia, SA (CIB), allowed him to make enough money to build a dream retirement home.

Alan Hill and the amateurs profiled in my book are not alone in this strategy. Virtually all of the great fund managers do this, Soros, Buffett, John Paulson… In fact The Oracle of Omaha once said that “ Diversification is protection against ignorance. It makes little sense if you know what you are doing.”

Advice: Check your investment and retirement portfolios to see that they aren’t “over” diversified in that they own hundreds or thousands of stocks or conversely that you don’t have multiple funds in different accounts investing in the same thing. If you manage your own portfolio and can afford it, don’t be afraid to invest outsized amounts in stocks you are highly confident are undervalued.

3) Don’t try to impose your ego on the market.

When most people buy stocks they use two currencies, the kind that you get at a bank, money, and emotional currency, which often involves a bit of ego. It goes like this: because of the great research you have done, you become convinced you are right on a stock, even if the market goes against. ‘The market is wrong, other investors are stupid.’ This is very dangerous. Don’t fall in love with your stock picks. You need to set up sell rules, say a 25% decline in price.

Advice: Periodically go through your portfolio holdings to determine if the stocks in it are still a good value according to your original investment criteria. Be clinical about it. If they no longer measure up, sell them or at least sell a portion of the holding.

4) Don’t be lulled by dividend payments–beware of value traps.

Sometimes stocks appear to be bargains on the surface because they either have high dividend yields and low P/E’s or are sitting on a pile of cash. Sometimes these stocks are indeed great buys, but sometimes they are value traps. These are stocks that may never appreciate in price, are cheap for good reason or there is some overriding macro trend that will ruin the rosy future you are envisioning. Washington Mutual Savings, better known as WAMU, to scores of investors looked like a screaming buy with a high dividend in 2007. Many investors piled in and lost a lot of money after the mortgage crisis put an end to WAMU and its high dividend yield.

Advice: Like a pit manager on a NASCAR team, you should run you stocks through a maintenance check each month. Re-evaluate the reasons you are holding the position to make sure they are still valid. Check relevant news and read the fine print of financial statement. For dividend stocks, consider the viability of the company’s earnings stream in maintaining the dividend. Above all, don’t ignore big macro trends that could impact your forecast.

5) Work to minimize your mistakes.

The same rule holds true for club level tennis players. The one who makes the least mistakes usually prevails. Investors in my book regularly review their portfolios to see that they are not taking undue risks in any one position. One WBND, Chris Rees, was so obsessed with protecting his downside that he told me his main investment strategy was “don’t lose money.” Of course he didn’t have a perfect track record on that score, but he did often run through worst-case scenarios on his stocks and would only consider buying a new stock if he thought it could be had for half its tangible book value.

There are also dumb mistakes investors need to avoid, like holding onto losing stocks too long (would the money be more productive in another stock?). Another dumb mistake for mutual fund investors is to ignore expenses. Expenses and other fees can make a big difference in your long-term returns. Make sure your fund’s expenses are relatively low in its peer group.

Advice: Same as above, when running your regular portfolio review, go through some “what if” worst case scenarios on each of your holdings. One WBND in my book, Randy McDuff of Winnipeg, Manitoba, would write out his thesis on each stock, as though he were a professional stock analyst, in an effort to crystallize his reasoning and run a check. Another important but overlooked point is to keep good records of your accounts, transactions and research. This can minimize mistakes and help you come tax time.

6) Ride the coattails of smarter people.

There is no shame in copying the moves of better investors or industry insiders you respect and revere. All of the best investors do this. Just check out who the other owners are on stocks in Berkshire Hathaway’s (BRK) portfolio. It’s a laundry list of top flight hedge funds. I recently wrote about how a number of top hedge funds, including David Tepper’s Appaloosa Management, bought into fertilizer company Mosaic (MOS) along with Goldman Sachs and a number of other top hedge funds.

Billionaire Tepper would be a good investor to ride the coattails of. In my book several investors sought out smarter investors on Web message boards like Gold investor Andrew Swann once made a killing riding the coattails of a smart industry executive who he noticed had landed at a new firm. Other investors track insider buys and sells, or regularly review 13F filings of stock holdings at U.S. Securities and Exchange Commission (Home Page).

Advice: Keep an eye on changes in 13F filings at the SEC. This will give you a leg up on where the smart money is moving. Several Web sites including market folly : hedge fund portfolio tracking, stock market analysis, and macro commentary and Stock Picks, Portfolios, News and Market Insight of Investment Gurus, regularly update readers on hedge fund moves. Another premium site, tracks insider buying and selling.

7) Pay attention to taxes.

It’s not just about how much money you can make on an investment. It’s also about how much you get to keep. Taxes can have a big affect on your returns. One of my Warren Buffetts Next Door, Alan T. Hill, converted his entire portfolio from traditional IRA to separate Roth IRAs sector by sector, giving him the opportunity to reverse the move if any one sector portfolio plummeted. Other investors I have talked to only buy stocks or preferreds with dividends eligible for the favorable 15% tax rate on qualified dividend income.

Advice: Consult a tax expert and read the coverage by my colleagues Janet Novack (click to read her stories) and Deborah Jacobs (click to read her stories). Both write about smart tax strategies for investors.

8) Successful investing takes time and passion.

Being a good investor doesn’t just happen, it takes a lot of time and effort. Every single investor in my book spends at least 3 hours per day working on his portfolio, or at least thinking about investment ideas. Some, with 9-5 day jobs, spend more than 5 hours a day. The second part of the equation is passion. You won’t devote a lot of time to investing and learning to be a better investor, if investing has no allure for you. You have to love the process and it should be fun for you. All of the Warren Buffetts Next Door are passionate about investing.

Advice: If you have the time begin by reading classic investment books like The Intelligent Investor by Benjamin Graham or even William O’Neil’s How To Make Money In Stocks. Also, the American Association of Individual Investors (AAII: The American Association of Individual Investors) offers excellent investor education and strategy tips. If you don’t have the time or passion for investing on your own, then you should think about index ETFs or about hiring a fee-only financial advisor.

Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

Buy When There's Blood In The Streets
Buy When There's Blood In The Streets

Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that "The time to buy is when there's blood in the streets."

He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. But that's not the whole story. The original quote is believed to be "Buy when there's blood in the streets, even if the blood is your own."

This is contrarian investing at its heart - the strongly-held belief that the worse things seem in the market, the better the opportunities are for profit.

Most people only want winners in their portfolios, but as Warren Buffett warned, "You pay a very high price in the stock market for a cheery consensus." In other words, if everyone agrees with your investment decision, then it's probably not a good one.
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Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

Four Myths About the Current Global Economy
The Oracle of Manitoba Is Buying - Forbes


First is the idea that the global economy is fragile. In 2007, at the last economic peak, global GDP came in at $65.4 trillion. Four years later, in 2011, global GDP is forecasted to be around $78 trillion. The world economy has grown 19.2%; slightly better than 4.5% a year, which is typical of a traditional global expansionary period. This is not indicative of an impending global economic collapse.

The second disconnect is that corporations are hurting. The media is extrapolating weakness in the banking industry to the rest of Corporate America. That fact is that corporate profits are growing nicely. In 2007, S&P 500 earnings were $82.54. In 2011, S&P 500 earnings are forecasted to touch $97.20, which is an increase of 17.8% from 2007. Looking forward, 2012 earnings are forecasted to grow more than 17% to $114.35 per share.

[The third disconnect is] that corporate balance sheets are strained. A key current indicator of balance sheet health is insider buying of stock with actual cash at market prices as opposed to stock option exercises. Just last week, insiders bought more company stock than was bought during the 2009 market low—which was the largest spate of insider buying in twelve years—according to Bloomberg [#msg-66293676]. Right now, corporate insiders are buying their own stock with their own dollars—a strong sign of corporate health.

[The fourth disconnect is] that government deficit issues will derail a tenuous recovery and push us into a double dip recession. We will not experience a double dip recession, because, for the most part, we have not experienced an economic collapse, particularly not on a global scale. Economies outside of the United States are still growing. As corporations continue to advance their profitability, even while governments cut back, there will be a natural reallocation of capital towards more productive and hence more valuable uses. It is entirely possible that government cutbacks will occur but that global economic health will continue to improve.


Re: I Am In The $$$MONEY$$$

My take on the market to YOU... And I have some professional experience here. Aint it funny how one can pick a few winners in the early season, and yet the paper begins to murk like you need glasses all of the sudden. .What was once crystal clear has now become history.... Hence the value of third party management. HOWEVER...

What makes me SICK about the markets. For starters the FUCKING NASDAQ is the biggest fuckfest giving the average investor a royal ass raping every time he makes a move. Did anyone ever wonder why it is that the price they get ALWAYS happens to be 1/8 or more higher than the ask?!? Right, my purhase offer single handedly swayed the stock price upward... Do you see some motivating factor for minor volatility in this conundrum?!? They are like a bunch a shitty half-ass pot dealers sitting on the couch passing on sack BUT JUST CANT SEEM TO LET A SINGLE ONE GO WITHOUT THE PERVERBIAL PINCH....

Market pricing is indeed just that. There is no rhyme or reason, only humanity and the ignorance that provides for effective action for others. REAL ASSETS, book value, profit to margin.. Really, where is a single corrolation measurable between products. So a tech stock with a negative book value can have a MARKET value of 100$/share, but based on value in principle or service.?!? A Company with a strong debt to asset ratio may be a dinasaur as to what it actually does or produces and have no value at all. But these days you have the conundrum of MARKET VALUE PRODUCTS as a vehicle to influence REAL DERIVATIVE PRICING. Take a gallon of gas. So in 2007 it skyrocketed to $4.00 gallon, and based on the fact that the MARKET PRICE of a barrel of oil was $150.00? I think not. FIrst Billy Bob Probably never paid AlliBabba more than $70 buck a barrel EVER!! Its as simple as that. The market commodity - 1 barrell of oil - is as fictional as a futures options, and was never realized or "reached Maturity" I suspect. It was a tool as a principle, that required hedging, strattling, and thus returned false inflated value unto its self. Besides, GAS is one of the few commodities produced with crude oil. You did not see the price of tires DOUBLE.

Whats the point. WE ARE ALL CATTLE USED TO SUPPORT MARKET PRICING. Without the average investor, there is no market price. But the key is that we, you are operating on old news, even if the transaction happens on a dime. A lot like TT metabolism LOL... The profit makers are the ones that start the ball rolling, create the positive paradigm, and BUY FIRST. The further up the food chain you are, the more you make. The PROFIT TAKERS are also the first to act. Has anyone realized that Bill Gates fortune in microsoft stock would be WORTHLESS if he tried to sell even half of it in a day. IT ABOUT WHAT PEOPLE THINK< only....

Real secrets will remain secrets. Warren Buffet, Peter Lynch,, these are rare in that the can wield the same market influence as major corporate players and governments, and yet they are mere individuals. They have achieved great success via sound investing strategies through common sence, patience, and stamina. Plus a little scoop here and there I am sure.

A solid strategy is intense observation and LIMITED involvement from time to time. Else, trying to time the market and the best one can hope for - Is to die in their sleep.... LOL. Desprite money never wins...

Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

I CLOSED out ALL of my positions when the S&P 1200 was hit! It looks like I did so early from the futures, but I had almost done the same on two prior 1200 spikes in the past month. I do plan on getting right back at ~1150.

Does the Euro Have a Future?
Does the Euro Have a Future? by George Soros | The New York Review of Books

OCTOBER 13, 2011
George Soros

The euro crisis is a direct consequence of the crash of 2008. When Lehman Brothers failed, the entire financial system started to collapse and had to be put on artificial life support. This took the form of substituting the sovereign credit of governments for the bank and other credit that had collapsed. At a memorable meeting of European finance ministers in November 2008, they guaranteed that no other financial institutions that are important to the workings of the financial system would be allowed to fail, and their example was followed by the United States.

Angela Merkel then declared that the guarantee should be exercised by each European state individually, not by the European Union or the eurozone acting as a whole. This sowed the seeds of the euro crisis because it revealed and activated a hidden weakness in the construction of the euro: the lack of a common treasury. The crisis itself erupted more than a year later, in 2010.

There is some similarity between the euro crisis and the subprime crisis that caused the crash of 2008. In each case a supposedly riskless asset—collateralized debt obligations (CDOs), based largely on mortgages, in 2008, and European government bonds now—lost some or all of their value.

Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

My hedge on CLOSING OUT when the S&P 1200 was hit is spot on!!! I expect the S&P to go lower, even sub 1100. At that point, I think it will be a great opportunity to load up, particularly on Biotech.

Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

Company Stock Prices Before Public Announcements of Oncology Trial Results

Prior knowledge of phase III clinical trials of new drugs and Food and Drug Administration (FDA) regulatory decisions may affect the price of a drug company's stock according to a study published September 26 in the Journal of the National Cancer Institute.

Regulatory decisions made by the FDA and phase III clinical trials are important for the financial success of new drugs. Investors with information on the trial results and FDA decisions before they are released to the public may profit regardless of the drug's success or failure. This information can also influence the market value of the companies that bring the drugs to market. Trial investigators, company employees, and outside consultants are aware of trials results before they are made public, and investment analysts may go to great lengths to obtain this "insider information" for their clients because the results are not necessarily reflected in the market price of a stock.

To determine what kind of impact prior knowledge of clinical results may have had on a company's market value and stock prices of particular drugs, researchers did a retrospective analysis of stock prices of publicly traded biotechnology and pharmaceutical companies before and after key public announcements made between January 2000 and January 2009 regarding 23 positive and 36 negative phase III clinical trials in which their cancer drug was tested and from 41 positive and nine negative FDA regulatory decisions. They obtained stock prices from the Center for Research in Security Prices and Bloomberg Professional. The researchers then analyzed each company's daily closing stock price before and after the date of a public announcement.

The researchers found that the average stock price of a drug 120 days before a phase III clinical trial announcement showed an increase of 13.7% for companies that reported positive trials and a decrease of 0.7% percent for companies that reported negative trials. In a post hoc analysis that compared average stock prices over the period from 120 to 60 days before clinical trial announcements to the average price for the subsequent 60 days, companies reporting positive trial results saw a mean increase in their stock price of 9.4%, while those reporting negative trial results saw a decrease of 4.5% in their stock price, a statistically significant difference. Company stock prices before FDA regulatory decisions, however, didn't differ between companies with positive and negative decisions.

According to the researchers, one possible explanation for these trends is insider trading, where individuals make stock trades based on nonpublic information or by providing nonpublic information to others. The researchers write, "The changes in post-announcement share price that we have demonstrated highlight the potential use of this information by individuals for profit once it becomes public." They add that FDA decisions would not influence stock prices because the information on which they are based is already public. However, the researchers also point out certain limitations of the study, including selection bias, the fact that it was retrospective, and the small number of companies included in the analysis. They also note differences in the companies, namely that those reporting positive phase III study results are likely to be more established and profitable.

Even so, the researchers say they were surprised to see the differences in company stock prices in relation to positive and negative trials, given all the variables affecting a company's stock price. They write, "The results of this study call for increased awareness by investigators regarding the legal and ethical aspects of divulging nonpublic information regarding clinical trials."

In an accompanying editorial, Adam Feuerstein, a Senior Columnist at TheStreet, and Mark J. Ratain, M.D., of the University of Chicago, write that the suggestion by Dr. Detsky and colleagues that some investigators involved in phase III trials are illegally tipping the results, which is a criminal violation of the Securities Exchange Act, is "of grave concern."

However, the editorialists also maintain that the positive and negative trials were different in other ways. In undertaking their own analysis of the companies studied, they calculated the market capitalization of the companies at 120 days before public announcements. They found that it was 80-fold greater for companies with positive trials compared to those with negative trials, implying that the subsequent negative trials were not a surprise. They write, "The perceived high risk of failure of phase III oncology trials is primarily limited to smaller oncology companies." Furthermore, "The stock market is known to anticipate future events, as opposed to reacting to the past. Thus, it is not surprising that sophisticated investors are able to judge the probability of success, which is reflected in the share price."

Rothenstein JM, Tomlinson G, Tannock IF, Detsky AS. Company Stock Prices Before and After Public Announcements Related to Oncology Drugs. Journal of the National Cancer Institute. Company Stock Prices Before and After Public Announcements Related to Oncology Drugs

Background Phase III clinical trials and Food and Drug Administration (FDA) regulatory decisions are critical for success of new drugs and can influence a company’s market valuation. Knowledge of trial results before they are made public (ie, “inside information”) can affect the price of a drug company’s stock. We examined the stock prices of companies before and after public announcements regarding experimental anticancer drugs owned by the companies.

Methods We identified drugs that were undergoing evaluation in phase III trials or for regulatory approval by the US FDA from January 2000 to January 2009. Stock prices of companies that owned such drugs were analyzed for 120 trading days before and after the first public announcement of 1) results of clinical trials with positive and negative outcomes and 2) positive and negative regulatory decisions. All statistical tests were two-sided.

Results We identified public announcements from 23 positive trials and 36 negative trials and from 41 positive and nine negative FDA regulatory decisions. The mean stock price for the 120 trading days before a phase III clinical trial announcement increased by 13.7% (95% confidence interval = ?2.2% to 29.6%) for companies that reported positive trials and decreased by 0.7% (95% confidence interval = ?13.8% to 12.3%) for companies that reported negative trials (P = .09). In a post hoc analysis comparing the stock price averaged over 60 trading days before and after day ?60 relative to the clinical trial announcement, the mean stock price increased by 9.4% for companies that reported positive trials and decreased by 4.5% for companies that reported negative trials (P = .03). Changes in company stock prices before FDA regulatory decisions did not differ statistically between companies with positive decision and companies with negative decisions.

Conclusions Trends in company stock prices before the first public announcement differ for companies that report positive vs negative trials. This finding has important legal and ethical implications for investigators, drug companies, and the investment industry.

Company Stock Prices Before Public Announcements of Oncology Trial Results. Journal of the National Cancer Institute. Company Stock Prices Before Public Announcements of Oncology Trial Results

Feuerstein A, Ratain MJ. Oncology Micro-Cap Stocks: Caveat Emptor! Journal of the National Cancer Institute. Oncology Micro-Cap Stocks: Caveat Emptor!

Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

The Best Cloud Computing Firms
Constant Contact, DemandTec and Vocus are attractively priced.
SPS Commerce, Pandora Media Seen as Picks -

Public cloud computing/software-as-a-service companies have evolved considerably since we began covering the sector nearly a decade ago. They are at various stages with their growth, profitability, and size.

The median public company calendar 2013 estimated revenue growth is 20%, earnings before interest, taxes, depreciation and amortization (Ebitda) margin is 21%, and fully diluted enterprise value is about $830 million.

This compares with calendar 2012 estimated-revenue growth (including acquisitions) of 22% and Ebitda margin of 21%.

Our coverage companies' results were mostly in line [in the third quarter]. SPS Commerce (ticker: SPSC) and NetSuite (N) had notable strength in both revenue and earnings per share. SciQuest's (SQI) revenue came in at the low end of guidance due to a delayed state contract, but EPS were above expectations.

The overall software-as-a-service (SaaS) group's calendar 2012 revenue and EPS estimates are largely unchanged over the past six months. But, compared with this time last year, the group's (including RightNow Technologies (RNOW), SciQuest and SPS Commerce) revenue increased 8% and EPS was unchanged. Constant Contact's (CTCT) consensus has changed as it provided conservative revenue guidance, DemandTec's (DMAN) due to two dilutive acquisitions, and NetSuite's as it reinvests to meet demand.

Over the past three months, RightNow (up 42%), Constant Contact (up 35%), SPS Commerce (up 31%), NetSuite (up 30%), and DemandTec (up 23%) have significantly outperformed the SaaS group's 13% increase and the Nasdaq's 3%. The group's performance tends to be about two times the Nasdaq's -- year-to-date it is up 10% (versus the Nasdaq's 2% drop), 2010 was up 56% (versus 17%), 2009 increased 73% (versus. 44%), and 2008 declined 51% (versus down 41%).

As a percentage of float, the overall SaaS group's short interest is 9%. Most of our coverage list is in line with the group, except Constant Contact's 23% and NetSuite's 15% are notably higher.

As demonstrated by Oracle's (ORCL) pending acquisition of RightNow for $1.5 billion (announced Oct. 24) and Providence Equity Partners' purchase of Blackboard for $1.6 billion (closed Oct. 4), we expect consolidation to continue in the software sector. Among our coverage list, we view Constant Contact, DemandTec and Netsuite as the most likely to be bought. Besides being takeout candidates, most of our covered companies have made an acquisition in the past year.

Software remains a focus for the venture-capital community -- in the third quarter there were 263 investments for $2 billion in total, the highest dollar amount in 10 years. Since 2002, there have been about 230 investments per quarter for $1.3 billion.

We maintain our Outperform ratings on SPS Commerce, Pandora Media (P) and SciQuest, viewing them as good companies at reasonable prices; as well as Constant Contact, DemandTec and Vocus (VOCS) as attractively priced.

We continue to rate NetSuite at Market Perform, purely because of its high valuation.

Lastly, we lowered our rating on RightNow to Market Perform given the pending takeout; the stock had increased about 45% since we initiated in August.

We are increasing our price targets for SPS Commerce (to $27.50 from 22.50) and DemandTec (to $9.50 from $7.50).

Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

The Effective Use of Benford's Law to Assist in Detecting Fraud in Accounting Data
C. Durtschi, W. Hillison and C. Pacini

The authors review the background and development of Benford's Law, and then show where digital analysis based on Benford's Law can be used most effectively and where auditors should exercise caution.

Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

Our 10 Favorite Stocks for 2012
Top-quality names, most with dividends, could deliver gains of 15% to 20% next year. Think Berkshire Hathaway, Freeport McMoRan, Procter & Gamble, MetLife, Comcast, Daimler, Sanofi, Seagate Technology, Vodafone and Royal Dutch Shell.


After a volatile year, stocks are heading into the homestretch about where they began. The benchmark Standard & Poor's 500 Index finished the week at 1255, within a percentage point of where it started the year. The Dow Jones Industrial Average is up 5% in 2011, largely reflecting the strength of a single stock, IBM (ticker: IBM), which has risen 32% to 194 and dominates the price-weighted index owing to its lofty absolute share price.

Most equity strategists are optimistic at best about 2012. They're worried that earnings growth and strong corporate balance sheets will be offset, in investors' minds, by the tough economic backdrop and the European debt crisis. Barry Knapp, Barclays Capital's chief market strategist, recently set an S&P 500 target of 1330, 6% above Friday's close. He expects a "difficult" first half followed by a second-half rally.

The important offset to the economic and political situation is valuation. U.S. stocks look reasonably priced, especially with 10-year Treasuries yielding 2% and short-term rates near zero. The S&P 500 is valued at 13 times projected 2011 profits and about 12 times next year's projected earnings. Bulls cite the combination of attractive valuations and super-low rates. "I feel like a kid in a candy store…I don't know where to begin," said Joe Rosenberg, chief investment strategist at Loews, told Barron's in last week's interview ("The Best Opportunities in a Half-Century," Dec. 5). Rosenberg is partial to a range of blue-chip stocks.

We compiled a list of 10 stocks that could reward investors in 2012, including blue chips like Berkshire Hathaway (BRKA), Procter & Gamble (PG), Royal Dutch Shell(RDSA) and Britain's Vodafone Group (VOD). In this diversified selection, nearly all pay dividends, the exception being Berkshire, which is understandable given CEO Warren Buffett's extraordinary investment skills. The average yield is 3%, in line with that of the 30-year Treasury. Half of them have price/earnings ratios below 10 on next year's projected profits. The most expensive stocks, Berkshire and P&G, are valued at about 15 times estimated '12 earnings.

Four of our top 10 are European, reflecting depressed markets and high dividend yields there. European investors and managements have a preference for dividends over share repurchases, the reverse of the situation here.

We initiated this 10-stock compilation at the start of this year ("Hear, Hear," Jan. 3, 2011). That group has trailed the market this year (see table) mostly because of declines in General Motors (GM), JPMorgan Chase (JPM) and United Continental (UAL). Through Thursday, the 10 stocks were down an average of 6.9%, versus a 1.9% drop for the S&P 500. All our new favorites have the potential to generate 15% to 20% total returns in 2012. Here's a closer look.

Berkshire Hathaway

Warren Buffett rarely comments on the stock, but he sent a strong signal that he felt it was undervalued in September when the company announced its first share-buyback program in his 46-year tenure as CEO. The buyback announcement didn't amount to much because Berkshire set a limit on what it would pay -- a 10% premium to book value -- and the stock quickly traded above that threshold.

While the Class A shares have moved up 15% since the buyback announcement to around $116,000, they look appealing, trading for less than 1.2 times our estimate of year-end 2011 book value of $102,000. Class B shares trade around $78 and are valued at 1/1,500 of an A share.

Berkshire is in its best shape ever with a diversified business mix producing profits of about $7,500 per share annually, or $12 billion. Berkshire offers exposure to an improving economy, an upturn in property and casualty reinsurance rates and a rising stock market thanks to its $70-billion-plus equity portfolio, including a new $11 billion investment in IBM. Barclays analyst Jay Gelb carries an Overweight rating with a price target of $127,500. The chief negative is Buffett's age -- he's 81 -- and the lack of an obvious successor. Yet a healthy Buffett hopes to run Berkshire for at least another five years.

If Berkshire trades at a modest 1.2 times estimated year-end 2012 book of $112,000, the stock would trade around $135,000, 16% above current levels. Downside seems limited with the buyback in place, buttressed by $31 billion in cash.


The big U.S. life insurer looks appealing based on two key measures: earnings and book value. At $31, the shares are valued at less than seven times projected 2011 profits of $4.92 a share and for a similar multiple of estimated 2012 EPS of $5.06. And the stock trades at just two thirds of estimated year-end 2011 book value of $49 a share. This is a conservative measure of book value, or shareholder equity that excludes investment gains.

MetLife (MET) gave an upbeat view on 2012 last week, noting that it has significant excess capital and will likely build even more next year, which would allow a higher dividend payout and significant buybacks.

After the analysts meeting, Nigel Dally of Morgan Stanley wrote that "the outlook looks significantly better than what is reflected in the current stock price." He has an Overweight rating on the stock and a $45 target price.

MetLife is expanding overseas, as well. Following its deal in 2010 to buy some of American International Group's life-insurance operations, MetLife now gets more than a third of its profits from outside the U.S.

Negatives include a low-rate environment that hurts reinvestment income and overall profits and a modest looming hit to shareholder equity from regulatory changes. These issues aren't major and appear well discounted in MetLife's depressed stock price.


This big French drug concern should more than survive its major patent expirations this year. It could generate some of the best growth among its peers starting in 2013. Sanofi (SNY) has an attractive drug portfolio that isn't well appreciated by U.S. investors, including treatments for diabetes, cancer and cardiovascular disease, vaccines and animal-health compounds.

The U.S. listed shares, now around $35, trade for under eight times estimated 2011 profit of $4.58 a share and yield 5%. Sanofi's valuation is one of the lowest among major drug companies. Next year's profit is expected to decline about 10% but then expand in 2013 and potentially increase 10% in both 2014 and 2015.

"Sanofi trades at a discount to almost every other large-cap" drug company, "yet its longer-term financial average is better than the group average," wrote Bernstein analyst Tim Anderson in a note last month. He has an Outperform rating on the stock with a $44 price target -- 25% higher than the current quote.

There's some debate about whether Sanofi overpaid when it bought biotech Genzyme for $20 billion earlier this year. Barron's argued that a buyback would have been a better use of corporate cash, but CEO Chris Viehbacher sees Genzyme as a key part of Sanofi's post-patent growth engine. One believer is Warren Buffett, whose Berkshire Hathaway has been a sizable holder.

Seagate Technology

Summer floods in Thailand have temporarily washed out about 25% of global disk-drive production and hurt Seagate's chief rival, Western Digital.

That is producing a financial windfall for the unaffected Seagate (STX) that may last through 2012. Beyond the supply disruptions, Seagate should benefit from consolidation. Likely to be winnowed down to just three main producers shortly -- Seagate, Western Digital (WDC) and Toshiba -- the industry should see greater pricing power and discipline.

Seagate trades for under six times estimated profit of $3 a share in fiscal 2012, which ends in June. Needham analyst and Seagate bull Richard Kugele has an above-consensus estimate of $3.92 a share for the current year and a $35 price target. The shares recently traded below $16. "Seagate is going to throw off more than half its market value in cash during the next four quarters," Kugele says. The company could boost its dividend, now providing an ample yield of 4.6%, buy back stock or reduce debt.

Bears say disk drives are on their way out as solid-state memory supplants them. Yet personal computers aren't going away and the explosion of Internet content creates storage demand that can be met economically only with disk drives. Seagate also benefits from a savvy and shareholder-friendly management team led by CEO Steve Luczo that is moving to cement Seagate's competitive position in an improving industry.


U.S. utility stocks -- telecom and electrics -- are among the richest sectors of the stock market, trading for about 14 times projected 2012 profits.

Yield-oriented investors can do better in Europe, where Vodafone, the leading global wireless company, trades at a discount to its U.S. counterparts and yields a fat 5%. Its U.S.-listed shares, now trading around $27, fetch 10 times estimated profit in the current fiscal year ending in March. That's a sharp discount to Verizon Communications(VZ), which trades for 15 times estimated 2012 profit.

Vodafone and Verizon share ownership of Verizon Wireless, the No. 1 U.S. cell-phone company and each company's best asset. Vodafone owns 45% and Verizon 55%. Investors haven't given Vodafone full credit for that valuable stake, which could be worth $75 billion, or more than half the company's market value. That will change in early 2012 when Verizon Wireless pays $10 billion in dividends to its corporate parents ("It's Time to Ring Up Vodafone," Nov. 14).

Last month's article opined that Vodafone could hit $35 in the next year, a 30%-plus total return. That's a nice potential gain for a low-risk stock.

Royal Dutch Shell

The three major international integrated oils -- ExxonMobil, Chevron, Royal Dutch -- all look reasonably priced, trading for eight to 10 times projected 2012 profits. What differentiates Royal Dutch is the highest dividend yield among the trio at 4.7%, double that of Exxon (XOM) and two percentage points higher than that of Chevron (CVX).

The bull case on Royal Dutch is that cash-flow growth is accelerating as new energy projects in places like Qatar and Canada come on stream and that its dividend, unchanged since 2009, will start to rise in the next year. Net debt levels are down sharply, falling to $20 billion in the latest quarter.

"We estimate Shell's free cash flow will outstrip its current dividend by 50% to 100% consistently during 2012-2014," wrote Morgan Stanley analyst Martijn Rats, who sees 9% annualized dividend growth in the next three years.

Shell's U.S. listed shares, now around $70, could top $80 in the coming year, according to Morgan Stanley's projections.

Freeport McMoRan Copper and Gold

Copper is critical for developing economies and Freeport McMoRan Copper and Gold is the largest investor-owned producer in the world with a diversified resource base on four continents.

Freeport shares, around $39, are attractive based on several measures, including earnings, dividend yield and asset value. The stock is down 36% this year thanks to a 20% decline in copper prices to $3.40 a pound. Yet Freeport is very profitable at current copper prices, given mining costs of less than $1 a pound. The stock trades for eight times both 2011 and 2012 profits. It yields 3.7%.

Recent copper-mining transactions suggest that Freeport is significantly underpriced. If Freeport ever went on the block, it likely would fetch a nice premium and attract a range of bidders, including mining giant BHP Billiton (BHP) and even China, which accounts for over a third of world-wide demand.

Freeport has a great balance sheet with no net debt and huge reserves of nearly 100 billion pounds of copper, plus a large amount of gold. Investors worry about a drop in Chinese demand and a labor strike at a large Indonesian mine that has effectively shut down production. The China risk seems already reflected in the stock price and the Indonesian strike probably gets settled next year.


The cable-TV industry doesn't receive much credit on Wall Street for its dominant position in providing high-speed Internet access to consumers.

And for Comcast, the country's largest cable provider, the lucrative Internet business may now be more important than TV services. "Cable companies are infrastructure companies, not media companies, and they're winning the battle in most of America" versus the telecom industry, notes Craig Moffett, the cable and telecom analyst at Bernstein. Moffett has an Outperform rating and $32 price target on the stock.

Comcast (CMCSA) shares, at $23, trade for 12 times next-year earnings. Moffett expects the company to lift its dividend and boost its share-repurchase program during 2012 using its growing free cash flow. The stock yields 2%.

Comcast is still working to turn around the flagging NBC broadcast-TV business, which is in last place in prime-time ratings and losing money. Fortunately, NBC represents just 6% of Comcast revenues and probably has nowhere to go but up. Investors have been waiting for Comcast to aggressively return cash to shareholders, and that may start in 2012.

Procter & Gamble

With its broad array of popular brands -- including Tide, Bounty and Pampers -- and its global marketing muscle, P&G offers a low-risk way to play the growth in developing countries. The stock, a laggard in recent years, trades around $65, or 15 times projected profits in its current fiscal year, ending in June.

P&G yields over 3% and another dividend increase is likely in 2012. Throw in buybacks and P&G is returning about 7% to shareholders each year. If dividends increase in the next 10 years at anything like the pace of the past decade, P&G could be yielding 5% or more by 2020 based on the current share price. P&G is like a bond with an increasing yield.

Wall Street has been critical of the company for focusing too much on developed markets and higher-priced products, but P&G's strategy is changing. Bernstein analyst Ali Dibadj has argued that P&G needs to undertake a large restructuring initiative to cut costs and shift its "center of gravity" from its headquarters in Cincinnati to the emerging markets, where it gets about 30% of sales.

The company believes it's capable of high single-digit to low double-digit annual earnings growth. That's double the growth of electric utilities, whose shares trade in line with P&G. Dibadj, who upgraded P&G to Outperform in the summer, has a target price of $73 on the shares.


Luxury-goods makers ranging from Coach and Tiffany to LVMH and Richemont, are in vogue with investors, but the maker of Mercedes Benz, arguably the ultimate vehicle brand, is very much out of favor.

Daimler's U.S.-listed shares (DDAIF) trade around $45, down from a peak of $79 in the spring, and fetch just six times projected 2012 profit. They yield 6%. Investors are worried about several issues, including costs, an aging lineup of high-end Mercedes cars, the lack of profit momentum and troubles in Europe, where Mercedes gets half its sales.

Yet Daimler has a great balance sheet with more than $15 a share in net cash and investments. It's also one of the largest global makers of trucks, and its Mercedes franchise is strong in status-conscious China. Even detractors concede Daimler looks appealing based on a sum-of-the-parts analysis. It's one of the world's great industrial companies. The stock looks too cheap to ignore.

Michael Scally MD

Doctor of Medicine
Re: I Am In The $$$MONEY$$$

Merrill Lynch's 10 Favorite Stocks for 2012
Merrill Lynch's 10 Favorite Stocks for 2012 - TheStreet

BOSTON (TheStreet) -- Apple(AAPL_), Marathon Oil(MRO_) and CBS(CBS_) made Bank of America/Merrill Lynch's list of top stocks for 2012 and may help investors beat the market next year by a wide margin.

Bank of America/Merrill Lynch strategist Savita Subramanian compiled the firm's favorite stock ideas for 2012, plucking one name from each of the 10 sectors of the S&P 500. Subramanian says the stock picks align with Bank of America/Merrill Lynch's investment themes for the year ahead.

The Bank of America/Merrill Lynch analysts have a 12-month price target of 1,350 for the S&P 500, 6.9% higher than current levels. By comparison, the average return of the 10-stock portfolio, based on the price targets offered by analysts, is 30%.

The New York-based firm, which doesn't offer updates during the year on the list, says the stocks are chosen by Bank of America/Merrill Lynch's fundamental analysts. All companies carry a "buy" rating and are reviewed for favorable valuation, quality, yield and growth.

As it turns out, next year's favorites could have stood in for the firm's best picks for 2011. The group has an average return of 5.3% this year. The S&P 500, a broader measure of the largest stocks in the U.S., is little changed. Of Bank of America/Merrill Lynch's group of favorite stocks, CBS is the best performer so far this year, up 34%, while Lincoln National (LNC_) lags the most, with a 26% drop.

The 10 stocks on Bank of America/Merrill Lynch's list are arranged below in order of potential upside, based on the firm's 12-month price target and the stock's price as of Dec. 5.

10. Xcel Energy (XEL_)

Company Profile: Xcel Energy is a supplier of electric power and natural gas service in several U.S. states, including Colorado, Kansas, Michigan, Minnesota, New Mexico, North Dakota, Oklahoma, South Dakota and Texas.

Sector Representation: Utilities

Share Price: $26.06 (Dec. 5)

Potential Upside: 7.4% based on a price target of $28

Investment Thesis: Analyst Steve Fleishman touts Xcel for the company's yield, earnings stability and dividend growth. He also likes the stock as it is one of the highest quality, lowest risk regulated utilities in his coverage universe.

"We like XEL's strong rate-base wind program and multi-state utility model, and find the stock attractive post its equity overhang completion," Fleishman writes. "Investments in wind generation provide solid growth. Challenges will be translating these opportunities into [earnings-per-share] growth by managing cash flow and regulatory lag."

9. Altria(MO_)

Company Profile: Altria is the parent company for Philip Morris USA, John Middleton, U.S. Smokeless Tobacco Company, Ste. Michele Wine Estates and Philip Morris Capital. The company's brands include Marlboro, Parliament, Virginia Slims, Stag's Leap Wine Cellars and Basic.

Sector Representation: Consumer staples

Share Price: $28.31 (Dec. 5)

Potential Upside: 9.5% based on a price target of $31

Investment Thesis: Lisa Lewandowski says that tobacco is the firm's preferred staples industry, and that Altria gets the nod because it is the highest yielding S&P 500 tobacco stock.

"Altria is the largest U.S. cigarette producer, with about a 50% market share," she writes. "While the tobacco litigation environment has improved in recent years, consumption trends continue to decline. We expect price growth, cost cutting and share repurchases to drive above category earnings growth and we expect returns to shareholders to rise. As such, we believe Altria should trade at a premium to peers."

8. Union Pacific(UNP_)

Company Profile: Union Pacific operates a railroad franchise that covers 23 states in the western U.S., extending as far east as Chicago and New Orleans.

Sector Representation: Industrials

Share Price: $105.30 (Dec. 5)

Potential Upside: 12.1% based on a price target of $118

Investment Thesis: Analyst Ken Hoexter says that Union Pacific comes up under the firm's screens for yield and high quality. Specifically, he highlights Union Pacific as a solid investmentopportunity in a slow-growth environment.

"We continue to believe the rail group will improve service metrics and raise core rates," Hoexter writes. "Union Pacific has improved its operating ratio from the mid-80s to 70% most recently, which has led to sustained upper-teens earnings growth. Ongoing benefits look to be derived as it moves to reprice the approximately 12% of its business that has not re-priced since 2004."

7. Eli Lilly(LLY_)

Company Profile: Eli Lilly is the 10th-largest pharmaceutical company in the world. It's pharmaceutical products include Cialis, Prozac, Methadone and Cymbalta.

Sector Representation: Health care

Share Price: $37.63 (Dec. 5)

Potential Upside: 14.3% based on a price target of $43

Investment Thesis: Analyst Gregg Gilbert favors Eli Lilly in the health care space because of yield, quality and inexpensive valuation. He notes that Eli Lilly is the highest dividend yield of the S&P 500 pharma stocks.

"Eli Lilly offers a good mix of low valuation, a track record of returning cash to shareholders, and pipeline optionality, in our view," Gilbert writes. "Any positive pipeline news or reasonable business development deals could result in improved sentiment."

6. CBS Corp.(CBS_)

Company Profile: CBS is a media conglomerate with a focus on television broadcasting and film, publishing and Internet. CBS, Showtime Networks, CBS Studios, CNet, and CBS Radio are among the company'sassets.

Sector Representation: Consumer discretionary

Share Price: $25.72 (Dec. 5)

Potential Upside: 16.6% based on a price target of $30

Investment Thesis: Analyst Jessica Reif-Cohen says that media is her preferred industry in the consumer discretionary area, and that her focus on the theme of cash deployment makes CBS her top pick in the sector.

"We believe that CBS will benefit from an improving earnings mix due to growing subscription based revenue streams, solid fundamentals across the board and support from an announced $1.5 billion share repurchase authorization," Reif-Cohen writes. "Strong ratings in a solid advertising market drove a strong 2011 upfront for CBS, format changes at radio have driven station outperformance and improving outdoor will benefit from the 2012 London Olympics."

5. Air Products & Chemical(APD_)

Company Profile: Air Products supplies a portfolio of atmospheric gases, process and specialty gases, performance materials, equipment and services to a wide range of industries from food and beverage, health and personal care to energy, transportation and semiconductors.

Sector Representation: Materials

Share Price: $84.03 (Dec. 5)

Potential Upside: 19% based on a price target of $100

Investment Thesis: Analyst Kevin McCarthy says that chemicals is the preferred industry within the materials sector, and that quality, growth, and attractive valuation led him to Air Products.

"We view Air Products as a leader in industrial gases, with exposure to high-growth markets, including Asia, refinery hydrogen, and electronics," he writes. "Take-or-pay onsite gas contracts, and 3-5 year merchant gas contracts provide a cushion against downturns. We expect earnings to benefit from ongoing recovery in the global industrial economy and rising global energy prices. Additional positives include a healthy backlog of new projects, such as hydrogen for crude oil refining and oxygen for coal gasification."

4. Apple(AAPL_)

Company Profile: Apple, the maker of consumer electronic devices like the iPhone, iPad and iMac, is one of the largest companies in the world.

Sector Representation: Information technology

Share Price: $395.01 (Dec. 5)

Potential Upside: 30.4% based on a price target of $515

Investment Thesis: Like most tech analysts, Scott Craig favors Apple because of its high quality, the secular growth opportunity, and attractive valuation.

"We remain positive on Apple's growth potential given its opportunity to gain market share in large addressable markets, especially in the PC and handset markets," Craig writes. "We find Apple's valuation compelling, particularly based on the upside potential from revenue and earnings growth in the Mac/PC and iPhone segments and from gross margins, which we think should more than outweigh the near-term slowdown in iPod units and consumer exposure."

3. CenturyLink(CTL_)

Company Profile: CenturyLink is the third-largest telecommunications company in the U.S. based on access lines, providing phone, high-speed Internet, and wireless services to customers in 37 states.

Sector Representation: Telecommunication services

Share Price: $36.30 (Dec. 5)

Potential Upside: 37.7% based on a price target of $50

Investment Thesis: Analyst David Barden says the CenturyLink is inexpensive with a high dividend yield, and that investors could be in store for buybacks or dividend growth in 2012.

"We view yield-based wireline stocks as the equivalent of equity bonds where the required return (yield) is a function of relative risk ([free cash flow] payout ratio)," Barden writes. "Within this framework CTL screens positively among yield stories at 8.4% yield from a 48.5% [the 2012 estimated] payout ratio."

2. Marathon Oil(MRO_)

Company Profile: Marathon Oil is an independent upstream company. The company has international operations in exploration and production, oil sands mining and integrated gas.

Sector Representation: Energy

Share Price: $28.81 (Dec. 5)

Potential Upside: 73.6% based on a price target of $50

Investment Thesis: Analyst Doug Leggate picks Marathon Oil out from his entire coverage universe because of the company's attractive valuation, high quality and yield.

"We believe the recent announcement to separate the company into two separate units that focus on exploration and production and refining, will release value from the shares and demand a higher premium to the current share price," Leggate writes.

1. Lincoln National(LNC_)

Company Profile: Lincoln National, with assets of $153 billion, offers annuities, life insurance, 401(k) plans, savings plans, and comprehensive financialplanning and advisory services.

Sector Representation: Financials

Share Price: $20.85 (Dec. 5)

Potential Upside: 82.3% based on a price target of $38

Investment Thesis: Analyst Edward Spehar prefers insurance out of the entire financials industry, and Lincoln National stands out because of the potential for dividends and buybacks.

"The company has a 10% return on equity today with some upward bias given that tangible ROE (or an indicator of potential new business returns) is closer to 13% and excess subsidiary capital and free cash flow should allow for balance sheet deleveraging and increased payouts to shareholders (dividends and share buybacks) over time," Spehar writes. "All of these factors suggest that the share price should conservatively move to a 10%-15% discount to book value, in our view."

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