Is US 10-year bond yield & Yen decoupling?

USDJPY and US 10Yr yield, the differential of both have always had strong positive correlation in past. However, recently we have witnessed a decoupling in the correlation between the Japanese yen and US 10 Yr yields, where differential have started widening.

The yields on 10Yr bonds have fallen on account of Fed policies keeping its interest rate nearly zero, whereas Yen has depreciated against the dollar largely due to the extended Asset Purchase program by BOJ supported by week macro economic data in Japan. If Fed maintains its policy rates unchanged and on other side Bank of Japan continues to expand its monetary policy to boost economy which should be enough to lift the USDJPY towards north. Hence, the differential between USDJPY and US 10Yr yield will uphold in near term. Now, the question remains for how long this will sustain as in past both have positive correlation for prolong period.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

10 Best Warren Buffett Stocks To Own Right Now

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Has McDonald's Become Too Pricey to Buy or Hold?

Top 5 Penny Stocks To Buy Right Now

We are strong believers in making buy, sell or hold investing decisions predicated on the fundamentals of the business that the common stock represents. On the other hand, we also acknowledge the undeniable reality that "Mr. Market" does not always price a company according to its intrinsic value based on earnings and cash flows. However, we would further argue that Mr. Market's shenanigans are more apt to apply over the shorter run than they are over the longer run. To summarize, earnings determine market price in the long run, but investor psychology can play havoc with sound fundamental values over shorter periods of time.

With this article we're going to take an in-depth look at McDonald's Corp. (MCD) based on its fundamental value by the numbers. There are two primary reasons for writing this particular article at this particular time, both of which were instigated by reader comments and suggestions.

First of all, we've seen a running debate regarding whether McDonald's (MCD) is fairly valued or overvalued at today's valuation levels. Second, we've been challenged to write articles that were depicting full value or overvaluation because we have typically only written articles on undervalued selections. We believe that because McDonald's had such a strong run in calendar year 2011, many people believe that it now must be overvalued after rising so much.

McDonald's 2011 performance: Low $72.14 - High $101.00

We believe that most investors are at a disadvantage because they typically are left with making their investment decisions based on price movement alone. As we can see from the price only graph on McDonald's below, the stock price rose very strongly throughout calendar year 2011, with only the month of September showing any negative movement (see red circle). Therefore, after an approximately 30% increase in value, many in! vestors automatically assume that the company has become overvalued. On the other hand, as we will soon demonstrate, there is a difference between fairly valued, fully valued and overvalued.

Moreover, there can also be a significant difference between modestly overvalued versus dangerously overvalued. We believe these valuation distinctions are critical ones for investors to make. Understanding these differences will have a significant impact on the risk return relationship. As we will demonstrate, it is possible to buy a stock when it's fully valued or even modestly overvalued and still be able to generate strong overall performance on your investment. This point will be functionally related to the growth and more precisely, the rate of growth that the business behind the stock is capable of generating.

In other words, a company with powerful and/or explosive growth can overcome the investor mistake of paying a little more than fundamentals would suggest. We will attempt to show that when the investor does this, pays a little more than they should, they take on more risk for the eventual return they achieve.

However, if they do this with the right business, the rewards can still be handsome enough to compensate them for the extra risk. Conversely, we will also attempt to clearly illustrate that a smarter purchase is made when valuation is fair, or even better, low. Furthermore, investing at or below fair value enhances future returns while simultaneously lowering risk.

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McDonald's: Fundamentally Speaking by the Numbers

Since McDonald's is one of the most widely-recognized brands on the entire planet, it hardly needs any introduction. Therefore, we will refrain from any descriptive dissertation on the company or its business. It's most likely that most readers will have had a direct experience with McDonald's at one point or the other from visi! ting one ! of their restaurants. Instead, our objective will be to examine the fundamental relationship and correlation between McDonald's the business, and McDonald's the common stock.

In order to accomplish this, we are going to run McDonald's (MCD) through its paces utilizing the dynamic fundamentals analyzer software tool F.A.S.T. Graphs™. We're going to examine McDonald's Corp. over various time frames from long to short in order to measure several important relationships and metrics. First, we are going to evaluate McDonald's historical operating earnings history and determine whether the company's earnings growth is accelerating or decelerating. In other words, has McDonald's recent earnings growth been better or worse than its past earnings growth?

Furthermore, we want to discover how Mr. Market has traditionally treated McDonald's business results by how it has traditionally priced their common stock. And very importantly, we want to evaluate how McDonald's current stock price measures up relative to the historical norm. But most importantly of all, we're going to examine what the future holds for McDonald's shareholders given today's current price and valuation.

McDonald's Corp.: A 20-year History of its Earnings Price Relationship

With our first graph we examine McDonald's earnings and price relationship since the beginning of calendar year 1993. The orange line plots McDonald's earnings per share each year and applies a fair value P/E of 15 to its above-average earnings growth rate of 11.5%. Then we correlate monthly closing stock prices (the black line) to the orange earnings justified valuation line which draws a picture of how the market has historically valued McDonald's shares relative to their earnings. The dark blue line represents a calculated normal P/E ratio which indicates that the market has traditionally priced McDonald's shares at a premium to their intrinsic value.

We have marked this graph with several arrows indicating variations in val! uation. F! or the time frame 1998 to 1999 we marked the graph with an arrow marked OV for overvaluation. This is followed by an arrow marked UV for undervaluation for January 2003. Then we offer two arrows marked FV for fully valued at October 2003 and the other at May 2007. Our final arrow, marked IV for intrinsic value, points to Feb. 27, 2009 when McDonald's stock price was touching the orange line representing True Worth™ valuation.

What we are demonstrating with this exercise is how you can visually see that overvaluation resulted in poor short to intermediate-term performance for long-term McDonald's shareholders. However, even when McDonald's shares were significantly overvalued (1999), true long-term shareholders were still rewarded with capital appreciation if they still own the stock today.

However, they would have had to endure several years of losses before the stock price began to rise again. On the other hand, they would have received an increase in dividend income every year even during the times when stock prices were falling.

The graphic also illustrates that those investors with the presence of mind and courage to buy McDonald's stock once the price had fallen below the orange earnings justified valuation line were rewarded with excellent long-term returns, and thanks to low valuation, achieved them at below-average risk. Moreover, we can also see that investors that paid full value (the arrows marked FV) also achieved good returns over the long run. And finally, if McDonald's shares were bought at intrinsic value, long-term shareholder returns were strong.

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The long-term (19 years or more) historical earnings and price correlated graph on McDonald's (MCD) teaches us an important and final lesson on valuation. Notice on the above graph that McDonald's stock price was touching the blue normal P/E ratio line on the first day of the ! graph, an! d likewise is touching it at the closing price on Jan. 30, 2012. Consequently, earnings growth of 11.5% translates into an almost identical capital appreciation (Closing Annualized ROR) of 11.6%.

Furthermore, in addition to the approximately $712,705 of capital appreciation ($100,000 initially invested grew to $809,751.45), McDonald's shareholders received total cash dividends in excess of $117,000 that ballooned their total return to over 12.4% per annum. These numbers significantly exceed the numbers produced passively from the S&P 500 index.

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Examining the Consistency of McDonald's Earnings Growth Record

Next we are going to look at several earnings and dividends-only graphs starting with 20 years of history and then followed by shorter time frames. The purpose of this exercise is twofold. First of all, we want to illustrate how consistently McDonald's has performed as an operating business over time, and second, to show how McDonald's earnings growth rate has remarkably accelerated in more recent times, which includes the great recession of 2008. With our first chart we once again see that McDonald's grew earnings at 11.5% since 1993.

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With the next chart we cut five years off the time frame and measure McDonald's earnings growth from 1998 to present. Here we discover a slight deceleration in McDonald's earnings growth rate from 11.5% to 11.1%. However, this time period 2001-2003 includes a recession, and represents the three worst performing years in McDonald's history since calendar year 1993. Nevertheless, 11.1% earnings growth remained very consistent, all things considered, with their long-term historical average.

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Things really get interesting when we look at McDonald's earnings achievement over the 10 years (more than 9) since 2003, their last poor earnings year. Here we discover that McDonald's earnings growth rate has accelerated to an average of 15.8% since calendar year 2003. Later, we will show the impact this had on shareholder performance, especially when considering that this was also a time when McDonald's shares were undervalued.

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With our next earnings and dividends-only graph we look at the last five years (note the graph says six years because we include 2012, which of course has only gone on for one month). Here we discover that McDonald's has continued to generate an above-average earnings growth rate right through and including the great recession of calendar years 2008-2009. Based on this graph, we're comfortable stating that McDonald's appears to be a very recession-resistant business (see yellow shaded area on bottom the graph).

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Re-examining McDonald's 10-year Earnings and Price Relationship

With our next graph we reintroduce monthly closing stock prices to our 10-year earnings and dividend only graph on McDonald's. Here we discover that McDonald's share price was undervalued at the beginning of calendar year 2003 and currently trades at the highest valuations it has over this 10-year period (9 years plus one month).

However, we also see a very highly-correlated long-term relationship where price follows earnings. Notice how every time the price deviates from the orange earnings justified valuation line over or under, it inevitably and usually in short order, returns to fair value.

Furthermore, thanks to this blue-chip company's consistent and above-average earnings growth rate, there really is no bad time to i! nvest in ! McDonald's stock on this graph. Even if you bought McDonald's stock when the price was above the dark blue normal P/E ratio line, the investor would have still made money over the longer term. Of course, it's also clearly evident that the best time to invest in McDonald's is when price sits below the orange line. Clearly, when valuations are lower, so is risk, and better yet, the longer term rate of return is greater also.

A final take-away from this graph is that on a historical basis since calendar year 2003, McDonald's stock is clearly trading at a higher than normal valuation. On the other hand, the current valuation is not so high that it would destroy any potential for future returns. Instead, today's moderate overvaluation would in theory only reduce returns to a less than optimal level. Furthermore, based on historical price action, it would also seem logical to assume that the patient investor would have the opportunity, in the not too distant future, to buy McDonald's when valuations would be better aligned with earnings. At least, this has always happened before, as the graph so vividly depicts.

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The performance results associated with the above graph illustrate how powerful and rewarding it can be to invest in a great stock where its price is undervalued. McDonald's grew earnings at the above-average rate of 15.8% since calendar year 2003. However, beginning undervaluation accelerated shareholder returns to over 22% per annum based on capital appreciation, and to just under 24% per annum when cumulative dividends are added in (however, not reinvested).

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Our final historical graph simply shows that although McDonald's current blended P/E ratio of 18.7 is slightly higher than normal, it is not excessively high. We can see from ! the below! graph that from 1997 through 2002, McDonald's P/E ratio was much higher at a range between P/Es of 24 to 26 times earnings.

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McDonald's Looking to the Future

After examining McDonald's history over several different time frames we learn that this company has a very consistent record of growing earnings at double-digit rates. Moreover, we also learned that Mr. Market has shown a penchant of pricing McDonald's shares within reasonable variations of its earnings achievements. However, it's now time to look to the future in order to answer the question posed by the title of this article of whether or not McDonald's is too rich to buy or hold at today's prices.

So utilizing our Estimated Earnings and Return Calculator, let's start out by looking at our default estimates based on the current consensus of 19 analysts reporting to Capital IQ. Here we discover two things that we believe are important. First of all, the consensus of leading analysts expect McDonald's earnings to only grow at a below historical average rate of 10% per annum over the next five years.

Moreover, the consensus for calendar year 2012 is for earnings to only grow at 9% (see blue circle) before moving on to the average five-year growth estimate of 10%. Based on McDonald's past history we feel it's logical to assume that there might at least be a moderately negative bias to current estimates. This seems even stranger when you consider that on Jan. 24, 2012, McDonald's reported fourth quarter calendar year 2011 earnings growth was approximately 15%, and the same number for all of calendar year 2011 (note that our graphs are only showing 2011 earnings growth of 14% and marked with an E for estimate; the official data has not yet filtered through the database).

Assuming that consensus estimates are correct, it would appear that McDonald's shares are currently moderately overva! lued (sha! re price more than two years ahead of earnings — red line). The four lighter-colored orange lines, two above and two below the darker orange line, represent what we like to call the value corridor.

Notice that the lines are all parallel to each other and sloped at the estimated growth rate of 10%. Also, the appropriate P/E ratios that apply to each of the lines are listed on the scale to the right of the graph. Therefore, the calculated five-year estimated total return of 8.4% per annum assumes that McDonald's does in fact grow earnings at the consensus rate of 10%, and that the market appropriately capitalizes that growth at a P/E of 15.

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However, when you consider that McDonald/s has grown earnings at 15.7% since calendar year 2007, and that their earnings growth in 2011 was also 15%, the consensus estimate of only 10% seems low. Therefore, utilizing the override feature of the Estimated Earnings and Return Calculator, we will recalculate our expectations for McDonald's five-year estimated future growth using their 15.7% historical average. In other words, we are asking "what if" McDonald's continues to grow earnings as it has in the past.

When we redraw the chart using these numbers, we discover that McDonald's may still currently be fully valued where its price is now sitting near the top of the value corridor (the top light orange line). However, we believe it would be a stretch to call it overvalued at today's price levels. Considering that if McDonald's was to continue achieving its historical growth, then the potential for a total annual return of approximately 15% or better becomes very real.

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The following Earnings Yield Estimator table expresses the Estimated Earnings and Return Calculator in numerical form. This table c! alculates! McDonald's annual earnings and annual dividends based on estimating their future earnings growth rate at the same rate of their historical achievement.

For a clear perspective of valuation, these estimated earnings and dividend values are compared to what can be earned on a theoretically riskless 10-year Treasury. In other words, if the stock is trading at any type of fair value, then it should obviously be able to generate total cumulative earnings and dividends that are far in excess of what a theoretically riskless investment in a Treasury bond would generate.

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Conclusions

Unfortunately, most investors are forced to rely on charts based solely on stock price in order to determine whether the stock is a good buy, sell or hold. Consequently, it's very easy to become misled by either a rapidly rising or rapidly falling stock price. We believe that the only way to really have a clear vision of the appropriateness of investing in any given stock is when price and fundamentals can be viewed simultaneously.

When you examine the 20-year earnings (fundamentals) and price correlated graph on McDonald's, the relationship between fundamentals and stock price can be vividly seen. Therefore, more appropriate buy, sell or hold decisions can be made based on a sound foundation of fundamentals. This is not to imply that perfect decisions can be made, but we believe it is clear that when price and fundamentals are viewed in concert with each other, a more learned perspective is attained.

When applying these principles to McDonald's current valuation, it appears that McDonald's stock is currently fully priced, but once again, we would stop short of calling it overpriced. Although we would not purchase McDonald's stock at today's prices, we only make that decision based on the belief that sometime in the near future we might be given the opportunity to invest ! in this b! lue chip at a better valuation. This opinion is founded upon the principles of valuing earnings, and the long-term history of how the market has specifically valued McDonald's earnings. Consequently, we currently rate McDonald's a long-term hold.

Disclosure: Long MCD at the time of writing.

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

Top Warren Buffett Companies To Own In Right Now

One of the benefits of attending the Berkshire Hathaway (NYSE: BRK-B  ) shareholders' meeting is learning from the great value investors and Buffettologists who also make the yearly trek to Omaha. In this multipart series, Fool analyst Rex Moore speaks with Lawrence Cunningham, author of The Essays of Warren Buffett: Lessons for Corporate America. The book offers a unique approach by arranging all of Buffett's shareholder letters thematically, rather than chronologically.

Today, Professor Cunningham speculates on Berkshire's next big acquisition.

Meanwhile, solid companies selling at depressed prices have consistently helped generations of the world's most successful�investors�preserve capital, minimize risk, and achieve long-term, market-trampling returns. For one such company, read our free report: "The One Remarkable Stock to Own Now." Just click here to get started.

Top Warren Buffett Companies To Own In Right Now: Concurrent Computer Corporation(CCUR)

Concurrent Computer Corporation provides solutions that enable the seamless delivery, management, and monetization of video on any screen. Its screen-independent video delivery and media data solutions create a 360 degree view of the consumer video experience, which is built on video firsts and patented technology. The company provides advanced advertising to customers in the cable, telecommunications, wireless, Web, advertising, and content development industries by harnessing the full potential of video. Its video solutions consist of software, hardware, and services for streaming video and collecting media data based on cross services data aggregation, logistics, and intelligence applications; and real-time products consist of Linux and other real-time operating systems, and software development tools to various companies seeking high-performance, real-time computer solutions in the military, aerospace, financial, and automotive markets around the world. Concurrent Comp uter Corporation was founded in 1966 and is headquartered in Duluth, Georgia.

Top Warren Buffett Companies To Own In Right Now: News Corporation(NWS)

News Corporation operates as a diversified media company worldwide. Its Cable Network Programming segment produces and licenses news, business news, sports, general entertainment, and movie programming for distribution through cable television systems and direct broadcast satellite operators primarily in the United States, Latin America, Europe, and Asia. The company?s Filmed Entertainment segment produces and acquires live-action and animated motion pictures for distribution and licensing in entertainment media, as well as produces and licenses television programming worldwide. Its Television segment operates 27 broadcast television stations in the United States. The company?s Direct Broadcast Satellite Television segment distributes programming services via satellite and broadband directly to subscribers in Italy. Its Publishing segment provides newspapers and information services, such as publishing national newspapers in the United Kingdom, approximately 146 newspape rs in Australia, and a metropolitan and a national newspaper in the United States; book publishing services, including the publishing of English language books worldwide; and integrated marketing services comprising the publishing of free-standing inserts, which are marketing booklets containing coupons, rebates, and other consumer offers, as well as provides in-store marketing products and services, primarily to consumer packaged goods manufacturers in the United States and Canada. The company also sells advertising, sponsorships, and subscription services on the company?s various digital media properties and outdoor advertising space on various media primarily in Russia and eastern Europe; and provides data systems and professional services that enable teachers to use data to assess student progress and deliver individualized instructions. News Corporation was founded in 1922 and is headquartered in New York, New York.

Advisors' Opinion:

• [By Andrew]

  I know I said best 10 stocks but I just thought of another one and I couldn’t resist.  NewsCorp is making a lot of very smart moves to cater to the new generation of TV watchers.  Their shows on the FX network are outstanding and they just signed a massive deal with the UFC.  They pay a small dividend of 1.1%, but still better than nothing. If you look at what they are doing and who they are targeting, you’ll see that it is all very sensible and forward thinking.  It’s not just Fox News.  There is a lot to the company and a lot of smart people pulling strings there.  Expect the UFC ratings to move the stock price as well as extremel y solid TV ratings in 2012 for the FX network.

Hot Insurance Stocks To Watch Right Now: Network Exploration Ltd. Cl A (NET.V)

Network Exploration Ltd., a junior mineral exploration company, engages in the acquisition, exploration, and development of mineral properties. The company focuses on base and precious metal properties comprising gold, silver, and copper. It has interests in the Caldera gold and copper prospect located in the Huasco province, Chile; Pistala property comprising 1,600 hectares in southern Peru; and 25 Strike quartz claims in Yukon Territory, Canada. The company was incorporated in 1983 and is headquartered in Vancouver, Canada.

Moody's Upgraded to Strong Buy - Analyst Blog

On Jul 11, 2013, Zacks Investment Research upgraded Moody's Corp. (MCO) to a Zacks Rank #1 (Strong Buy). With a strong return of 70.4% over the past one year and a positive estimate revision trend, Moody's is an attractive investment opportunity.

Why the Upgrade?

Upbeat first quarter results, strength in new domestic debt issuance and improving clarity over regulatory climate in Europe contributed to the upgrade. Moody's remains a solid franchise in rating debt instruments based on its diversified credit research business model and international growth opportunities.

Moody's reported first quarter earnings of 97 cents per share that were well ahead of the Zacks Consensus Estimate of 87 cents. However, including litigation expenses of 14 cents, earnings were 83 cents per share, up 9.0% from the year-ago quarter.

Revenues surged 13.0% year over year to $731.8 million and exceeded the Zacks Consensus Estimate of $718.0 million. Domestic revenues soared 18.0% year over year to $406.1 million in the reported quarter. International revenues increased 8.0% year over year to $325.7 million in the quarter.

Moody's expects 2013 revenues to grow in the high single-digit percent range. Operating expenses are projected to increase in the mid-single digit percent range. Operating margin is projected to be between 41% and 42%. Earnings for 2013 are expected to be in the range of $3.49 to $3.59 per share.

The Zacks Consensus Estimate for fiscal 2013 increased 2.6% to $3.58 per share as most of the estimates were revised higher over the last 90 days. The current estimate is within the guidance range provided by Moody's. For fiscal 2014, the Zacks Consensus Estimate increased 2.4% to $3.90 per share.

The long-term expected earnings growth rate for Moody's is 13.9%.

Other Stocks to Consider:

Investors can also consider other stocks that are doing well right now. These include Akamai Technologies (AKAM), Energizer Holdings (ENR) and CIT Gro! up (CIT). While Akamai and Energizer carry a Zacks Rank #1 (Strong Buy), CIT carries a Zacks Rank #2 (Buy).

Ask The Expert: When Is The Best Time Of Year To Invest?

Top 5 Stocks To Invest In Right Now

If you'd like us to answer one of your investing questions in our weekly Ask The Expert Q&A column, email us at editors@investinganswers.com. (Note: We will not respond to requests for stock picks.)

Question: When's the best time of year to invest?

--Valerie V., Seattle

Investors have become well acquainted with the phrase "Sell in May and go away," which suggests that stocks only generate gains until Memorial Day, after which they slip in value before rising again after Labor Day. Is this axiom on the mark, or is it a myth?

Well, in an analysis of 100 years' worth of monthly returns, Bespoke Investment Research couldn't find any such trend. The Dow Jones Industrial Average (DJIA) rose 0.37% on average every June, 1.39% each July, and 1.01% every August. Then again, the market tends to modestly rise in most months, with February and September being the only months that have traditionally generated negative returns. What do February and September have in common? Nothing.

So why do we still hear the phrase "Sell in May and go away?" Perhaps it's due to the fact that a clear summer swoon has been affecting the market in recent years. In 2010, 2011 and again in 2012, stocks got off to a great start, fell swiftly in the spring and then posted solid gains after pullbacks ranging from 9% to 17%. The sell-off has come a bit later in 2013, but stocks again appear to be hitting a rough patch, with the S&P falling nearly 4% from its late May 2013 peak. Recent history suggests the market may fall further in coming weeks before its next upward move.

Sadly, we can't point to any unifying factors that account for these repeated periodic pullbacks. In each instance, a series of external events appeared to cause the markets to fall, from the tsunami in Japan to the economic crisis in Greece to threats of a U.S. government shutdown. In 2013, it's! the fears of an eventual end to the Federal Reserve's stimulus, along with signs of a slowing U.S. economy, that are creating headwinds.

The Tech Exception
Yet a case can be made to proceed with caution with technology stocks during the summer months, thanks to a pair of factors.

First, many Europeans take extended vacations in August, and European corporations tend to slow down their orders in June and July in anticipation of factory shutdowns. (The technology sector has a greater exposure to Europe than any other sector).

Second, professional stock traders tend to take time off during the summer, which generates smaller trading volumes and higher volatility. And volatility is to be avoided, as far as many investors are concerned. Tech stocks, as measured by beta, are more volatile than any other kinds of stocks.

The Year-End Rally
So what's the best month for investing? December, which has typically generated a 1.42% annual gain for the DJIA, according to Bespoke Research. In fact, the market has risen in December 73 times in the past 100 years.

What explains this phenomenon, known as the "December effect"?

Many investors sell stocks in October and November to make sure that they have generated trading losses to offset trading gains in order to minimize their capital gains tax bite. This is known as tax-loss selling.

Those sold-off stocks, which have likely already performed poorly in prior months, tend to become oversold, and far-sighted investors start snapping them up in December before the crowd pivots back to these bargains early in the new year.

The second-best month for stocks? January, which has shown a gain on 64 occasions over the past 100 years. On average, the DJIA rises roughly 2.5% in those two months, which is the best two-month pair of anytime during the year.

One final thought: Should you try to time the market and buy in ahead of strong months and sell ahead of weak months? The answer is mixed.

On the one h! and, mark! et performance is driven off of specific events (such as good economic news or a bad hurricane season), and it's foolhardy to simply ignore the external investing environment when making investment choices. Then again, recent history has shown that it is wise to take profits after the market has delivered an extended period of solid gains. That was the case in the spring of 2010, 2011 and 2012, and may again be the case in 2013.

This article was originally published at InvestingAnswers.com
Ask The Expert: When Is The Best Time Of Year To Invest?

Top Value Stocks To Invest In 2014

LONDON -- To me, capital growth and dividend income are equally important. Together, they provide the total return from any share investment and, as you might expect, my aim is to invest in companies that can beat the total return delivered by the wider market.

To put that aim into perspective, the FTSE 100 has provided investors with a total return of around 3% per annum since January 2008.

Quality and value
If my investments are to outperform, I need to back companies that score well on several quality indicators, and buy at prices that offer decent value.

So this series aims to identify appealing FTSE 100 investment opportunities and, during recent weeks, I've looked at�Tesco� (LSE: TSCO  ) ,�British American Tobacco� (LSE: BATS  ) ,SABMiller� (LSE: SAB  ) ,�Reckitt Benckiser� (LSE: RB  ) and�J Sainsbury� (LSE: SBRY  ) . This is how they scored on my total-return-potential indicators (each score in the table is out of a maximum of 5):

Top Value Stocks To Invest In 2014: Tupperware Corporation(TUP)

Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.

Advisors' Opinion:

• [By Sam Collins]

  Household name Tupperware Brands Corp. (NYSE:TUP) is a global direct seller of products with multiple brands through an independent sales force of 2.4 million people. Its product line focuses on kitchen storage and serving solutions, as well as personal-care products. Over 60% of sales in 2011 are expected to come from Europe and Asia, and the stock has appeal as an emerging markets story.

  S&P estimates that 2011 earnings will increase to $4.54 versus $3.53 in 2010, and it increased its rating to a “five-star strong buy” with a recently revised 12-month target of $81, up from $73. The 2005 purchase of Sara Lee’s (NYSE:SLE) direct-sales business, which has a high growth rate, should be a long-term benefit. TUP’s annual dividend yield is 1.92%.

  Technically TUP had a pullback following a new high at over $70 and is currently oversold. Buy TUP at the current market price with a trading target of $70, but longer term a much higher target will likely be attained.

Top Value Stocks To Invest In 2014: Schlumberger N.V.(SLB)

Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.

Advisors' Opinion:

• [By Kathy Kristof]

  Headquarters: Houston
  
  52-Week High: $79.38
  
  52-Week Low: $56.86 
  
  Annual Sales: $39.5 bill.
  
  Projected Earnings Growth: 18% annually over the next five years 
  
  
  Energy-services giant Schlumberger is the prototypical multinational. The company derives roughly 85% of its revenues from overseas, including developing markets in Africa, Brazil and Asia. 
  
  With particular expertise in deep-water drilling, Schlumberger is well-positioned to compete in a world where oil is harder to find, says Argus Research analyst Philip Weiss. Admittedly, oil exploration is a cyclical business, driven largely by crude prices. And weak prices for natural gas have hit the company’s stock, Weiss says. But the price of natural gas has little to do with Schlumberger’s profits, so Weiss just sees this as an opportunity to get the shares at a more reasonable price.

Hot Oil Companies To Invest In 2014: Caterpillar Inc.(CAT)

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.

Advisors' Opinion:

• [By Ben Levisohn]

  For one day at least, this CAT is not a dog.

  Caterpillar (CAT) has gained 2% to $86.22 today, its largest gain since in a month and the largest gain among the Dow components. The machinery manufacturer has dropped 11% during the past six months, however, as a slowdown in China and cost-cutting at mining companies have hit its shares.

  Bloomberg

  Susquehanna’s Ted Grace offers reasons for optimism, even as he lowers his 12-month price target to $97 from $104:

  CAT remains Positive rated with 15% upside to our $97 price target and upside-downside of 1.2-to-1 (which, like most of our machinery names, is admittedly shy of the 2-to-1 or better ratio we prefer). Despite our 2014-15 EPS being ~6% below consensus, we view our updated estimates as closer to buyside expectations while noting that consensus appears to embed a low tax rate that explains over half of the variance. While there remains plenty of uncertainty on 2014/15, particularly in mining, we believe CAT shares currently discount reasonable top-line expectations while recent meetings with mgmt suggest potential for structural cost savings that could drive better than expected margins/ incrementals. While difficult to identify discernible catalysts, if CAT’s framework for flat-to-better RI revenue growth in 2014 proves correct (admittedly not assumed in our estimates), this would almost certainly debunk the core of the bear thesis and be meaningfully positive for shares.

  Investors waiting for the stock to actually, you know, rise can take comfort in Caterpillar’s $2.40 dividend per share and its more than $3 per share in buybacks in 2013, Grace says.

  Caterpillar’s 2% gain has trumped the Dow Jones Industrial Average’s 0.04% rise, and United Technology’s (UTX) 0.1% drop, while competitor Deere (DE) has gained 1.9% to $83.22.

• [By Roberto Pedone]

  Caterpillar (CAT) is staging a textbook breakout in May. Shares of heavy equipment maker haven't exactly been kind to investors year-to-date; CAT has barely broken even during a time when the broad market has been in a historic rally. But a textbook breakout should change that.

  CAT started forming an inverse head and shoulders pattern back in early April. The inverse head and shoulders is formed by two swing lows that bottom out around the same level (the shoulders), separated by a lower low called the head; the buy signal comes on the breakout above the pattern's "neckline" level, which was just below $86 for CAT. That puts this stock's upside target right around $92.

  Even though CAT has nearly hit its upside target already (the post-breakout buying has been very quick), the longer-term implication for investors is a break of the downtrend that had been haranguing shares this year. Now, with that downtrend broken, CAT should have more room to move higher. I'd just expect some consolidation first.

• [By Jim Cramer,TheStreet]

  Caterpillar (CAT) could be a monster in 2011, especially with the integration of Bucyrus International (BUCY), which I think will turn out to be a fantastic acquisition.

  Current earnings-per-share estimates of about $6 are, I think, way too low. I see this stock going to $120 in the next year. Too gutsy? Ask yourself what happens if the United States comes back as a growth nation? Right now almost all of the growth is overseas.

  Still a fantastic mineral play and a terrific call on world growth.

Top Value Stocks To Invest In 2014: Dollar Tree Inc.(DLTR)

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.

Advisors' Opinion:

• [By Sam Collins]

  Dollar Tree (NASDAQ:DLTR) is a leading operator of discount variety stores. The stock has hugged its 50-day moving average since mid-February. But a recent minor revision of earnings for this year by several analysts and the recent market sell-off have resulted in a fall from its high of the year at over $70 to under $66. However, Goldman Sachs (NYSE:GS) increased its price target to $73 from $69.

  Technically DLTR is oversold, according to MACD. A break below its 50-day moving average could result in a pullback to $64, but positions could be taken at the current market price. The trading target for DLTR is $72.

SIFMA to SEC: Revamp SRO Structure

The Securities Industry and Financial Markets Association called on the Securities and Exchange Commission on Thursday to review the regulatory structure of broker-dealers, exchanges and the self-regulatory model, as technology advances have changed the way market participants operate and because SROs now compete with the BDs they regulate.

In a July 31 letter to the SEC, Theodore Lazo, SIFMA’s managing director and associate general counsel, said that the self-regulatory model is a “crucial area for immediate action,” and that SIFMA believes "a discrete review of the regulatory structure of broker-dealers, exchanges should be carried out now because that structure is widely viewed to be outdated and in need of reconsideration and reform."

A part of that review, Lazo continued, "should focus on SRO structure, because the markets have changed to the point that the current structure of the self-regulatory model is widely viewed to be outdated and in need of reform.”

The largest U.S. securities exchange operators, Lazo said, “have evolved from member-owned utilities to for-profit business enterprises,” all while “technological advancements have changed the way the securities markets and market participants operate, with securities exchanges and non-exchange venues operated by broker-dealers performing essentially identical functions in certain respects.”

However, the status of exchanges as self-regulatory organizations “has not changed, even as the exchanges have become active competitors with the broker-dealer members they are charged with regulating,” Lazo added. “This inconsistency has led to tensions, anomalies, and conflicts in the structure, operation and regulation of the securities markets.”

Lazo identified some key areas that SIFMA believes the SEC should review, noting that the review should not be exclusive to those areas.

• What is an Exchange and Why Is It an SRO? In today’s reality, the interests, incentives and functions of the member-owned cooperative exchanges of 1934 bears little resemblance to those of the current for-profit exchanges. Eliminating exchange’s SRO status would streamline regulatory processes and make self-regulation more efficient by centralizing regulation.

• Exchanges Compete with the Broker-Dealers they Regulate. Combined with the transformation of exchanges into for-profit enterprises in search of ways to expand their businesses, exchanges and broker-dealers have become direct competitors in many aspects of their businesses. Most prominent is the competition for order flow between exchanges and broker-dealers. In this competitive dynamic, the policy of having exchanges regulating broker-dealers has become outmoded.

10 Best Canadian Stocks To Own Right Now

• Competitive and Regulatory Disparities. While competitive benefits flow from exchanges’ status as SROs, including limitations on liability, market data revenue, and ability to design market structure developments, exchanges are not subject to some of the significant regulatory requirements applicable to broker-dealers, such as best execution, supervisory controls, and financial responsibility. At the same time, SIFMA said it recognizes that exchanges are subject to unique regulatory requirements, including the requirement to submit rule changes for their business practices for SEC approval, fair access requirements, and ownership restrictions.

• Funding of Self-Regulation. While broker-dealers are subject to numerous regulatory fees from SROs, there is no way to assess the reasonableness of the regulatory funding model without greater transparency into SROs’ existing regulatory fees as well as their actual regulatory expenses. For many exchanges, regulatory fees are intended to offset the exchanges’ cost of outsourcing regulation to other SROs–such as FINRA–effectively duplicating costs on member firms.

SIFMA urges the commission to consider requiring SROs to make this important information publicly available on a regular basis.

Risk Management: Best bets are contingency, insurance plans

While one venture may be risky for an individual, the same venture may be safe for some other person. But to be prepared for it is a different ball game all together. One never knows what difficulty is awaiting him at the next turn of life. It's said that it never rains, it pours.

 The most recent example which most of us can relate to is the global recession. Although India was not as affected as other countries, people did feel the pinch of the financial meltdown.

Almost all companies cut their costs, didn't hike salaries, bonuses were either less or none, less global demands. The job market was in a sorry state.

There was a freeze on hiring too. In a situation like this, losing a job is the last thing anyone would want. Every-one must be prepared for such eventualities. The best thing possible is risk management.

Two steps generally involved in risk management are contingency planning (emergency planning) and insurance planning.

Contingency planning

 This is the first step in risk management and also the first step in building a sound financial plan for any individual. Once a person's risks are covered, he can safely plan for his goals. If risks are not covered and he plans for his goals of life right away, then all of his savings accumulated to meet the goals will get wiped out if any untoward incident occurs.
 
What is contingency planning? How to go about it?

Contingency planning can well be termed as saving for a rainy day. It is planning for any emergency that might be lurking round the corner. A contingency fund or emergency fund has to be prepared to meet any emergency. Predicting how much would be enough for such situations is always difficult.

How to calculate a contingency plan?

Each one of us prepares a monthly budget wherein we list the items and the expenses against them. From the list of expenses, a person needs to distinguish them as mandatory expenses and voluntary expenses. Mandatory expenses are those that are supposed to be met 'come what may'. EMIs, insurance premium, grocery and utility bills, etc fall under this category. Voluntary expenses are those which can be avoided during bad times. Going on a vacation, eating out or going for movies fall in this category.

Source: http://www.nirmalbang.com/Research/BeyondMarket.aspx?id=31&type

Top 5 Small Cap Stocks To Watch Right Now

To read the full report click here

Are Stocks Overbought? These Little-Known Indicators Say Yes

The S&P 500 index rose another 3% last week, continuing a winning stretch that began last fall.

Since Nov. 7, the S&P has risen 22%. That works out to be a roughly 35% annualized gain. Trouble is, the rally is increasingly due to a perception by individual investors that stocks can only move in one direction: up.

In its most recent survey, the American Association of Individual Investors (AAII) noted that the percentage of investors who are currently bearish is now less than 20%. That's the lowest reading in 18 months, yet as legendary fund manager Sir John Templeton once noted, "The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell."

I've already researched one half of that maxim. Back in 2010, I noted that stocks tend to rally when that AAII survey finds few bullish investors. The logic is quite simple: When investors are in a negative mood, they have already pushed stocks down to levels that are too low to ignore. As Templeton notes, maximum optimism should be of equal concern.

Discussing the sharp gains posted in the market last week, MKM Securities' Katie Stockton noted that "short-term momentum was strong enough to lift the S&P 500 above its June levels, while generating abundant breakouts on the individual stock level. Breakouts tend to foster additional momentum," which she adds can lead to overbought conditions.

In effect, technical indicators like momentum -- not fundamental indicators like valuations and growth rates -- are ruling this market.

The Profit Disconnect
It's important to think about issues such as momentum and investor bullishness as we head into earnings season, which will replace speculation with fact. Companies in the S&P 500 are expected to boost profits 3% from the same quarter last year, though the actual figure is likely to end up closer to ! 4% or 5% once the numbers have been digested. In each of the past three earnings seasons, year-over-year profit growth has been 1 or 2 percentage points above early season forecasts.

Yet the real risk to stocks will be based on what companies have to say for the rest of 2013. Both a strong dollar (which mutes foreign earnings) and a fresh slowdown in key emerging market economies could easily compel companies to set a lower bar for the next two quarters.

Margin Concerns
There's an unusual stock market correlation that has developed over the past 15 years that investors should heed. In 2000 and 2007, the amount of money that investors had borrowed to buy stocks (that is, margin debt) surpassed $350 billion. In both cases, the stock market was sharply lower a year later, partially induced by forced margin selling -- and more importantly, the U.S. economy had slipped into recession by then. It's as if investors became overly aggressive with margin debt right at a time when they should have been tilting toward caution.

Well, for the third time in 15 years, margin debt has again moved above $350 billion. The figure has stayed constantly above that threshold for the whole year. (Data are only available through May, which saw a modest downtick, likely induced by "tapering" comments by the Federal Reserve on May 21, though the trend may have been reversed as those tapering comments have subsequently been walked back. The next data will be released in late July.)

The Move To Cash
Thanks to aggressive recent stock buying, many investors have come close to exhausting their sidelined cash and are "all in," as they say in poker. But having all of your chips on the table can be dangerous, especially if you carry margin debt as well.

So while your gut may tell you to stay focused on further market gains, your head should be talking you into locking in profits. Yet which stocks should you sell during this earnings season?

In market environments with less froth, you s! hould alw! ays seek to cull the bad stocks from your portfolio and "let your winners ride." But the current environment, which has seen more than 90% of the stocks in the S&P 500 move above their 200-day moving average, means that even great stocks should be in question.

My rule of thumb: Unless a company can make a solid case for robust profit growth over the next few years, the time may be here to take profits.

I would also prioritize my portfolio, separating the low-priced stocks (in terms of price-to-earnings, price-to-book, or price-to-cash flow) from the high-priced ones. Though both types of stocks would flourish if the market moves yet higher, the lower-priced stocks at least have better downside protection if the market moves lower. Lower-priced stocks are also more likely to initiate share buyback or dividend hikes if the market comes under deeper pressure.

Risks to Consider: With U.S. trading partners in distress, this coming earnings season could take a much more somber tone. This is no time to be complacent (even though the VIX index -- the "fear gauge" -- is again below 14, signaling historically high levels of complacency).

Action to Take --> Instead of focusing on the market, keep a close watch on the stocks in your portfolio. Examine the coming quarterly results (and outlooks). Merely "decent" business conditions are no longer grounds to hold any stock that has appreciated sharply in recent quarters.

Gold Fields on Track to Meet FY13 Target - Analyst Blog

Gold producer Gold Fields Limited (GFI) announced that it is on track to meet its production targets for 2013. The company retained its guidance of 1,825,000 and 1,900,000 ounces (oz) of gold for 2013 despite a 5% decline in production in the second quarter of 2013 compared with the first quarter. Cash cost and notional cash expenditure (NCE) for the year are expected to be $860/oz and $1,360/oz, respectively.

Gold Fields also provided its outlook of 451,000 gold-equivalent ounces for the second quarter of 2013, with cash costs and NCE of about $860/oz and $1,250/oz, respectively. The primary cause for the sequential decline in production in the second quarter was the illegal strike at the Tarkwa and Damang mines in Ghana. The illegal strike was resolved following the settlement of issues between Gold Fields' management team and the Ghana Mineworkers Union (GMU).

This illegal strike resulted from a number of demands coming from the GMU and its affiliates, the Professional Managerial Staff Union and the Branch Union. These employees threatened to take industrial action against Gold Fields if their demands are not fulfilled.

Disputes relating to determination of profit share payments to employees, the unconditional reinstatement of an employee who was dismissed following an internal disciplinary procedure, dissatisfaction with certain management structures, removal of some members of senior management, concerns regarding catering delivery models, and allegations of discrimination between expatriate and Ghanaian employees are some of the causes of concern for the Union.

Gold Fields currently carries a Zacks Rank #4 (Sell). The company is scheduled to post its second quarter results on Aug 22.

Other companies in the mining industry with favorable Zacks Rank are Lake Shore Gold Corp. (LSG), NovaGold Resources Inc. (NG) and Pretium Resources Inc. (PVG). All of them carry a Zacks Rank #2 (Buy).

ManTech Gets DOJ Contract - Analyst Blog

Critical software services provider ManTech International Corporation (MANT) recently procured a $16-million worth time and materials (T&M) contract from the Department of Justice's (DOJ) Civil Division to provide the requisite IT support, strategic planning and training services to end users.

The Civil Division of DOJ represents Members of Congress, Cabinet Officers and other federal employees in any civil or criminal matter within its scope of responsibility. Its primary responsibilities include ensuring the uniformity of the Federal Government's voice in its view of the law, preserving the intent of Congress and credibility of the government before the courts.

According to the agreement, ManTech will provide a 24/7 service desk in addition to software development, training, and administration services to the end users to ensure easy accessibility of information. The company has a long-standing business association with DOJ and the current contract reinforces this mutual relationship.

Over the years, ManTech has a steady stream of contract awards (bookings). Bookings aggregated $306 million in first quarter 2013, representing a book-to-bill ratio of 0.5. With a significant number of awards, the company had a healthy backlog of business worth $6.1 billion by the end of the quarter. At quarter-end, ManTech had $172 million in cash and cash equivalents.

With strong liquidity position and robust business backlogs, ManTech is poised to register solid revenue growth in 2013. The company envisages continuous recruitment initiatives to fulfill its order backlogs. We also remain encouraged by the positive developments in the industry.

ManTech presently carries a Zacks Rank #3 (Hold). Other players in the industry worth reckoning include Syntel, Inc. (SYNT), NeoPhotonics Corporation (NPTN) and TriQuint Semiconductor, Inc. (TQNT), each carrying a Zacks Rank #2 (Buy).

Sequoia Fund Annual Letter to Shareholders (2011) and Discussion of Major Holdings

When Warren Buffett folded up his investment partnership more than 40 years ago he recommended one fund to his investors: the Sequoia Fund, which was managed by his friend Bill Ruane.

Here we are 40 some years later and the Sequoia Fund is still beating the market, and still holds a significant position in Buffett's Berkshire Hathaway (BRK.A)(BRK.B).

Interestingly, in 2011 it seems that the main challenge that the Sequoia Fund had was being overwhelmed by inflows from new investors after Morningstar named them fund manager of the year in 2010.

You would think that the 40-year track record of Sequoia would have been more interesting to potential investors than being named manager of the year for one trip around the sun.

The 10 largest positions in the Sequoia Fund represent over 50% of invested assets, so the fund is still managed in a concentrated value style like it was by Bill Ruane years and years ago.

To the Shareholders of Sequoia Fund, Inc.

Dear Shareholder:

Sequoia Fund's results for the quarter and year ended December 31, 2011 appear below with comparable results for the S&P 500 Index:

To December 31, 2011	Sequoia Fund	Standard & Poor's 500*
Fourth Quarter	12.58%	11.82%
1 Year	13.19%	2.11%
5 Years (Annualized)	4.30%	-0.25%
10 Years (Annualized)	5.57%	2.92%

The performance shown above represents past performance and does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance may be lower or higher than the performance information shown.

* The S&P 500 Index is an unmanaged, capitalization-weighted index of! the common stocks of 500 major U.S. corporations. The performance data quoted represents past performance and assumes reinvestment of distributions. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Year to date performance as of the most recent month end can be obtained by calling DST Systems, Inc. at (800) 686-6884.

The Fund outperformed the S&P 500 Index for the fourth quarter and the year. While the stock market posted modest gains in 2011, an investor in the Index still would not have recovered his losses from 2008, when the Index declined 37%. Over the past five years, the Index has generated a slightly negative overall return while Sequoia has compounded at a 4.3% annual rate, net of fees.

Sequoia has generated this return while operating with roughly 15% to 20% of our assets in cash for most of the past four years. We were pleased with the 13.2% gain in the Fund for the year but recognize that our performance would have been better had we been fully invested in the stocks we already owned.

The high concentration of cash in the Fund in 2011 was not by design. We entered 2011 with a 21% cash position, but were quite active buying securities during the year. Sequoia ended 2010 with 34 stocks in the portfolio. We added a net of 12 positions in 2011, bringing us to 46 stocks. Overall, the Fund began the year with a bit less than $3.5 billion of assets under management and was a net purchaser of $643 million of equities during the year.

However, we were surprised by the inflow of money into the Fund that occurred after we were named last January as domestic equity fund managers of the year for 2010 by Morningstar. In 2011 investors contributed $930 million to Sequoia, net of withdrawals. We thought the inflow that began immediately after the award would prove temporary, but it remained steady all year. It became a problem in the fourth quar! ter. Stoc! k market valuations rebounded strongly at the end of the year and our buying activity slowed in response. Yet Sequoia took in more than $275 million during the quarter.

Thus, despite our best efforts we finished 2011with more than $1 billion in cash in the Fund and roughly the same 21% cash weighting as we had at the start. Faced with what are, for now, limited options for deploying capital, we elected in early January to close the Fund to new investment from financial services platforms such as Charles Schwab, TD Ameritrade and E*Trade, as they were accounting for the overwhelming majority of our inflows.

Turning to performance, we experienced broad-based strength from our equities in 2011. Nine of the 10 largest positions in Sequoia outperformed the 2.1% return of the S&P 500 Index.

At year-end, the 10 largest holdings in Sequoia represented 52.8% of the Fund's assets and nearly two-thirds of our investments in securities. As always, we endeavor to concentrate Sequoia in our best ideas. Though we finished the year with a record number of companies in the Fund, we remain comfortable with our overall level of concentration in the top 10 positions.

As we reported to you last year, we have been steadily adding to our research staff over the past decade. As a result, we have broadened our reach and begun studying dozens of businesses for the first time. In 2011, we added 14 new positions to the Fund and sold two, leaving us with a net addition of 12 securities. As recently as 1999, we had fewer than 12 stocks in the Fund in total.

It is a bit of a paradox that we're holding so much cash at a time when we own more stocks than ever before. However, we have been cautious buyers and that has resulted in a somewhat lopsided portfolio. The 12 smallest positions in the Fund cumulatively amount to 1.5% of our holdings. Similarly, we made quite a few investments in 2011, but none of them at year-end amounted to more than 1% of the Fund's assets.

There are several reas! ons why w! e hold so many stocks that cumulatively amount to a non-material portion of the Fund's assets. While we bought a lot of stocks last year, with benefit of hindsight it appears we were a bit too cheap. As stock prices zigged and zagged, we tried to remain disciplined purchasers. We ended up buying tiny amounts of a number of stocks that briefly touched our buy prices and then quickly moved higher. We presumed continued market volatility would create more chances for us to buy shares. Too frequently, however, we ended up bottom-ticking the shares and owning immaterial amounts of stock. In most cases, we've opted to continue holding these small positions in the hope that we may get a chance to buy more shares in the future.

Sequoia investors should be prepared to own a portfolio of 50 or more stocks and should not be surprised if a number of these positions amount to "rounding errors." We like following and owning smaller, more entrepreneurial companies but these stocks can be difficult to buy. It can take weeks of trading to accumulate a full position. As we will not sacrifice price discipline to acquire a stock in size, there will be times when we end up with fractional positions.

Even as the portfolio grows, we expect that a relatively small number of holdings will continue to represent the lion's share of Sequoia.

Looking ahead, we humbly submit that we have no idea what the stock market will do in 2012. The reader is no doubt aware of the budget situations in the United States, Europe and Japan, and the threat they pose to long-term economic growth in the developed world. The faster growing economies of the emerging world suffer from their own structural inefficiencies that could disrupt their upward path. At the same time, corporate America arguably has never been stronger: profit margins are high, balance sheets are healthy, labor productivity continues to improve faster than wages.

Rather than try to guess what might happen next, we think it more prudent to own ! a portfol! io of market-leading companies that earn high returns on capital, boast strong balance sheets and self-fund their growth. We try to invest in high-quality management teams and to identify businesses with many years of growth ahead of them.

Throughout our history we have preferred to speak to our investors directly and clearly. We meet with Sequoia shareholders once a year, usually in May, and answer questions for several hours. Otherwise, we do not court publicity. We have no marketing arm. As a result, we were perhaps unprepared for the impact the Morningstar award had on the Fund. To our new investors, welcome. Our goal today is the same as it has always been: to own a portfolio of businesses that have been vigorously researched and carefully purchased, which consequently can outperform the broader stock market over many years. We have a proud history but we are looking forward, always.

You should be aware that our large cash position could act as an anchor on returns in a prolonged bull market. Conversely, in a bear market the cash might cushion the blow to stocks and provide us with flexibility to make new investments. Investors should remember that a concentrated portfolio of stocks will not track the results of the S&P Index from year to year. Over time, a well-selected portfolio should outperform the Index. We believe the current portfolio will generate satisfactory returns over time for Sequoia shareholders.

Management's Discussion of Fund Performance (Unaudited)

The total return for the Sequoia Fund was 13.2% in 2011. This compares with the 2.1% return of the S&P 500 Index. Our investment philosophy is to make concentrated commitments of capital in a limited number of companies that have superior long-term economic prospects and that sell at what we believe are attractive prices. Because Sequoia is deliberately not representative of the overall market, in any given year the performance of the Fund may vary significantly from that of the broad market indices.
The tabl! e below shows the 12-month stock total return for the Fund's major positions at the end of 2011.













































The outperformance vs. the Index in 2011 was driven by strong performance of the Fund's equity holdings. Nine of the Fund's 10 largest holdings outperformed the Index, and these 10 holdings constituted 52.8% of the Fund's assets under management at year-end. During the year, investors committed $930 million of cash to the Fund, net of withdrawals. As a result, some securities which performed well during the year declined as a percentage of the Fund's assets as we failed to buy more shares as cash flowed into the Fund.

At year-end, the Fund was 78.5% invested in common stocks and 21.5% invested in cash and Treasury Bills.

Our largest holding, Valeant, had a busy year. Many of its end markets and products grew nicely. Overall, we believe Valeant generated about 8% organic revenue growth in 2011, led by its U.S. Dermatology unit that grew more than 20%. Full year numbers have not been reported yet, but we estimate that the European, Canada/Australia, and Latin America divisions will also generate double digit organic growth in 2011. This growth was partially offset by declines in the U.S. Neurology and Other division, led notably by a double digit decrease in sales of the antidepressant Wellbutrin XL.

On the acquisition front, Valeant (VRX) was involved in several transactions including PharmaSwiss, Sanitas, Ortho Dermatologics, Dermik, and iNova. The PharmaSwiss and Sanitas acquisitions should increase Valeant's European business to well over $600 million in revenues in 2012, which would put Europe at close to 20% of the total business. Ortho Dermatologics and Dermik will help Valeant become one of the leading dermatology companies in the world with over $1 billion in revenues. iNova increased Valeant's presence in Australia and helped it establish footholds in South Africa and Southeast Asia. Management is optimistic that the new positions in Southeast Asia, South Africa and Russia represent future growth platforms for Valeant.

As we discussed in last year's re! port, we ! like Valeant's approach to the pharmaceutical business. In an industry marked by heavy spending on unproductive research and development, Valeant over a period of years has acquired a stable of older branded drugs, generic and OTC drugs. Many of its drugs are steady sellers in niche categories of dermatology or neurology. In our view, Valeant is essentially a value investor in pharmaceutical products.

Berkshire Hathaway's look-through earnings likely improved only slightly in 2011, but this may mask a more impressive increase in earnings power. Berkshire's sometimes volatile insurance underwriting profits declined sharply due to record global catastrophe losses, with two devastating earthquakes in New Zealand and Japan, record floods in Thailand, and heavy losses from US tornados.

Despite these unusually high catastrophe losses, Berkshire's underlying performance improved. GEICO's voluntary auto policy sales increased at double digit rates and retention was up, a medical malpractice unit was acquired, and Gen Re bid for an Asian life company, all building a platform for stronger future results. Outside the insurance units, Berkshire spent more than $10 billion to buy Lubrizol and an additional 16.5% interest in Marmon, both of which will add to future earnings power. We think the investment portfolio grew in size. While $11 billion of high-yielding securities in Goldman Sachs, GE and Swiss Re were called away, Berkshire spent an equal amount on IBM common generating look-through earnings equal to the lost investment income.

The rest of the company's profits rose at a mid-teens rate as the large non-insurance units — the Burlington Northern railroad, IMC Metalworking, the mini-conglomerate Marmon, and Midamerican Energy — all generated fine results. Operating profits were boosted by the partial-year ownership of Lubrizol and the larger share of Marmon. At year-end, Midamerican spent $3 billion for two Western solar facilities that have long-term contracts to sell elec! tricity t! o California utilities at premium prices. Berkshire also bought back shares to take advantage of an historically low valuation.

We have held shares of TJX (TJX) in the Fund for 11 years. The company has been a very good performer for a long time, but earnings growth has accelerated in recent years. TJX is the largest off-price apparel and home goods retailer in the United States, Canada and the UK and has a presence in Poland and Germany. The long-term struggle of U.S. department stores to remain relevant to shoppers has been a boon to TJX. As apparel vendors search for new channels for growth, off-price retailers have become increasingly powerful in the marketplace. TJX not only continues to source high-quality goods from a vast roster of vendors, it has enjoyed steadily rising margins for several years as it buys goods on favorable terms. In 2007, TJX earned $0.84 per share. We believe earnings per share for 2011, which will be reported later in February, will approach $2.00, accounting for a recent stock split. This would represent a four-year growth rate of 24%. We don't expect this kind of growth to continue indefinitely, but TJX earns extremely high returns on capital, enjoys ample free cash flows and returns most of that free cash to its owners in the form of dividends and stock buybacks. We believe there is room to grow the store base by roughly 5% per year for several more years, and the company typically repurchases 4% – 6% of its shares annually, leaving it well-positioned to keep growing earnings at low-double digit rates.

We have held shares in Fastenal (FAST), a broad-line industrial distributor with a specialty in industrial fasteners, for 11 years. Fastenal's 2011 results provided a worthy encore to its outstanding performance in 2010. Revenue increased by 21.9%, and Fastenal's exceptionally energetic and frugal management team leveraged that result into a 34.8% increase in net income. At the end of 2011, Fastenal operated 2,585 branch locations, and as the law of l! arge numb! ers takes hold, the company relies less and less on new store openings to drive its growth. However, the company continues to find creative ways to invest in its store base so that its branches grow faster than GDP for many years after they are opened. In 2009, the company embarked on an effort to automate the sale of certain industrial products by installing vending machines and automated lockers at customer work sites. These machines make the sales process more efficient and save money for Fastenal's customers by reducing waste at the point of sale. In the first two years of the program, Fastenal installed 1,925 machines at customer locations. In 2011, it installed 5,528 machines and built the capacity to install 10,000 annually in the future. Though still in its early stages, Fastenal's automated solutions initiative shows enormous potential, and Fastenal's large branch network enables it to stock and service the machines more efficiently than its competitors. Though Fastenal's results will fluctuate with the industrial economy, its prospects for continued rapid growth in 2012 are excellent.

At the end of 2011, Advance Auto Parts (AAP) and O'Reilly Automotive (ORLY) were the fifth- and tenth-largest positions in the Fund, respectively, and together constituted 6.2% of our assets. Auto parts retail is a difficult business for all but the most efficient players. An auto parts retailer must carry literally thousands of hard parts for hundreds of models of cars. Not many people walk in the door needing an alternator for a 1994 Ford, but the person who does is probably experiencing a crisis. The retailer who can manage a substantial investment in slow-turning parts inventory is able to earn a high margin on sales.

Faced with a proliferation of parts, even commercial garages are increasingly relying on the neighborhood auto parts store to act as their local warehouse. As Americans are keeping their cars longer than before, the volume of repairs and accompanying demand for parts rise! s steadil! y.

We've always liked O'Reilly for its industry-leading distribution network, allowing for wide inventory coverage and prompt delivery of parts to commercial garages. The company is led by a talented and experienced team dedicated to growing the store base, expanding parts coverage, and returning excess cash to shareholders through stock buybacks. O'Reilly continues to do an excellent job integrating CSK, a Western auto parts chain it acquired in 2008. The company has a solid balance sheet and generates ample free cash flows, which should enable it to grow its store base by 3%-4% annually while sustaining stock buybacks.

We bought Advance Auto Parts in 2009 after a new management team had taken over. The company has executed an impressive turnaround since then. Looking ahead, management is focused on improving its service to commercial garages. Advance Auto Parts bought back stock worth 14% of its market capitalization in 2011 while maintaining a strong balance sheet. We think Advance can expand its store base by 3% – 4% annually and continue to buy back substantial amounts of stock.

Idexx (IDXX) performed well in 2011, generating solid revenue growth and high-teens earnings growth thanks to a slight recovery in the veterinary end market, the ramp up of its new ProCyte hematology instrument, continued share gains in reference laboratories and one-time gains from production animal disease eradication programs in Europe. While we continue to like the company's prospects and are impressed with its execution in a still sluggish market for animal healthcare, we trimmed our position in 2011 at prices we found attractive given our expectations for the business.

As a major producer of floor coverings, the fortunes of Mohawk Industries (MKK) are tied to housing and commercial construction. In 2011, total sales for Mohawk rose about 5% as home remodeling spending grew only fitfully. For the year, commercial sales were stronger than residential. Much of Mohawk's gains came f! rom highe! r prices, as the company was able to pass along raw material cost increases. We believe Mohawk gained market share in nearly all of its product categories and geographies, thanks to new products and superior distribution. Management continued to cut costs, resulting in operating earnings that handily outpaced the increase in sales. If market conditions improve in 2012, Mohawk's leaner cost structure should allow it to generate strong earnings leverage on sales growth.

The fiscal year of Precision Castparts (PCP) ends in March. Through the first nine months of the fiscal year, sales advanced 16% and EPS grew 18%. The company is on track to earn about $8.40 for fiscal 2012, up from $7.01 a year ago. Precision has deployed its prodigious cash flow on acquisitions. It created a new platform in aerospace structural components with the $800 million-acquisition of Primus International. In addition, it beefed up its fastener and forgings businesses with two small acquisitions and added to its technical capability in oil & gas pipes with two other acquisitions. The deal making in the oil patch paid off in September when it won a large order to supply specialty pipe to Saudi Aramco with a unique offering that allows customers to pump more oil in less time. Precision has since won an order even larger than the first. We expect more growth from Precision this year as Boeing and Airbus raise production rates. Despite last year's activity, Precision still has more cash than debt on its balance sheet, giving it plenty of flexibility to make more acquisitions.

At Rolls-Royce (RYCEY), new CEO John Rishton had a busy and fruitful start to his tenure. Most importantly, Rishton began to focus Rolls on areas where the company stood to improve, including cash generation, cost structure and customer service. He also successfully extracted the company from its legacy narrow body civil engine joint-venture with Pratt & Whitney (IAE) for an attractive price, positioned Rolls as exclusive supplier for the Airbus! A350-100! 0, further secured the company's strong position on the A350 program, and closed the tricky Tognum acquisition which will begin to bear fruit in 2012. While Rolls had not released its 2011 results as of the writing of this letter, both we and the markets expect the company to report mid-to-high single digits revenue growth and low-to-mid-teens earnings growth in the year past.

The Fund made a number of new investments in 2011, adding 14 new securities to the Fund while parting with two holdings. However, none of the new purchases amounted to more than 1% of assets of year-end. Our largest investment during the year was in Corning (GLW), the glass maker. We were attracted to Corning's dominant position in the lucrative business of supplying glass for the liquid crystal displays found in flat-screen TVs, computer monitors, and mobile phones. Only three other companies in the world are capable of producing this highly specialized glass in any volume. Unfortunately, the reality of consumer electronics is that as gadgets get cheaper every year component suppliers face constant deflation, too. As sales growth of flat-screen TVs slowed in 2011, glass manufacturers reduced inventory under severe price pressure. It also suffered from a customer defection at one of its joint ventures. Consequently, net income fell by 21%. Going forward, the company's performance will chiefly turn on its ability to moderate glass price declines. In the meantime the business is highly cash generative and management has the chance to deploy the proceeds in constructive ways such as its recently initiated stock repurchase plan.

We added to a number of our existing holdings during the year as new cash flowed into the Fund. We did not exit any significant positions during the year.

http://www.sec.gov/Archives/edgar/data/89043/000114420412011491/v300527_n-csr.htm

Tuesday, August 13, 2013

Market Summary for August 9, 2013

Top Safest Stocks To Buy Right Now

The major U.S. indices extended their move lower this week, albeit at a slower pace than last week's declines. Improvements in housing and jobs markets helped partially offset weakness caused disappointing corporate earnings and bearish Federal Reserve comments. Interesting, consumer confidence has risen to recent highs, while the same consumers continue to constrain their spending, hurting retail sales in July ahead of the key back-to-school season.

Foreign markets moved largely lower during the week, too. Britain's FTSE 100 is down 0.9%, Germany's DAX 30 is down 0.5%, and Japan's Nikkei 225 is down nearly 6%. The eurozone has shown signs of improvement, thanks to Germany's robust growth, while China's rising inflation has sparked hopes that its slowdown won't be as slow as many economists projected. But, with many markets still at their highs, expectations may be too lofty to justify right now.

SEE: How To Profit From Inflation

The SPDR S&P 500 (ARCA:SPY) ETF fell 0.75% lower, as of early trading Friday morning. Currently, the index trades in a price channel with an upper 172.31 bound and lower 160.00 bound. Traders should watch for a break of this upper bound or a move down to the pivot point at 166.26 or 50-day moving average at 165.06. Looking at technical indicators, the RSI has moved off of its highs to 60.53, while the MACD has experienced a bearish crossover.



The PowerShares QQQ (NASDAQ:QQQ) ETF fell 0.15% lower, as of early trading Friday morning. Currently, the index remains in a price channel with an upper 77.54 bound and a lower 71.00 bound. Traders should watch for a breakout of this upper bound at the R1 resistance level or a move down to the 74.44 pivot point or 50-day moving average at 73.65. Looking at technical indicators, the RSI remains overbought at 65.85 and the MACD may be ready to crossover.



SEE: Trading With Support And Resistance

The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF fell 0.80% lower, as of early trading Friday morning. Currently, the index trades between an upper trend line at about 156.50 and a lower trend line and S1 support at 149.92. Traders should watch for a breakout from the upper trend line or a move down to the 50-day moving average at 152.18. Looking at technical indicators, the RSI has come off of its highs to 52.74, but the MACD is in a bearish trend.



The iShares Russell 2000 Index (ARCA:IWM) ETF fell 0.7% lower, as of early trading Friday morning. Currently, the index trades between an upper trend line at about 106.69 and a lower trend line at about 98.50. Traders should watch for a break of this upper trend line and R1 resistance or a move down to the 101.95 pivot point or 100.40 50-day moving averages. Looking at technical indicators, the RSI stands at 58.43 and the MACD remains in a bearish pattern.



SEE: Tweezers Provide Short-Term Precision For Forex Traders

The Bottom Line
The major U.S. indices moved largely lower this week and appear to be in downward trends based on the MACD indicator, which means that traders should be cautious about entering long positions at these levels. Those with long positions may want to consider putting tight stops in place for protection against any downside over the coming weeks.

Next week, traders will be watching for a number of economic indicators, including retail sales on August 13th, PPI data on August 14th, jobless claims, CPI and industrial production data on August 15th, and housing starts data on August 16th. In particular, traders will be watching for any improvements to retail sales and ongoing improvements in jobless claims.

At the time of writing, Justin Kuepper did not own shares in any of the funds mentioned in this article.

Charts courtesy of StockCharts.com.

Monday, August 12, 2013

Can Chesapeake Energy Thrive Under a New CEO?

Chesapeake Energy's (NYSE:CHK) stock has surged 18 percent since January 28 — the day Aubrey McClendon announced he would step down as CEO. With a new management team at the helm, the company is focusing on stabilizing its natural gas operations, which have struggled owing to an oversupply of natural gas, and reducing the amount of debt on its balance sheet.

Is Chesapeake Energy on a sustainable path to profitability? Let's use our CHEAT SHEET investing framework to decide whether Chesapeake Energy is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.

C = Catalysts for the Stock's Movement

Clearly, investors responded positively to the news of Aubrey McClendon's departure, but what exactly were they celebrating? McClendon faced pressure to leave largely due to unsavory allegations arising from his involvement. Under his guidance, the company became the second-leading producer of natural gas in the U.S. While the company holds many attractive properties for unconventional gas and oil plays, its capital expenditures and drilling costs have consistently outstripped its cash flow. This was largely due to McClendon's willingness to pay high premiums for attractive oil fields.

Under new CEO Doug Lawler, Chesapeake Energy is focusing on strengthening its balance sheet — namely, reducing the $12 billion of debt on its books. To do this, the company recently announced that it is selling portions of its Haynesville and Eagle Ford shale fields, for a total selling price of $1 billion.

While the company will lose some production capabilities from the sale, it will not have to take on additional debt to run its operations for the rest of the year. New management has committed to avoiding land sales to fund operations in the future, and instead is focusing on creating net positive cash flows by compressing its leasing operations, and focusing on higher-yielding extraction operations.

E = Earnings are Mostly Increasing Year-over-year 

Chesapeake Energy announced solid first quarter earnings back in May. The company reported a 67 percent increase in net income from the previous year's quarterly net income. Additionally, total oil production increased by 9 percent on a year-over-year basis.

Depressed U.S. natural gas prices continue to hold back the company's top line, but these prices look to be improving. The price of West Texas Intermediate crude oil surpassed the price of Brent crude oil — a benchmark for international oil prices — on Friday.

Position	% of assets 12/31/11	Total return	% of assets 12/31/10
Valeant Pharmaceuticals	10.8	65.0	9.2
Berkshire Hathaway	10.0	-4.7	10.7
TJX	6.8	47.4	6.3
Fastenal	6.2	48.5	6.0
Advance Auto Parts	3.6	5.7	2.9
Idexx Laboratories Inc.	3.3	11.2	6.4
Mohawk Industries	3.3	5.4	4.3
Precision Castparts	3.2	18.5	3.8
Rolls-Royce	2.9	19.4	3.5
O'Reilly Automotive	2.7	32.3	2.9

	2013 Q1	2012 Q4	2012 Q3	2012 Q2	2012 Q1
Qtrly. EPS	$0.02	$0.04	-$3.19	1.29	-$0.11
EPS Growth YoY	118.18%	-29.94%	-359.35%	89.71%	65.63%
Qtrly. Revenue	$3.24B	$3.54B	$2.97B	$3.39B	$2.42B
Revenue Growth YoY	41.55%	29.74%	-25.32%	2.14%	50.06%

*Data sourced from YCharts

S = Support is Provided by Institutional Investors and Insiders

Chesapeake Energy has experienced strong support from "smart money." Two institutional giants, Carl Icahn and Southeastern Asset Management, hold large stakes in the company. Icahn increased his holding from 7.6 percent of his total portfolio, to 8.9 percent of the company late last year. Additionally, Southeastern Asset Management's Mason Hawkins owns a 13.5 percent stake in the company. With a track record of investing in successful companies, Icahn and Hawkins clearly see growth potential in Chesapeake Energy.

Insiders are bullish on their company, as well. Insider buying activity has increased drastically in the past three months. The most notable of these trades was a 450,000 share purchase by Director Archie Dunham on May 22. The number of shares bought by insiders has exceeded the number of shares sold by insiders tenfold in the past three months. If the people that know the company the best are buying, investors should take it as a sign that the stock is poised for growth.

T = Technicals on the Stock Chart are Strong

Chesapeake Energy is currently trading around $22.31, above both its 200-day moving average of $20.11, and its 50-day moving average of $21.17. The stock has experienced a strong uptrend in the past year — rising almost 30 percent in the last 12 months.

Currently, Chesapeake Energy has a RSI (relative strength index) number over 80, implying that the stock is overbought in the short-term, and could be poised for a pullback. The stock is trading about 3 percent below its 52-week high of $22.97, which was hit at the beginning of March.

Conclusion

As the second-leading domestic natural gas producer, Chesapeake Energy is certainly a company to consider if you are bullish on the energy renaissance in the United States. Chesapeake Energy has the greatest exposure to unconventional oil plays, and has a history of selecting profitable projects, such as its holdings in the Eagle Ford Shale in Texas, and in the Utica Shale in Ohio.