5 Best Performing Stocks To Invest In 2014

Most investors are aware that the market undergoes times of strong trends and times of lateral ranging. Many investors employ a different trading system for each environment. But what happens in a period of extreme volatility? Any system a trader might use is susceptible to the increased market swings, which could wipe out previous gains and more. By using either a non-directional or a probability-based trading method, investors may be able to more fully protect their assets.

When Volatility Increases
It is important to understand the difference between volatility and risk. Volatility in the financial markets is seen as extreme and rapid price swings. Risk is the possibility of losing some or all of an investment. So as volatility increases, so does profit potential and the risk of loss, as the market swings from peaks to troughs. There is a marked increase in the frequency of trades during these periods and a corresponding decrease in the amount of time that positions are held. During times of increased volatility, a hyper-sensitivity to news is often reflected in market prices.

Directional Investing
Most private investors practice directional investing, which simply requires the markets to move consistently in the desired direction, which can be either up or down. Market timers, long or short equity investors and trend investors all rely on directional investing strategies. Times of increased volatility can result in a directionless or sideways market, repeatedly triggering stop losses. Gains earned over years can be eroded in a few days.

Non-Directional Investing
Non-directional investors attempt to take advantage of market inefficiencies and relative pricing discrepancies. Following are some strategies they deploy:

Equity Market Neutral - Here is where stock pickers can shine, because the ability to pick the right stock is just about all that matters with this strategy. The goal is to leverage differences in stock prices by being both long and short among stocks in the same sector, industry, nation, market cap, etc. By focusing on the sector and not the market as a whole, emphasis is placed on movement within a category. Consequently, a loss on a short position can be quickly offset by a gain on a long one. The trick is to identify the standout and the underperforming stocks. The principle behind this strategy is that your gains will be more closely linked to the difference between the best and worst performers than the overall market performance and therefore will be less susceptible to market volatility. Merger Arbitrage - Many private investors have noticed that the stocks of two companies involved in a potential merger or acquisition often react differently to the news of the impending action and try to take advantage of the shareholders' reaction. Often the acquirer's stock is discounted while the stock of the company to be acquired rises in anticipation of the buyout. A merger arbitrage strategy attempts to take advantage of the fact that the stocks combined generally trade at a discount to the post-merger price due to the risk that any merger could fall apart. Hoping that the merger will close, the investor should simultaneously buy the target company stock and short the acquiring company's stock. Relative Value Arbitrage - The relative value approach seeks out a correlation between securities and is typically used during a sideways market. What kinds of pairs are ideal? They are heavyweight stocks within the same industry that share a significant amount of trading history. Once you've identified the similarities, it's time to wait for their paths to diverge. A 5% or larger divergence lasting two days or more signals that you can open a position in both securities with the expectation they will eventually converge. You can long the undervalued security and short the overvalued one, and then close both positions once they converge. Event Driven - This scenario is triggered by corporate upheaval, whether it be a merger, assets sale, restructuring or even bankruptcy. Any of these events can temporarily inflate or deflate a company's stock price while the market attempts to judge and value these newest developments. This strategy does require analytical skills to identify the core issue and what will resolve it, as well as the ability to determine individual performance relative to the market in general. Trading on Volatility

5 Best Performing Stocks To Invest In 2014: Honeywell Intl Inc(HON.L)

Honeywell International Inc. operates as a diversified technology and manufacturing company worldwide. Its Aerospace segment provides turbine propulsion engines, auxiliary power units, environmental control and electric power systems, engine systems and accessories, avionic systems, aircraft lighting, inertial sensors, control products, space products and subsystems, and landing products for aircraft manufacturers, airlines, business and general aviation, military, space, and airport operations, as well as offers management and technical, logistics, aircraft wheels and brakes and repair, and overhaul services. The company?s Automation and Control Solutions segment provides environmental and combustion controls, and sensing controls; security and life safety products and services; scanning and mobility products; process automation products and solutions; and building solutions and services for homes, buildings, and industrial facilities. Its Performance Materials and Techn ologies segment provides resins and chemicals; hydrofluoric acid; fluorocarbons; nuclear services; research and fine chemicals; performance chemicals; chemical processing sealants; fibers and composites; specialty films and additives; imaging and electronic chemicals; semiconductor materials and services; catalysts, adsorbents, and specialties; and renewable fuels and chemicals. It offers products for applications in the refining, petrochemical, automotive, healthcare, agricultural, packaging, refrigeration, appliance, housing, semiconductor, wax, and adhesives segments. This segment also provides process technology and equipment for the petroleum refining, and petrochemical and gas processing industries. The company?s Transportation Systems segment provides charge-air systems; thermal systems; and brake hard parts and other friction materials for passenger cars and commercial vehicles. Honeywell International Inc. was founded in 1920 and is headquartered in Morris Township , New Jersey.

5 Best Performing Stocks To Invest In 2014: NextEra Energy Inc. (NEE)

NextEra Energy, Inc., through its subsidiaries, engages in the generation, transmission, distribution, and sale of electric energy in the United States and Canada. As of December 31, 2010, NextEra Energy had approximately 43,000 mega watts of generating capacity. The company involves in the generation of renewable energy from wind and solar projects. It also generates electricity through natural gas, nuclear, oil and coal, and hydro power plants. The company serves approximately 8.7 million people through approximately 4.5 million customer accounts in the east and lower west coasts of Florida. In addition, it leases wholesale fiber-optic network capacity and dark fiber to telephone, wireless carriers, Internet, and other telecommunications companies. The company was formerly known as FPL Group, Inc. and changed its name to NextEra Energy, Inc. in May 2010. NextEra Energy, Inc. was founded in 1984 and is headquartered in Juno Beach, Florida.

Advisors' Opinion:

• [By Ben Levisohn]

  Abbvie (ABBV)
  Ameren Corp. (AEE)
  Arthur J. Gallagher (AJG)
  E.I. DuPont de Nemours & Co. (DD)
  ENSCO (ESV)
  Enterprise Products Partners LP (EPD)
  General Mills (GIS)
  H&R Block (HRB)
  Hancock Holding (HBHC)
  Kraft Foods Group (KRFT)
  Lorillard (LO)
  Magellan Midstream Partners LP (MMP)
  MarkWest Energy Partners L P (MWE)
  McDonald’s (MCD)
  Microchip Technology (MCHP)
  NextEra Energy (NEE)
  Regency Centers (REG)
  TELUS Corp. (TU)
  West Corp. (WSTC)
  Williams Companies (WMB)

Hot Biotech Stocks To Invest In Right Now: Donegal Group Inc.(DGICB)

Donegal Group Inc., through its subsidiaries, offers personal and commercial lines of property and casualty insurance to businesses and individuals in the United States. The company?s personal lines of insurance products include private passenger automobile insurance, which provides protection against liability for bodily injury and property damage arising from automobile accidents, and protection against loss from damage to automobiles owned by the insured; and homeowners insurance that offers coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft, as well as covers liability of the insured arising from injury to other persons or their property. Its commercial lines of insurance products comprise commercial automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents, and protection against loss from damage to automobiles owned by the insured; commercial multi-peril policies, which offer protection to businesses against various perils primarily combining liability and physical damage coverages; and workers? compensation policies that provide benefits to employees for injuries sustained during employment. Donegal Group Inc. markets its insurance products through a network of approximately 2,200 independent insurance agencies. As of December 31, 2010, it wrote business in 22 states of the United States. The company was founded in 1986 and is headquartered in Marietta, Pennsylvania.

Advisors' Opinion:

• [By Jake L'Ecuyer]

  Shares of Donegal Group (NASDAQ: DGICB) got a boost, shooting up 16.24 percent to $23.22 after Gregory Shepard offered $33-$37 per share for Donegal Group.

• [By Luke Jacobi]

  Donegal Group (NASDAQ: DGICB) closed up 14.86 percent to $23.95 after Gregory Shepard offered $33-$37 per share for Donegal Group.

  The ExOne (NASDAQ: XONE) gained 4.13 percent to closed at $48.32 as 3D printing stocks once again were spotlighted for today's trading session.

5 Best Performing Stocks To Invest In 2014: Apple Inc.(AAPL)

Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers. In addition, it sells third-party Mac, iPhone, iPad, and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and other accessories and peripherals through its online and retail stores; and digital content and applications through the iTunes Store. The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative markets. As of September 25, 2010, it had 317 retail stores, including 233 stores in the United States and 84 stores internationally. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is headquartered in Cupertino, California.

Advisors' Opinion:

• [By Doug Ehrman]

  Of the many new rollouts introduced by Apple (NASDAQ: AAPL  ) at this year's Worldwide Developers Conference (WWDC), one with the real potential to change our lives, was "iOS in the Car." The system is Cupertino's answer to fully integrating Apple products into your automobile, thus taking the place of the native systems that have been designed by various car manufacturers over the years. While this genesis may seem inevitable, not every car maker is ready to hand over the reins.

• [By Evan Niu, CFA]

  With Apple (NASDAQ: AAPL  ) and Cirrus Logic (NASDAQ: CRUS  ) holding hands today as they dive into new 52-week lows, how cheap have shares gotten? Answer: Very.

5 Best Performing Stocks To Invest In 2014: Cinemark Holdings Inc(CNK)

Cinemark Holdings, Inc. and its subsidiaries engage in the motion picture exhibition business. As of June 30, 2011, it operated 436 theatres with 4,983 screens in 39 states of the United States, as well as in Brazil, Mexico, and 11 other Latin American countries. The company is headquartered in Plano, Texas.

Advisors' Opinion:

• [By John Udovich]

  The shares of small cap IMAX Corporation (NYSE: IMAX) have slipped more than 10% this week on growth concerns - meaning it might be a good idea to take a closer look at the stock plus its performance�verses other cinema stocks like Carmike Cinemas, Inc (NASDAQ: CKEC), Cinemark Holdings, Inc (NYSE: CNK) and Regal Entertainment Group (NYSE: RGC) along with the PowerShares Dynamic Leisure & Entertainment ETF�(NYSEARCA: PEJ).

• [By Rich Smith]

  As movie-theater operator Cinemark (NYSE: CNK  ) exits the Mexican market, another "gringo" is expanding to fill the gap -- from even farther north of the border.

With K-Cup patent expired, others try to cash in

BURLINGTON, Vt.— Green Mountain Coffee Roasters in Waterbury, Vt., built a huge business on the strength of its patented K-Cup single-serve portion pack for Keurig single-cup coffee makers.

When the patent expired in September 2012, some analysts foretold doom.

That has not been the case. Rival companies have captured just about 8% of the single-serve market, and through the third quarter of this year, $2.4 billion of Green Mountain's $3.3 billion in revenue has come from selling the ubiquitous portion packs.

Green Mountain struck deals to make K-Cup packs for some of the biggest names in the business, including Starbucks and Dunkin' Donuts, and has kept that business after the patent expiration.

"The patent expired 13 months ago," said Bill Chappell, an analyst with SunTrust Robinson Humphrey in Atlanta. "We've had more than ample time to see what kind of impact it would have, and it really hasn't had that much."

That doesn't mean there aren't determined challengers out there, perhaps none more feisty than Rogers Family Co. in Lincoln, Calif.

Founder Jon Rogers remembers his first mug of K-Cup coffee, some 20 years ago at a car wash. He didn't like it and decided the single-cup craze would be a flash in the pan.

"I didn't think it had legs," he said. "Obviously time proved me wrong."

Rogers didn't wait for Green Mountain Coffee's patent to expire to launch his own single-serving portion pack, which led to his company being sued in November 2011. Green Mountain Coffee lost that lawsuit in May and appealed to the federal circuit, where the appeal is ongoing.

Rogers said he felt it was important to fight the much-larger Green Mountain Coffee because Rogers' One Cup portion pack is so different from the K-Cup pack. Rogers Family Co. has about $200 million in annual sales.

"Look at ours, and look at theirs," Rogers said. "They don't have a leg to stand on."

The One Cup uses a ring made from plant-based materials and an inner bag made from wo! od pulp, together with a mesh filter made from food-grade polyester. It is 97% biodegradable, says Rogers, who invested $10 million in machines to make the pods. Only the mesh filter is not biodegradable. Rogers is looking for an alternative that will make One Cup 100% biodegradable.

"It's done very well," Rogers says of One Cup. "It's pretty much nationwide, sold in selected Costcos. We manufacture (the) private label for Safeway."

One of the enduring criticisms of the K-Cup pack has been that it ends up in landfills — a problem that Green Mountain Coffee is still trying to solve.

Whole Foods Market, which launched a pod under its private 365 Everyday Value brand in July, did not even consider Green Mountain Coffee as a supplier, said Mark Dickerson, a buyer for the grocery chain.

Dickerson declined to say who makes Whole Foods' pods but did say the famously green company had to grapple with the fact that its consumers "tend to not like additional packaging."

As much as Whole Foods might chafe at the single-serve pod — which is difficult to recycle because of its small size and the combination of plastic and aluminum used in its packaging — the company decided it couldn't ignore the numbers.

"The sales trend really, really made it compelling to explore the opportunity," Dickerson said. "In doing so we wanted to stay true to our mission and core values and do it in a Fair Trade organic format to differentiate ourselves."

While the inroads that unlicensed portion packs have made so far are modest, Green Mountain Coffee's plans to introduce a brewer in 2014 that can reject unlicensed pods has some analysts wondering just how worried the company is.

CEO Brian Kelley explains that Keurig 2.0, as the new brewer is known, utilizes interactive technology to distinguish licensed from unlicensed pods.

"We will brew perfectly every licensed pod," Kelley said. "We're in the process of offering unlicensed pods the opportunity to come into the system so the! y, too, c! an be perfectly brewed."

Top Medical Companies To Invest In 2014

Kelley declined to say what the fate of unlicensed pods will be in the new system, but it could range from not brewing them at all to brewing them a few times before they no longer work.

"It's fair to say we're still deciding on exactly how we will handle the unlicensed pod," Kelley said.

Dan D'Ambrosio also reports for the Burlington (Vt.) Free Press

Why Changyou Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese online gaming operator Changyou.com (NASDAQ: CYOU  ) plummeted 19% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock has soared over the past year on a string of better-than-expected quarters, but today's Q2 revenue miss -- $182.4 million versus the average estimate of $183.4 million -- coupled with downbeat guidance for the Q3 is forcing Mr. Market to quickly sober up. And while Changyou's profit of $75.2 million managed to top estimates, gross margin during the quarter slipped 100 basis points, suggesting that the super-high earnings growth is getting more expensive to sustain.   

Now what: Management now sees third-quarter EPS of $1.33-$1.38 on revenue of $180 million-$186 million, well below the consensus of $1.48 and $191 million. "With an array of new games planned for the PC, Web and mobile and the capabilities we have built over the years in game development, operation, marketing and distribution, we believe we are positioned to succeed over the long-term," CEO Tao Wang reassured investors. More important, with the stock now off about 20% from its 52-week highs and trading at a forward P/E of around 6, Mr. Market might finally be providing a window to buy into that bullishness.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Top 5 Growth Stocks For 2014

Harley-Davidson Stock Is Still Riding Strong

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5 Stocks the Bears Got Dead Wrong

Iconic motorcycle manufacturer Harley-Davidson (HOG) reported solid quarterly results this week, helped by this summer’s spike in North America motorcycle sales.

Top Gold Stocks To Buy Right Now

Net income rose at HOG to $162.7 million or 73 cents a share. That was in-line with analyst expectations and marked a 21% improvement from earnings of $134 million, or 59 cents a share, a year ago. Sales also surged a solid 7% to $1.34 billion.

Though Harley shipments haven’t reached their pre-recession levels of 350,000, they are on the rise once again. For the full-year, shipments are expected to be between 259,000 to 264,000. They rose 2.3% in the most recent quarter to 54,025 — also in-line with expectations for HOG.

Harley-Davidson has also been expanding its marketing towards women and overseas customers. About 30% of its customers have come from this outreach, according to Jamie Katz, an analyst with Morningstar.

“They have done a spectacular job with outreach,” she said in an interview. “They totally blew away our expectations.”

Plus, Harley still has its core consumer base, and remains an aspirational brand. As Baby Boomers begin retiring in droves over the next few years, many of them are going to want to make “Easy Rider” fantasies that have laid dormant for decades come true.

No wonder investors have been impressed with Harley-Davidson; HOG stock has soared more than 33% year-to-date — 11 percentage points better than the S&P 500. Many analysts don’t think HOG stock is going to run out of gas quite yet, either. JPMorgan, for one, recently reiterated its “overweight” rating of HOG stock and raised its price target to $70.

One thing to note: Harley does have a new rival: Indian motorcycles — a brand being resurrected by Polaris Industries (PII).

The return of the brand, which went out of business in the 1950s, has generated lots of buzz. It was featured on the A&E reality show American Pickers and has captured the attention of the motorcycle trade press.

“They styled them beautifully,” said Mark Hoyer, editor-in-chief of Cycle World in an interview about the Indian revival, adding that Polaris has plenty of engineering savvy that it can channel into its motorcycle business. “They are in it to win it.”

The precise impact of Indian on the motorcycle market isn’t clear yet since Polaris, which also makes Victory motorcycles, only began shipping them in September. But all in all, it represents a small threat to HOG stock.

To start, Polaris is dwarfed in size by Harley. Sales in Polaris Motorcycles division fell 6% to $49.4 million in the three months through Sept. 30 as dealers were “continuing to calibrate their inventory levels.” Meanwhile, motorcycles sales for HOG totaled nearly $860 million during the same quarter.

And HOG holds a whopping 55% heavy weight motorcycle market share, while the Polaris Victory brand’s 5% market share is less than a-tenth of Harley’s.

“It’s going to be really hard to gain share from Harley,” Katz of Morningstar said. And her views were echoed by Hoyer.

“Harley has an unrivaled relationship with American culture and motorcycles dating back 110 years.” he added.

With that in mind, there’s no reason to think HOG stock can’t continue revving up a stellar performance for investors.

Jonathan Berr doesn not own shares of the afformentioned stocks.   Follow him on Twitter@jdberr and at Berr’s World. 

Ford reports $1.3B net for Q3, raises guidance

Updated noon ET with reaction, regional details and share price.

Ford Motor reports it racked up strong profits in the third quarter, driven by continued strength in North America and smaller operating losses in Europe.

Net income was $1.3 billion, or 31 cents a share, in the quarter, which was down $359 million, or 41 cents a share, from the quarter a year ago.

But excluding one-time charges of $498 million -- primarily costs for European restructuring and for Ford's lump-sum pension buyout program -- Ford had pre-tax earnings of $2.6 billion, or 45 cents a share. That handily beat analysts' consensus expectations of 38 cents.

Ford shares were up 24 cents, or 1.37%,at $ 17.76 in midday trading.

Ford also raised it full-year guidance, saying it now it expects its full-year pre-tax profit to beat 2012, up from "equal to or higher." Significantly, it also said it now expects its automotive operating margins to be higher than last year, up from "about equal."

"After a strong start to the year, Ford showed no signs of slowing down in the third quarter with a 10% improvement in sales volume coupled with a more than respectable 2% bump in transaction prices," said Alec Gutierrez, senior analyst at Kelley Blue Book.

The company said it was profitable in all regions except Europe, where it cut losses nearly in half.

"North America continues to achieve strong profits and we saw significantly improved results outside North America," said Bob Shanks, Ford's chief financial officer, in a statement. "We substantially reduced our losses in Europe, set a record third quarter profit in Asia Pacific Africa and saw a $150 million improvement in South America."

Results by region:

• North America. Ford generated a $2.3-billion quarterly profit with an operating margin of 10.6%, down from 12% a year earlier. Ford raised its third-quarter U.S. market share from 14.9%, up slightly.

Ford's F-Series trucks "really gained traction year-to-date over rivals GM and ! Chrysler as Ford continues to widen market share lead," said David Kudla, CEO of Mainstay Capital Management.

"This is especially critical for a product line that accounts for the majority of the company's earnings in North America," Kudla said. "Other successful product standouts are the Fusion and Fiesta, both up sharply in year-over-year sales."

• Europe.

Ford more than halved its loss from $468 million a year earlier to $228 million and gained market share. The automaker is now expecting to lose less than the $1.8 billion in the region for the year.

"We believe Europe has reached a level of stability," said CFO Shanks. "We are seeing evidence and signs where we will start to see modest growth take hold over the near term."

Asia Pacific Africa. It was the best quarter ever for this Ford division, with earnings of $126 million before taxes, up from $45 million a year earlier. The unit includes China, where Ford says its market share rose eight tenths of a percentage point from a year ago to equal last quarter's 4.3%. b

• South America. New products drove earnings of $159 million before taxes, up from just $9 million in the quarter a year ago.

Ford said it contributed $1.1 billion in the quarter to its funded pension plans worldwide, including about $700 million to its U.S. plans, as it continues its plan to cut its pension risks.

3 Reasons to Own Starbucks Stock

When does it stop? Starbucks (NASDAQ: SBUX  ) stock just keeps soaring. Shareholders holding the stock over the past five years boast a 300% gain, trouncing the Dow Jones' paltry 32% increase in the same period.

Is it too late to jump in? Definitely not. Here are three reasons Starbucks stock is worth owning.

Economies of scale
The company has more than 11,100 Starbucks-branded locations in the U.S. alone. Comparatively, Dunkin' Donuts (NASDAQ: DNKN  ) and Caribou Coffee have 7,200 and 600 points of distribution, respectively.

If the story ended here, Starbucks would already have a large enough lead on competitors for obvious scale advantages. But in the international markets, Starbucks' story gets even better. While Dunkin' Donuts' 3,100 locations outside the U.S. in 30 countries is impressive, Starbucks is far ahead. It has 7,000 stores in 60 countries.

Store growth
Starbucks added 590 net new stores globally in just one quarter. Though 337 of those were Teavana stores, the company still added 253 Starbucks locations in its second quarter of 2013. Comparatively, Dunkin' Donuts added just 108 net new locations in its most recent quarter.

Starbucks' potential in the China/Asia-Pacific region alone will provide substantial growth drivers for Starbucks stock. In China, the company plans to grow its 2012 footprint of 700 stores to 1,500 by the end of 2015. This year alone, it plans to open 600 net new stores in the China/Asia-Pacific region.

Food
"Responding to customer demand for more wholesome and delicious food options," explained a June 4 press release, Starbucks acquired La Boulange in 2012.

The goal? To "bring the artistry of the French bakery to the marketplace in a similar way that Starbucks brought the romance of the Italian espresso bar to many North American coffee consumers for the first time," described the press release from Starbucks announcing the acquisition.

Now, with the help of La Boulange's renowned French baker Pascal Rigo, Starbucks wants to shake things up with food, too. Sounds ambitious? It is.

Yet Fool contributor Demitrios Kalogeropoulos thinks that Starbucks' Food expansion is its most important growth driver. He thinks the addition of food can "double-check averages over time" and boost same-store sales growth.

Is there upside left to Starbucks stock?
Starbucks' growth era is far from over. Sure, 33 times earnings is a high price to pay, but the company looks poised to deliver over the long haul.

Now more than ever, it's essential to take control of your investments if you want to have a financially secure retirement. The Fool wants to help you retire rich, so we've put together a research report with three promising stocks specifically chosen with long-term retirement investors in mind. Don't miss out on this absolutely free report; click here and get your copy today!   Editor's note: A previous version of this article misstated the number of company-owned U.S. locations and the number of additional locations planned in China. The Fool regrets the error.

Business Sales Slump, Inventories Up for April

Business sales are down, and inventories are up, according to an April Commerce Department report (link opens in PDF) released today.

Seasonally adjusted sales took a 0.1% dip, to $1,268 billion, for April. While retailers maintained steady sales, a 0.7% drop-off in manufacturing outweighed a 0.5% increase in merchant wholesalers. In the last year, a 3.5% boost in retail sales has provided the primary push for a 1.5% increase in total business sales. Manufacturing is up 0.6% in the last 12 months, while merchant wholesalers have managed a 0.7% increase.

As sales dipped, April inventories headed up a seasonally adjusted 0.3%, to $1,657 billion. The moves mostly mimic sales, with a 0.4% increase in retail inventories leading the way. Manufacturers and merchant wholesaler supplies are both up 0.2% for April. In the last year, overall inventories are up 4.2%. 

To understand the rate at which goods are being made and sold, economists compute an inventories/sales ratio. Since sales fell and inventories rose from March to April, the inventories/sales ratio increased to 1.31, compared to March's 1.30 value. The April 2012 ratio was 1.27.

Source: Census.gov

Top Gold Stocks For 2014

A couple of days ago when gold and the SPDR Gold Trust ETF (NYSEARCA:GLD) were getting back into a bullish groove, I advocated Randgold Resources Ltd. ADR (NASDAQ:GOLD) as the better way to play gold's rebound. GOLD had fought its way back above a key ceiling, and was poised to take off... much more so than GLD was. To tell you the truth though, Randgold Resources Ltd. wasn't actually my first choice. The gold mining name I wanted to suggest was a little smaller - Vista Gold Corp. (NYSEMKT:VGZ). In the meantime, VGZ has forged out enough of the bullish progress I saw brewing then to merit a mention now.

With a market cap of only $88 million, VGZ isn't exactly capable of commanding the same kind of attention that $7.5 billion GOLD can. The fact that Vista Gold isn't actually producing gold isn't helping either. But, for those who know the difference between a 'trade' and an 'investment' (Randgold Resources Ltd. is an investment, while Vista Gold Corp. is a trade), there's some serious opportunity with Vista as of today.

Top Gold Stocks For 2014: CME Group Inc.(CME)

CME Group Inc. operates the CME, CBOT, NYMEX, and COMEX regulatory exchanges worldwide. The company provides a range of products available across various asset classes, including futures and options on interest rates, equity indexes, energy, agricultural commodities, metals, foreign exchange, weather, and real estate. It offers various products that provide a means of hedging, speculation, and asset allocation relating to the risks associated with interest rate sensitive instruments, equity ownership, changes in the value of foreign currency, credit risk, and changes in the prices of commodities. CME Group owns and operates clearing house, CME Clearing, which provides clearing and settlement services for exchange-traded contracts and counter derivatives transactions; and also engages in real estate operations. Its primary trade execution facilities consist of its CME Globex electronic trading platform and open outcry trading floors, as well as privately negotiated transact ions that are cleared and settled through its clearing house. In addition, the company offers market data services comprising live quotes, delayed quotes, market reports, and historical data services, as well as involves in index services business. CME Group?s customer base includes professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, producers, and governments. It has strategic partnerships with BM&FBOVESPA S.A., Bursa Malaysia Derivatives, Singapore Exchange Limited, Green Exchange, Dubai Mercantile Exchange, Johannesburg Stock Exchange, and Bolsa Mexicana de Valores, S.A.B. de C.V., as well as joint venture agreement with Dow Jones & Company. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. CME Group was founded in 1898 and is headquartered in Chicago, Illinois.

Advisors' Opinion:

• [By Mark Thompson]

  The Chicago Mercantile Exchange (CME), which operates the world's biggest derivatives market, is asking investors to stump up more cash to trade in financial products that provide protection against rising interest rates.

• [By Jon C. Ogg]

  CME Group Inc. (NASDAQ: CME) was raised to Outperform from Market Perform at Keefe Bruyette & Woods.

  Cypress Semiconductor Corp. (NASDAQ: CY) was maintained as Buy, but earnings estimates were cut and the price target was cut to $13 from $15, by Sterne Agee. Wedbush downgraded it to Neutral from Buy after the warning.

Top Gold Stocks For 2014: Goldcorp Incorporated(GG)

Goldcorp Inc. engages in the acquisition, exploration, development, and operation of precious metal properties in Canada, the United States, Mexico, and Central and South America. It produces and sells gold, silver, copper, lead, and zinc. The company was founded in 1954 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• [By Doug Ehrman]

  In the following video below, Fool.com contributor Doug Ehrman discusses the impact that expansionary monetary policy has had on miners such as Barrick Gold (NYSE: ABX  ) and Goldcorp (NYSE: GG  ) , and he looks at what the end of this era could mean for those companies.

• [By Sean Williams]

  One lustrous investment
  If you hadn't guessed by now, I'm a big fan of gold and gold miners. There are multiple factors at the moment that I feel could usher in another rally in gold prices. These include weak global economies, which make gold an attractive safe-haven investment; low domestic interest rates, which make gold attractive relative to low-yielding CDs and bonds; copious U.S. money printing, which could lead to inflation; and a contrarian mentality to buy when others are fearful. That's why I think investors would be foolish to pass up on cost-efficiency mining expert Goldcorp (NYSE: GG  ) at its current levels.

Top 10 Tech Companies To Buy Right Now: Australian Dollar(AU)

AngloGold Ashanti Limited primarily engages in the exploration and production of gold. It also produces silver, uranium oxide, and sulfuric acid. The company conducts gold-mining operations in South Africa; continental Africa, including Ghana, Guinea, Mali, Namibia, and Tanzania; Australia; and the Americas, which include Argentina, Brazil, and the United States. It also has mining or exploration operations in the Democratic Republic of the Congo, Guinea, and Colombia. As of December 31, 2010, the company had proved and probable gold reserves of 71.2 million ounces. The company has a strategic alliance with Thani Dubai Mining Limited to explore, develop, and operate mines across the Middle East and parts of North Africa. AngloGold Ashanti Limited, formerly known as Vaal Reefs Exploration and Mining Company Limited, was founded in 1944 and is headquartered in Johannesburg, South Africa.

Advisors' Opinion:

• [By Sean Williams]

  I think the answer to this is yes, but it's definitely going to need some help from gold spot prices, and it'll need to formulate solidly structured contracts with its labor force in Africa. Last year, AngloGold Ashanti (NYSE: AU  ) was forced to come to a pay raise agreement with some 10,000 striking workers, after a strike that completely closed its TauTona and Mponeng mines for months. AngloGold understands that higher labor costs are never welcomed from a business perspective, but the alternative of mine closures is even worse.

• [By Dan Caplinger]

  One way Yamana has kept its competitive cost advantage is through extensive sales of base-metal byproducts like copper and zinc, as both it and fellow low-cost rival Goldcorp (NYSE: GG  ) benefit from utilizing those secondary metals to offset the cost of their gold production. Peers Gold Fields (NYSE: GFI  ) and AngloGold Ashanti (NYSE: AU  ) , on the other hand, face much higher costs in part because of their exposure to South Africa and its unstable labor market.

• [By Dan Caplinger]

  But even bigger damage came from gold-mining stocks. AngloGold Ashanti (NYSE: AU  ) has lost almost 60% of its value in 2013, with the drop in gold prices having an outsized impact on the gold miner's prospects. AngloGold has also suffered from investors moving away from emerging markets like South Africa in favor of U.S. stocks, as fears of the Federal Reserve's exit from its quantitative easing program have reduced overall risk tolerance among many investors.

Top Gold Stocks For 2014: First Majestic Silver Corp.(AG)

First Majestic Silver Corp. engages in the production, development, exploration, and acquisition of mineral properties with a focus on silver in Mexico. The company owns interests in La Encantada Silver Mine comprising 4,076 hectares of mining rights and 1,343 hectares of surface land located in Coahuila; La Parrilla Silver Mine consisting of mining concessions covering an area of 69,867 hectares; and San Martin Silver Mine comprising approximately 7,841 hectares of mineral rights and approximately 1,300 hectares of surface land rights located in Jalisco. It also holds interests in Del Toro Silver Mine consisting of 393 contiguous hectares of mining claims and an additional 129 hectares of surface rights located in Zacatecas; Real de Catorce Silver Project comprising 22 mining concessions covering 6,327 hectares located in San Luis Potosi state; and Jalisco Group of Properties consisting of mining claims totalling 5,240 hectares located in Jalisco. The company was founded in 1979 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• [By Doug Ehrman]

  It is no secret that precious metals companies have been taking a pounding for some time now. The SPDR Gold Trust (NYSEMKT: GLD  ) and iShares Silver Trust (NYSEMKT: SLV  ) , the gold and silver ETFs, have been hard hit and operating companies like First Majestic (NYSE: AG  ) and Barrick Gold (NYSE: ABX  ) have been hit even harder. Through all of these struggles, and in some cases because of them, one precious metals company continues to look attractive for the long term: Silver Wheaton (NYSE: SLW  ) .

• [By Doug Ehrman]

  While many precious-metals companies have been in a slump of late, there is one that belongs perpetually in your portfolio: Silver Wheaton (NYSE: SLW  ) . The company is not like other miners -- including Pan American Silver (NASDAQ: PAAS  ) and First Majestic (NYSE: AG  ) -- in that it has a unique business plan that insulates it against many of the vagaries of the mining business. Moreover, because silver will always have a significant industrial demand component, even with the heightened volatility you see in the silver market, maintaining exposure to silver is appropriate.

Top Gold Stocks For 2014: Claude Resources Inc.(CGR)

Claude Resources Inc. engages in the acquisition, exploration, and development of precious metal properties, as well as production and marketing of minerals in Canada. It primarily explores for gold in northern Saskatchewan and northwestern Ontario. The company holds interests in the Seabee gold mine located at Laonil Lake, northern Saskatchewan; and the Madsen property that consists of 6 contiguous claim blocks totaling approximately 10,000 acres, located in the Red Lake Mining District of northwestern Ontario. It also holds interest in the Amisk Gold project, which covers an area of 13,800 hectares in the province of Saskatchewan. The company was founded in 1980 and is based in Saskatoon, Canada.

Top Gold Stocks For 2014: Northgate Minerals Corporation(NXG)

Northgate Minerals Corporation, together with its subsidiaries, engages in exploring, developing, processing, and mining gold and copper deposits in Canada and Australia. Its principal producing assets include 100% interests in the Fosterville and Stawell Gold mines in Victoria, Australia; and the Kemess South mine located in north-central British Columbia, Canada. The company was formerly known as Northgate Exploration Limited and changed its name to Northgate Minerals Corporation in May 2004. Northgate Minerals Corporation was founded in 1919 and is headquartered in Toronto, Canada.

Top Gold Stocks For 2014: Newmont Mining Corporation(Holding Company)

Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company?s assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. As of December 31, 2009, it had proven and probable gold reserves of approximately 93.5 million equity ounces and an aggregate land position of approximately 27,500 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.

Top Gold Stocks For 2014: NEW GOLD INC.(NGD)

New Gold Inc. engages in the acquisition, exploration, extraction, processing, and reclamation of mineral properties. The company primarily explore for gold, silver, and copper deposits. Its operating properties include the Mesquite gold mine in the United States; the Cerro San Pedro gold-silver mine in Mexico; and the Peak gold-copper mine in Australia. The company also has development projects, including the New Afton gold, silver, and copper project in Canada; and a 30% interest in the El Morro copper-gold project in Chile. The company was formerly known as DRC Resources Corporation and changed its name to New Gold Inc. in June 2005. New Gold Inc. was founded in 1980 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• [By Ben Levisohn]

  One group of stocks not feeling the optimism today: Gold miners. With fewer concerns that a U.S. attack on Syria will be disruptive and more evidence that tapering will begin this month, the price of the precious metal has dropped 1.6% to $1,388.90 an ounce–and gold stocks are falling with it. New Gold (NGD), for one, has dropped 3% to $6.55, while Barrick Gold (ABX) has fallen 1.3% to $19.25.

• [By Ben Levisohn]

  Bridges favorite stocks include Goldcorp, Newmont, Eldorado Gold (EGO) and New Gold (NGD).

  Note, however, that these recommendations are all qualified in one way or another. Investors should keep that in mind before going all in on the gold miners.

Oil Giant Total to Pay $245 Million in Bribe Case

ALEXANDRIA, Va. (AP) -- The French oil giant Total  (NYSE: TOT  ) has agreed to pay $242.5 million to settle criminal charges alleging the company paid bribes to win lucrative contracts in Iran.

Court papers indicate Total paid $60 million in bribes between 1995 and 2004 that allowed it to reenter the Iranian oil and gas market.

The case was jointly pursued by the U.S. and French governments. French authorities said Wednesday they have requested the company and its CEO face criminal charges there for violating anti-bribery laws.

Also, the U.S. Securities and Exchange Commission entered into an order against Total requiring it to pay an additional $153 million.

The investigation against Total has been ongoing. Last year the company announced it had set aside hundreds of millions of dollars in light of the U.S. investigation.

IBM Proves the Death of Growth, $20 EPS Target Just Too Costly

International Business Machines Corp. (NYSE: IBM) is proving that it has very limited growth opportunities in new revenues. The only saving grace for the rest of us these days is that IBM is now no longer the largest DJIA stock since Visa Inc. (NYSE: V) is a DJIA stock.

Big Blue’s earnings came in up 10% at $3.99 per share on an adjusted basis and sales came in down 4% at $23.72 billion. Thomson Reuters was calling for estimates of $3.96 EPS but on sales of closer to $24.75 billion. Our view is that there is very little to get excited about in this earnings report and shares are taking it on the chin as a result.

If you back out restructuring and one-time charges, IBM’s earnings would have been $3.68 per share and that is up 11%. Operating margins were 49.1% on an adjusted basis and 48% on a net basis. IBM also maintained its operational earnings guidance of $16.25 to $16.90 per share versus estimates from Thomson Reuters of $16.89 per share.

Top Oil Companies To Invest In 2014

IBM is still maintaining that it expects to achieve its long-term plan of $20.00 in earnings per share by the end of 2015. 24/7 Wall St. believes that this earnings target is coming at too high of a price on its core business and that it is possibly gutting itself in the years beyond that target.

The key metric we pay attention to is the backlog of services and this was $141 billion as of the end of the quarter. Last quarter this was put at $141 billion as well. Here are some of the key metrics:

Software revenue was up 1 percent, and up 2 percent adjusting for currency; Key branded middleware up 3 percent; up 4 percent adjusting for currency; Services revenue was down 3 percent, up 1 percent adjusting for currency; Global Business Services revenue flat, but was up 5 percent adjusting for currency; Services backlog was up 2% to $141 billion, but this would have been up 6 percent adjusting for currency; Systems and Technology revenue was down 17 percent, and down 16 percent adjusting for currency; System z mainframe revenue was up 6 percent; and up 7 percent adjusting for currency; Growth markets revenue were down 9 percent, but down only 5 percent adjusting for currency; Business analytics revenue was up 8 percent year to date; Smarter Planet revenue was up over 20 percent year to date; Cloud revenue was up over 70 percent year to date.

IBM shares closed up 1.1% at $186.73 against a 52-week trading range of $178.71 to $215.90, but now shares are trading down over 5% and at a 52-week low in the after-hours trading session.

Investors wait for Washington to get act together

Click the chart for more stock market data.

NEW YORK (CNNMoney) Investors moved to the sidelines Tuesday as they waited for developments in Washington and digested a batch of earnings.

The Dow Jones Industrial Average and S&P 500 fell slightly in early trading following four straight days of gains. The Nasdaq was flat.

Senate leaders have said they have made "tremendous progress" toward an agreement to end the partial government shutdown and raise the debt limit, but investors are taking a cautious approach. Even if the Senate gets a deal, it still needs to win support in the House of Representatives, which is far from certain. And there were reports Tuesday morning that the House may push a separate bill.

On the earnings front, Citigroup (C, Fortune 500) was the latest big bank to disappoint investors. The company reported third quarter profits and revenues that fell short of analysts' expectations, sending shares lower. The bank noted that the spike in interest rates over the summer caused a slowdown in new mortgages and refinancings, as well as bond trading.

Coca-Cola (KO, Fortune 500)shares rose after the beverage maker reported an increase in its third-quarter profit, as global sales volume rose 2%. Johnson & Johnson (JNJ, Fortune 500) shares also moved higher after the company reported gains in quarterly sales and profit.

Yahoo (YHOO, Fortune 500) and Intel (INTC, Fortune 500) are set to report in the afternoon.

FedEx (FDX, Fortune 500) shares rose sharply after the shipping giant announced plans to buy back 32 million shares, bolstering its existing share repurchase program.

Tesla (TSLA) and Microsoft (MSFT, Fortune 500) gained ground after analysts upgraded their ratings on the stocks. Wedbush upgraded Tesla to outperform from neutral, while Jefferies boosted Microsoft's rating to buy from hold.

Meanwhile, Facebook (FB, Fortune 500) shares jumped after Evercore analysts said they believe the social media company's stock will rise to $60 and reiterated their overweight rating.

World markets: European markets were pushing higher in afternoon trading. Alastair McCaig, market strategist for IG in London, said he was surprised that European stocks were up given "the sorry shenanigans of Washington."

Though the broa! der market was higher, shares of Burberry (BBRYF) fell nearly 6% in London after the fashion company announced its CEO -- Angela Ahrendts -- would be leaving for the top retail job at Apple (AAPL, Fortune 500).

Most major Asian markets ended the day with modest gains.

China Life Names New CFO

China Life Insurance Company (NYSE: LFC  ) has a new chief financial officer, announcing yesterday that on March 27, its board of directors picked Yang Zheng to serve as its new CFO. His appointment became effective April 26.

Yang is currently the company's qualified accountant, a position he has held since 2006, and has served in various managerial capacities for the company since 2005. He is a 1993 engineering graduate of Beijing University of Technology, and holds an MBA from Northeastern University. Yang is also a member of both the American Institute of Certified Public Accountants (AICPA) and of the Association of Chartered Certified Accountants (ACCA). He is a director of the seventh session of the Board of the Accounting Society of China, a member of the National Technical Committee on Accounting Information of Standardization Administration of China, and a member of the China Insurance Solvency Regulatory Standard Committee.

link

Men’s Wearhouse fires founder George Zimmer

Men's Wearhouse no longer likes the way George Zimmer looks.

Zimmer, the founder, chairman and the public face of the discount apparel chain, has been terminated, according to a brief statement from the company.

UPDATE: Men's Wearhouse nixes Jos. A. Bank offer

Men's Wearhouse gave no reason for Zimmer's departure — which surfaced on Wednesday, just hours before the company postponed its annual shareholders meeting. A company spokesman declined comment but said Zimmer's departure won't affect operations.

TV AD: George Zimmer's famed slogan in company's marketing

Since the mid-1980s, Men's Wearhouse TV ads featured the baritone-voiced Zimmer with his signature slogan: "You're going to like the way you look. I guarantee it."

The former substitute schoolteacher built Men's Wearhouse from a lone Houston store that used a cigar box as a cash register into one of the nation's largest men's specialty retailers, with 1,239 stores under the Men's Wearhouse, Moores, K&G and Tux brands.

In a statement to cable news channel CNBC, Zimmer said in the past several months he had expressed his concerns about the direction of the company to the board of directors and that the board had "chosen to silence my concerns through termination as an executive officer."

Zimmer's ouster comes less than a week after Men's Wearhouse reported a 23% gain in first-quarter earnings on a 5% sales increase. After falling about 16% in 2012, shares were up about 20% so far this year before Wednesday's announcement. Shares slumped nearly 7% in early trading before closing off 1% at $37.04.

Zimmer, 64, served as CEO from 1991 until 2011, when he was named executive chairman. According to the company's latest proxy, he holds a 3.5% stake.

Richard Jaffe, a retail analyst at Stifel & Co., says Zimmer's abrupt departure came as a surprise. Jaffe, who has a buy rating on the company, says Zimmer's transition from hands-on manager to executive chairman may have hastened his ! ouster.

"We believe that despite Zimmer's planned transition to a smaller role at the company, he had difficulty letting go of the reins and the leadership of the business,'' Jaffe says. "We believe that this led to a conflict with the board and his subsequent termination."

Zimmer earned nearly $2 million last year in pay, bonuses and other compensation. Men's Wearhouse will owe Zimmer $250,000 annually for four years under a licensing deal for his image in advertising and marketing efforts, according to the proxy.

"This was a guy who founded and built the company, who probably thought that things can go on the same way forever, and that's the problem with founders,'' says Robbie Vorhaus, an independent communications strategist.

"You can get a guy with a big ego, and he doesn't want to go away. But management is beholden to customers and shareholders,'' Vorhaus says. "You couldn't do this to a Martha Stewart or an Oprah Winfrey, who are the faces of their brands. But Zimmer was becoming irrelevant."

Gene Grabowski, a branding and crisis-management expert at Levick, says Men's Wearhouse is due for a new brand image.

"Most companies go through a transition period and change the way they present themselves,'' Grabowski says. "(Zimmer) and the slogan were getting a little aged. There is appeal to an older audience. They have to find a way to cater to a younger clientele. I could even see them using a woman to promote the brand."

Follow Strauss on Twitter at @gbstrauss

Why Synopsys's Earnings Are Outstanding

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Synopsys (Nasdaq: SNPS  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Synopsys generated $376.8 million cash while it booked net income of $195.6 million. That means it turned 20.9% of its revenue into FCF. That sounds pretty impressive.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Synopsys look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

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

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 16.5% of operating cash flow coming from questionable sources, Synopsys investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 16.8% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 13.2% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

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

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add Synopsys to My Watchlist.

The Twitter Frenzy #WorthIt?

We buy and patiently harvest a broadly diversified portfolio of undervalued stocks to be held for their long-term appreciation potential. Twenty words encompassing 137 characters.

If we had a Twitter account, we could actually fit our entire investment strategy into just one Tweet! Of course, these days, many investors might lose interest by word 10, as attention spans have shortened dramatically given the exponential growth of financial information available via mouse-click. Alas, the byproduct of so much readily available content is that stories must often make outlandish claims to rise above the din. Few seem interested in learning about disciplined investment approaches that have served their long-term followers well, but should a piece offer a Dow 36,000 or Dow 3,600 headline, or perhaps mention a well-known celebrity, folks may take notice.

For example, it was probably not a surprise that the largest initial audience for one of these blog posts was when I discussed the apparent discovery of the equity market by actress Mila Kunis back on March 21, 2013. So when my editors at Forbes understandably decided to insert "Bullish on Stocks" into my original title, "Kudos To Kunis: Mila Knows Of What She Speaks," shortly after the post went live, it became obvious that the fast and furious clicks had come from the masses who had not realized the missive pertained to investing.

Such is the world in which we live, as I learned this weekend that some 10 times as many people recently clicked on stories pertaining to Miley Cyrus and her twerking than on articles about Syria and potential U.S. military action therein. And it would seem not to be the media's fault; supposedly there were 2.4 times as many stories on Syria as there were on Miley.

Alas, it looks like TV host Ellen DeGeneres had it right when she lamented, "Our attention span is shot. We've all got Attention Deficit Disorder or ADD or OCD or one of these disorders with three letters because we don't have the time or patience to pronounce the entire disorder."

Best Oil Stocks To Buy For 2014

As value investors, we have plenty of patience, secure in our belief that the tortoise will win the long-term performance war, even if the hare wins a battle here and there. And speaking of the rabbits, investors in the social media space have enjoyed sensational returns this year with excitement about the upcoming IPO of Twitter undoubtedly contributing to the euphoria.

Of course, it should be pointed out that companies seldom choose to go public at a discount. Whether it is simply looking to raise capital to facilitate growth or to provide a vehicle for founders to cash in, seldom does a company seek an inexpensive valuation in the IPO process. Twitter, which thus far has revealed absolutely nothing about its finances, will most assuredly prove to be no exception.

While we suspect that the excitement over Twitter will send investors into a frenzy, it should be pointed out that the superstar of social media actually has been LinkedIn (LNKD), shares of which have more than doubled this year alone, shooting the company's market capitalization into the stratosphere to nearly $30 billion.

By way of comparison, investors now think that LinkedIn is more valuable than insurance provider Allstate (ALL), railroad operator Norfolk Southern (NSC), agricultural products company Archer Daniels Midland (ADM) and healthcare provider Aetna (AET), all of which have market-caps less that of LinkedIn. More importantly, we find each of those four to be sufficiently undervalued to warrant residency in our broadly diversified portfolios.

Certainly, LinkedIn has been growing like wildfire, but the Internet space is littered with numerous riches to rags stories and the valuation for LNKD is expensive, to say the least. After all, the shares now change hands at nearly 180 times adjusted earnings and more than 20 times revenue.

While growth stock investors are not much concerned with where a company has been, as they care far more about the future growth potential, there is no guarantee that anything near expectations will materialize. True, LinkedIn is likely to show handsome top- and bottom-line growth for the foreseeable future, but even if the company doubled the $1.40 per share in adjusted profit earned over the last 12 months every year for the next three years (i.e. 100% compounded growth), earnings per share would reach 'only' $11.20. At the current near-$250 price, the stock would be trading for some 22 times that pie-in-the-sky earnings tally. Providing some valuable perspective, analysts (historically an optimistic lot) now believe that earnings per share may hit $5.00 in 2016.

While we respect that LinkedIn is a Wall Street darling, we need to look no further than Apple (AAPL) to find an equally sexy stock that actual trades for an inexpensive valuation. In addition to just having supplanted Coca-Cola as the world's most valuable brand, according to a report released this week by Interbrand, a brand consulting company owned by the Omnicom Group, Apple trades for a very attractive multiple of around 12 times trailing-twelve-month earnings. In addition, the consumer electronics powerhouse pays a substantial and sustainable dividend that provides a yield of 2.3% while the company has an approved share repurchase program of $60 billion (which equates to more than 13% of the outstanding shares).

And @Carl_C_Icahn seems to agree with us, per his Tweet and interview with CNBC on October 1. Via Twitter, Mr. Icahn said: "Had a cordial dinner with Tim last night. We pushed hard for a 150 billion buyback. We decided to continue dialogue in about three weeks." On CNBC, he stated: "It's a no-brainer and it makes no sense for this company with their multiple being so low not to do a major major buyback."

LinkedIn certainly has plenty of potential to beat expectations, but we would rather invest in undervalued companies with proven businesses. And we will have no interest in the Twitter IPO, as the history books confirm that value-oriented strategies have outperformed their growth counterparts by a significant margin over the long-term. To us, that's #SmartInvesting.

 

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Opinions expressed are those of John Buckingham, chief investment officer of Al Frank Asset Management, Inc. (AFAM). a division of AFAM Capital, Inc., and are subject to change without notice and are not intended to be a forecast of future events, a guarantee of future results or investment advice.

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10 Best Undervalued Stocks To Invest In 2014

Small cap BioScrip Inc (NASDAQ: BIOS) is a specialized health care services stock that���seeking to roll-up the heavily fragmented�home infusion care market���meaning its worth taking a closer look at the stock and its performance against healthcare ETFs like the iShares Dow Jones US Health Care ETF (NYSEARCA: IHF) or the Health Care SPDR ETF (NYSEARCA: XLV). However,�BioScrip has taken a beating and I should note that we have recently added shares to our SmallCap Network Elite Opportunity (SCN EO) portfolio�because we believe the company is on the verge of turning a profit and is potentially undervalued.

What is BioScrip Inc?

Small cap BioScrip provides comprehensive infusion and home care solutions. More specifically, BioScrip provides access to infusible medications and management solutions to optimize outcomes for chronic and other complex healthcare conditions.�BioScrip also offers complete Pharmacy Benefit Management programs that include customized benefit plan design, pharmacy network management and sophisticated reporting capabilities plus the company�has 33 retail locations in 25 major metropolitan markets across the US providing nationwide capabilities.

10 Best Undervalued 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 John Udovich]

  Everyone is familiar with�the Tupperware brand from�consumer products stock Tupperware Brands Corporation (NYSE: TUP) and you are probably familiar with the brands�of mid cap stock Jarden Corp (NYSE: JAH) along with small cap stocks Libbey Inc (NYSEMKT: LBY) and Lifetime Brands Inc (NASDAQ: LCUT); but what about the stocks themselves? Chances are, their brands or products are right under your nose at home and you probably don�� know anything about the mid cap or small cap stock behind them.

• [By Dan Caplinger]

  Where growth will come from
  One area that Newell Rubbermaid still has to tap fully is emerging markets. The company has done a good job of expanding overseas, with 17% annual growth in Latin America. But with barely a quarter of its sales coming from outside the U.S. and Canada, the company has a lot further to go. Storage rival Tupperware (NYSE: TUP  ) gets fully 60% of its total revenue from emerging markets, and it too has seen impressive gains in South America as well as the Asia-Pacific region.

• [By Brian Pacampara]

  Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, household products company Tupperware Brands (NYSE: TUP  ) has earned a coveted five-star ranking.

10 Best Undervalued 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 Tyler Crowe]

  Talk to your CFO if you experience bloating
  This quarter, Nabors, Halliburton (NYSE: HAL  ) , and Schlumberger (NYSE: SLB  ) have all struggled in their pressure-pumping businesses because of oversupply in the current market. According to Nabors CEO Anthony Petrello, this has led to a very competitive market: "It is not unusual to bid frac jobs against 20 other pumpers, and sometimes as many as 35 show up. We have seen some instances of competitors winning bids with economics that at least from our perspective appear to be near cash break-even."

• [By David Smith]

  Big and not so big at your service
  In the services sector, perhaps the most difficult to comprehend of the sub-sectors, you likely have a good handle on the kingpin, Schlumberger (NYSE: SLB  ) . The company, with a $100 billion market cap, operates in about 85 countries, through the efforts of more than 100,000 employees. Its services include everything from soup to nuts, or seismic to production assistance. So, if you're looking for an ideal company to constitute a single proxy for the services contingent, Schlumberger's a good bet.

• [By Dan Caplinger]

  Schlumberger (NYSE: SLB  ) will release its quarterly report on Friday, capping an up-and-down quarter for the stock. With U.S. natural gas prices having risen somewhat from their lows last year and with oil prices remaining above $100 per barrel, Schlumberger earnings have the fundamental support in place to drive higher.

• [By Arjun Sreekumar]

  Opportunities for oilfield services firms
  Not surprisingly, Halliburton and other major energy companies view Chinese shale gas development as a significant opportunity for future growth. Many of them, including Baker Hughes (NYSE: BHI  ) , ConocoPhillips (NYSE: COP  ) , and Schlumberger (NYSE: SLB  ) , have already developed strategic relationships with Chinese firms to better evaluate the nation's shale gas potential.

Best Safest Companies To Watch In Right Now: 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 Matt Thalman]

  Another Dow stock that likely fell on the news from China was Caterpillar (NYSE: CAT  ) , which ended the day down 0.1%. Although today's announcement clearly didn't have a major affect on either caterpillar or Alcoa, it did add fuel to the bearish sentiment investors have had with each company this year. Caterpillar is down 7.24% year to date, while Alcoa has lost 8.06%. These may not seem like massive declines, but when we add in the fact that the Dow itself is up 12.94% in 2013, the idea that Alcoa and Caterpillar have been beaten by nearly 20% over just the past six months is rather shocking.

10 Best Undervalued 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 Jon C. Ogg]

  Dollar Tree Inc. (NASDAQ: DLTR) was maintained as a Buy but was removed from the prized Conviction Buy list at Goldman Sachs.

  Duke Energy Corp. (NYSE: DUK) was raised to Buy from Hold with a $79 price target at Argus.

• [By Jacob Roche]

  With the economy starting to improve, you might think Dollar Tree's (NASDAQ: DLTR  ) fortunes will reverse. The deep discounter provided unemployed and lower-income consumers a safe place in the storm, but with the economic weather clearing up, it would be reasonable to expect consumers to venture out again to higher-end retailers. However, that assumption would be wrong.

• [By Rising Dividend Investing]

  Falling Stock Correlation: What It Says About Consumer Spending

  As we mentioned in the Take Aways from the August 26th Investment Policy Committee meeting, the correlation index has been steadily declining. In 2008-09, macroeconomic events drove nearly every stock downwards. Specific sectors and stocks moved in tandem with one another. Today, stocks and sub-industries within each sector are performing very differently – which indicates a return to a more normal stock market environment.
  The Consumer Discretionary (also known as Consumer Cyclicals) sector is an example of an industry that has been rewarded for its fundamental success over the past 12 months. As a whole, the sector grew sales 6.1% and earnings 9.2% in the second quarter - much better than the 1.4% sales and 3.3% earnings growth of the S&P 500. While the overall sector did well in the second quarter, the table below shows how differently the 5 sub-categories of Consumer Discretionary performed:
  
  (click to enlarge)
  As we drill down even further, sub-categories of sub-sectors differ even more dramatically. Below is a snapshot of the Retailing sub-sector and its notable components:
  
  (click to enlarge)
  Specific stocks within each sub-category are varying in performance as well. General Merchandise retailers were significantly differentiated in the second quarter. Target’s (TGT) adjusted EPS were up 6.1% from 2012, while Dollar General (DG) and Dollar Tree’s (DLTR) earnings were up nearly 12% and 9%, respectively.
  The differences in sales and earnings growth amongst these different industries tell a story. The economy is not improving enough that people feel like they can let go and spend money on pure pleasures, but it is improving enough that they can afford to replace their cars and fix the doors on their houses. As these items wear out and need to be replaced, we expect the pent up demand will drive increased economic activity from cons

Undervalued Questcor Is Setting Up For A Significant Upswing In Share Price

Questcor Pharmaceuticals (QCOR) is a 2013 high-performing biotech that I first wrote about in November 2012. Year to date, revenue is up about 60% over 2012 and share price is up more than 125%. These impressive numbers are mainly due to prescription growth from its flagship product H.P. Acthar Gel(TM) and it's 19 FDA-approved indications including: infantile spasms, acute exacerbations of multiple sclerosis, nephrotic syndrome and the newly-marketed therapeutic area, rheumatology disorders including dermatomyositis/polymyositis (DM/PM), psoriatic arthritis and rheumatoid arthritis.

There are compelling reasons to believe QCOR will maintain its robust 2013 revenue growth including:

Expansion outside the U.S. for the first time in the company's history A pilot program for Acthar GEL treatment of refractory sacrcoidosis, which opens up the pulmonology space for QCOR An acquisition of a related drug product Synacthen An exciting pipeline with potential catalysts beginning in Q4 2013 and all through 2014

In fact, 2014 is stacking up to be the year Questcor puts it all together. See the chart below.

(Click to enlarge)

Several Game Changers Are In The Pipeline

Both On-Label Indications and New Indications

Research and Development Progress:

"Questcor's continued strong financial performance has enabled the Company to increase investment in research programs to further clarify the potential immune-modulating properties of Acthar and identify Acthar mechanisms of action applicable to other inflammatory and auto-immune diseases with high unmet medical need," noted Dr. David Young, Chief Scientific Officer. "The Company is also identifying new patient populations in which to evaluate Acthar through clinical studies. Questcor has funded or has approved funding for approximately 70 resear! ch projects, including company-sponsored clinical and pre-clinical studies and independent physician sponsored studies."

Research and development (R&D) investment increased 44% to $12.2 million in the three months ended June 30, 2013, as compared to $8.5 million for the year ago period. R&D investments were $23.0 million for the first six months of 2013, as compared to $14.2 million for the year ago period.

NEW INDICATIONS--Label Enhancement Programs:

Amyotrophic Lateral Sclerosis (ALS): Questcor commenced screening patients for enrollment into a dose-ranging Phase 2 clinical trial to evaluate the safety and tolerability of Acthar in patients with ALS, often referred to as Lou Gehrig's disease. ALS is a life-threatening, progressive neurodegenerative disease that affects nerve cells in the brain and the spinal cord. Diabetic Nephropathy: Enrollment continues in a company-sponsored Phase 2 trial to evaluate the efficacy and safety of Acthar in patients with diabetic nephropathy, one of the most common causes of end-stage renal disease in the United States.

Research Regarding Approved Indications:

Idiopathic Membranous Nephropathy: Enrollment continues in a company-sponsored Phase 4 trial in idiopathic membranous nephropathy. Patients enrolled in this study are refractory, or non-responsive, to current standard therapies or have relapsed after partial remission on current standard therapies. Lupus: Enrollment continues in a company-sponsored multi-site Phase 4 company-sponsored clinical trial to evaluate the efficacy and safety of daily Acthar administration over a 6-month period in patients with persistently active lupus. Lupus Exacerbations: Questcor is providing grant support for a prospective independent investigator initiated study evaluating Acthar in the treatment of lupus exacerbations. The Company has been informed by the investigator that this study has recently been completed.

Planning activities related to the initial evaluation ! of a sele! ct grouping of potential Synacthen indications are in process. Questcor will provide further updates on this newly initiated development program as key activities get underway.

Recent Top Analyst Coverage With Current "Buy" Ratings:

1) Lazard (LAZ): Management meetings highlight under-appreciated earnings drivers; raising PT to $85; BUY

2) Bank of America/Merrill Lynch (BAC): Questcor Pharmaceuticals is upgraded from "neutral" to "buy." The target price has been raised from $58 to $80.

3) Piper Jaffray (PJC): Recent weakness is unwarranted as the landscape for Acthar remains favorable: OVERWEIGHT (BUY) rating and $74 PT

4) CRT Capital: BUY rating and $79 PT.

5) Mizuho: An Under Appreciated Opportunity with a PT of $84

Another Seeking Alpha Colleague Suggests that Questcor is one of 3 Takeover Candidates That Pay Dividends While You Wait:

"Questcor Pharmaceuticals is a healthcare name that deserves to be on this list, as it generates some of the highest takeover talk on a day-to-day basis of any name today. Benzinga reported earlier this week that there was unconfirmed chatter of interest from Sanofi (SNY), and although it's been linked to some other names, the latest talk has had the strongest legs. Shares of Questcor are up almost 5% in the past week and 28% over the past three months.

Year-to-date, the stock has more than doubled, as Questcor has generated earnings beats in four of its past five quarters. Questcor is a quality company that offers good growth prospects with a dividend yield just under 2%, so even if takeover chatter stalls, there's still reason to be invested here. Acthar, the company's flagship hormone medication for diseases like multiple sclerosis, saw its sales jump more than 40% last quarter (qoq), and Bank of America/Merrill Lynch upgraded Questcor to a "Buy" on this news last month. BofA's price target on Questcor is set at $80, which represents a 38% upside from! current ! levels. We'll be watching it closely."

Risks

Presently there are adoption risks related to new uses and managed care The approval of an AB substitutable biogeneric compound. Response: Research suggests that any generic compound will likely require testing in lengthy clinical trials, the usual regulatory risks, and will not be substitutable so near term concern are unwarranted. Concerns about reimbursement pressures from private insurers. Response: Acthar's use is generally prescribed for the most challenging patients and when first line therapies have failed, so reimbursement pressure will be mitigated. Investors fear consequences of an investigation into its marketing practices and/or lawsuit(s). Response: If found to be negative, this should be will be worked out for an insignificant figure or could be dismissed.

Catalysts - Growth Drivers

1) The company has launched an already successful new commercial effort for DM/PM, the first of several on-label rheumatology indications, which should evolve into another very meaningful commercial opportunity and drive future growth into 2014.

2) In Q4 2013, Questcor will be launching a pilot marketing program for Acthar treatment of sarcoidosis, which some analysts have pegged as a $500 million or greater revenue opportunity over the next several years. These initiatives alone are plenty to drive revenue growth for the Acthar franchise over the next several years, even without help from their robust pipeline and over sixty different R&D and clinical research initiatives.

3) As such, I would expect a run up into earnings coming in the next few weeks and well into 2014.

Let's Take A Look At The Math

BIOTECHNOLOGY INDUSTRY VALUATIONS

Per the following industry valuations study done by the NYU Stern School of Business earlier this year (2013) based on data from Valueline Database (which I subscribe to), the following are Biotechnology Industry Valuation Parameters which included v! aluations! based on 214 Biotechnology firms:

Current Average P/E Ratio is 32.89 Forward P/E Ratio is 47.35 Expected Industry Growth Rate is 20.28 Industry PEG Ratio is 1.54 Average Dividend Yield is .16%

COMPARE THE INDUSTRY RATIOS TO QUESTCOR:

Current QCOR P/E Ratio is 15.95 Forward P/E Ratio (using Analyst Consensus EPS for 2014 of $5.81) is 10.16 Expected QCOR Growth Rate is 30% using 5 Year Analyst Consensus Growth Rate Industry PEG Ratio is 1.54; Questcor's is under .30 Current Dividend Yield for QCOR is 1.69%

Given the enormous disparity between Questcor's valuation parameters and the Biotechnology Industry valuation parameters, Questcor is significantly undervalued. I would value QCOR using a DCF analysis based on projected free cash flow through 2015 with Total Value calculated using terminal multiples of 18x or higher (e.g., 18x to 25x as highlighted below), which reflects my conservative confidence in long-term growth potential and lack of obvious competitive threats, as well as, the potential for some of the new emerging indications that have not been identified.

QUESTCOR VALUATIONS USING INDUSTRY DATA AND ANALYST ESTIMATES:

Analyst Consensus Estimate for 5 Year Growth is 30%. Analyst Consensus EPS Estimate for 2013 Annual is $4.83 (GAAP) Analyst Consensus EPS Estimate for 2014 is $5.81 (GAAP) Using 30% on top of $5.81 for 2015 EPS Estimate would be $7.58 (GAAP)

Using these three estimates the following Valuation Table can be used to establish forward value based on a range of Price Earnings ratios per the Industry Valuations above.

P/E	2013 PPS	2014 PPS	2015 PPS
15x	$72.45	$87.15	$113.70
18x	$86.94	$104.58	$136.44	Low end of the Target Range
25x	! $120.7! 5	$145.25	$189.50	High end of the Target Range
30x	$144.90	$174.30	$227.40	NOTE this is 1.0 Equilibrium PEG for QCOR
32.89x	$158.86	$191.09	$249.31	NOTE this is the Biotech Ind. Average P/E
35x	$169.05	$203.35	$265.30

SOME FINAL PERSPECTIVES FROM QUESTCOR'S CHAIRMAN DON BAILEY -- Excerpts from a note to shareholders 10/7/13:

We believe Acthar has the potential to play a larger role in addressing the autoimmune and inflammatory processes in many serious diseases, and in so doing help many more patients than is currently the case. For example, we now have both the financial and scientific resources to pursue our own internal research programs in diabetic nephropathy and amyotrophic lateral sclerosis (ALS), two devastating conditions for which patients have virtually no effective treatments available to them. We are also working to identify other diseases and disorders where Acthar could possibly play a unique and important therapeutic role.

We have invested heavily in developing an experienced and well-trained commercial team to educate physicians about our growing understanding of Acthar and its ability to help their patients. Our representatives are highly experienced and have often spent most of their careers educating doctors about the proper use of advanced new biological medicines. Physicians are also supported by a growing team of Medical Science Liaisons, most of whom are PhDs, PharmDs or MDs, who respond to medical inquiries and provide technical information to healthcare providers regarding the growing body of scientific and clinical evidence related to Acthar.

We have been rapidly increasing our research and development ! spending,! focused on the basic and clinical science of Acthar and the melanocortin system, rather than on building a pipeline of unrelated products. In 2007 we spent less than $5 million on research and development. By 2012, Questcor spending on research and development had risen to $34 million, and that is budgeted to nearly double to $60 million in 2013. And we expect that spending to continue to grow in the future. This illustrates our firm commitment to rapidly grow our investment in research and development. So what is the potential for Acthar? Well, it is a bit different from the situation at most biopharmaceutical companies. Acthar is an approved product that has been on the market for sixty years, so its safety profile is very well known and is supported by decades of clinical use. However, we clearly recognize that there is a need for more modern data on the efficacy and safety of Acthar in the variety of diseases and disorders for which it is FDA-approved, as well as greater clarity regarding exactly how Acthar works in these patients. We are also identifying potential new indications that may be worth pursuing for Acthar. As a result, we have been dramatically increasing our R&D spending to identify new patient populations who may benefit from Acthar and Synacthen, as well as expand access for the patients who may benefit from these important drugs.

SOME ADDITIONAL THOUGHTS:

Quarterly Earnings, ROE and Net Cash Position/Flow

These have been "off the charts" (being done with virtually no debt leverage). This provides Questcor Management the flexibility to quickly maneuver acquisitions, R&D, and investigate more indications on top of the already Nineteen (19) FDA Approved Indications being pursued. Its EPS has been straight up coming out of the gates like a thoroughbred horse beating analyst expectations in 13 of past 14 quarters. So, any further acquisitions or strategic initiatives will be "icing" on the QCOR cake. Questcor i! s not onl! y financially able to move quickly on any "low hanging" acquisitions, but I believe that they have some professional M&A pharma staff to make any key acquisition work.

The EPS Estimates

EPS presented here do not take into account Questcor's ability to "lever up" and do a massive share buyback and/or other strategic initiatives.

Impressive EPS Growth

EPS growth has been sustained in spite of Questcor upping R&D from $5mm in 2007 to $60mm in 2013. It is not only sustaining major strategic initiatives, but doing so with rock solid financial performance quarter after quarter, something few, if any, companies of their size can pull off.

Biovectra and Synacthen Potential

The potential here is not really factored into the current EPS potential or the analysis provided here. This would be a bonus if ever announced.

International Expansion

This can also be a significant game changer too (also not priced in here) for all current and future IP and Operating Assets, but certainly has Not been included in analyst estimates (or in this report).

Investors Should Note

During prior conference calls, analysts have been inquiring about plans for the excess cash? With current undervalued share price, and Bailey proving to be one savvy and opportunistic CEO, he could easily orchestrate a significant share buyback (almost a mini-LBO) without taking on an inordinate amount of debt - especially since interest rates are historically low.

Assets

Questcor now has the Assets of Acthar, Synacthen and Biovectra to leverage internationally.

Summary:

QCOR is currently trading at a deep discount to its peers (on a forward PE multiple and an EV/EBITDA multiple basis), based on this analysis. Currently, QCOR shares are trading at a 30% discount to its specialty pharmaceutical industry peers. On an EV/EBITDA multiple, QCOR is trading at a 40% discount to its peers. With Acthar prescription trends continuing to show! strong g! rowth, one would have to believe that QCOR's discounted valuation creates an attractive buying opportunity at these levels.

Given that the current "fair value" P/E for Questcor from its recent financial performance and growth of 35-40% and Forward Consensus Growth for the next 5 years of 30% should conservatively be in the 18x to 25x with respectively current P/E's of 18x priced at $86.95 and 25x priced at $120.75. As such, I am very comfortable with a 2013 Price Target of $90 per share using these industry and analyst parameters.

Source: Undervalued Questcor Is Setting Up For A Significant Upswing In Share Price

Disclosure: I am long QCOR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)