This was the early method of performing a lobotomy. And just 50 years ago, they were carried out not only on severely mentally ill people, but also on moody teenagers, or housewives who’d lost their enthusiasm for domestic work. Seriously. Over 40,000 Americans were lobotomized, often with catastrophic results.

Thankfully, they’re a thing of the past. But it made me think about how medicine has changed over the years and what practices were once acceptable. Just a few hundred years ago, for example, you wouldn’t have questioned the “doctor” for putting leeches on you any more than you do today for prescribing an antibiotic.

What other common medical practices will be outdated in the years to come – and more importantly what will replace them? As someone who follows the health care sector, I believe I have the answer to the next big thing in health care: Immunotherapy and regenerative medicine…

How Immunotherapy is Changing the Playing Field

Immunotherapy has been around for decades in the forms of vaccines, allergy shots, etc. It involves introducing something into the body to create an immune response. For example, when you receive a flu shot, you’re essentially training your body’s immune system to respond to specific infectious agents.

And then there are more serious diseases – like cancer.

Over the past few years, we’ve seen new cancer medicines receive approval, with even more in development.

With greater technology and intensive ongoing research, we may one day look back at chemotherapy (the equivalent of carpet-bombing your body in order to kill cancer) as barbaric as we do lobotomies.

And with regard to immunotherapy drugs, the body’s immune system specifically targets the cancer, typically resulting in fewer side effects than chemotherapy.

Several well-known cancer drugs already employ this technique – for example, Genentech’s Avastin and Herceptin and Bristol-Myers Squibb (NYSE: BMY) and ImClone’s (now Eli-Lilly) joint-partnership with Erbitux. All three have become blockbuster drugs for these companies.

Three Small-Cap Firms That Could Cash in on Immunotherapy

But there are also many small-cap health care companies engaged in immunotherapy research, which stand to make piles of money for shareholders if they develop a successful drug. Here are some names to look into…

• Dendreon Corp. (Nasdaq: DNDN): Prostate cancer is the most common cancer among American men and is the second-highest cause of cancer deaths. Dendreon’s leading drug candidate for prostate cancer, Provenge, could be approved in 2010.
• Cel-Sci Corp. (AMEX: CVM): The company’s Multikine drug, which treats head and neck cancer has completed Phase II trials and its scientists are currently working on an H1N1 flu drug, too.
• Northwest Biotherapeutics (OTC BB: NWBO): The firm has several drugs in various phases of clinical trials for brain, prostate and lung cancers, including DCVax-Brain, DCVax-Prostate and DCVax-LB for non-small cell lung cancer. It also has DCVax-Direct, which treats ovarian, head and neck cancer.

Three “Regenerators” for Your Health Care Sector Watchlist

In addition to immunotherapy drugs, the field of regenerative medicine is also flourishing and holds some excellent growth potential, as we’re still in the early stages of understanding the power of stem and other regenerative cells. Here are a few names to kick off your research…

• Cytori Therapeutics (Nasdaq: CYTX): The company already has a product approved in Europe (Celution 800/CRS) and Asia (Celution 900/MB) for breast reconstruction following a partial mastectomy. The firm is currently running clinical trials in several cardiac areas, too.
• StemCells Inc. (Nasdaq: STEM): The company currently has clinical trials in progress for drugs that treat diseases of the central nervous system and liver.
• Geron (Nasdaq: GERN): It’s involved in both immunotherapy research for cancer and stem cell investigation in spinal cord injuries.

Keep in mind that most of these stocks are very small, so their trading can be volatile. In addition, they may need to raise funds to aid research and development, so do your due diligence.

However, I’m confident that over the coming years, firms like these will be at the forefront of new, more effective and safer ways to treat some of the world’s worst diseases.

Hoping your longs go up and your shorts go down,

Marc Lichtenfeld

Source: How to Profit from Immunotherapy & Regenerative Medicine

Amid a buzz of publicity, yesterday was the day that many Beatles fans had eagerly waited for, with the release of a new video game in the band’s name – “The Beatles: Rock Band.”

If you’re not familiar with the “Rock Band” concept, it’s a bit like karaoke, except you play music in addition to singing. Gamers follow along with their favorite musicians/songs, using an electronic drum kit and guitar, and sing the songs, too.

The game is enormously popular, having generated over $1 billion in revenue. And gamers can download individual songs, albums, or catalogs of groups like AC/DC, The Who and The Grateful Dead. So far, they’ve paid for and downloaded over 40 million songs…

Both Paul McCartney and Ringo Starr were part of the creative process and have endorsed the game in the ensuing media hype that developed.

But what about you and me? Well, while we might never be as wealthy as the “Fab 4,” perhaps we can profit from a new wave of Beatle Mania.

These “Fab Four” Stocks Are Set for a “Beatle Boost”

Let’s take a look at four companies that could make big bucks off the The Beatle’s Rock Band release…

• Viacom (NYSE: VIA.B): This firm should be the biggest beneficiary of the game’s success. Its MTV unit owns Harmonix Music Systems, the creator of “Guitar Hero” and several “Rock Band” titles, including “The Beatles.”

Viacom also owns cable TV staples such as Comedy Central, VH1, Nickelodeon and CMT. In addition, it produces and distributes movies through its Paramount Pictures division.

However, Wall Street likes Viacom about as much as conservatives liked Paul, John, George and Ringo’s mop-top haircuts in the 1960s. Analysts currently have eight “Buy” recommendations on the stock, 17 “Holds” and eight “Sell” ratings.

Keep in mind that most analysts rate stocks as “Buy.” A “Hold” essentially means sell, while an outright “Sell” rating means “this stock is so bad, even we don’t want the firm’s investment banking business.”

And note that Wall Street analysts have a horrendous track record when it comes to rating stocks.

So given my contrarian nature, I like stocks that have lots of “Hold” and “Sell” ratings, since analysts are often behind the curve and afraid to go against the grain. When a company turns around, they’re then forced to upgrade the stock and that often leads to gains in the share price.

And as for Viacom, the future doesn’t look as bad as they portray it. The company is expected to earn $2.05 per share in 2009, followed by a nearly 10% increase to $2.25 next year. In 2011, Wall Street projects earnings of $2.61.

The stock trades at just 12 times this year’s expected earnings, 11 times next year’s and just 1.1 times its trailing 12-month sales.

Viacom shares seem cheap. And if the game sells as well as I believe it will, shareholders will reap the reward.

• Sony Corporation (NYSE: SNE): Sony owns partial rights to The Beatles’ music catalog. That means every time a Beatles record is purchased, a song is downloaded, or a tune is played on the radio, Sony rings the register. The rights are held by Sony/ATV Publishing, a joint venture between Sony and Michael Jackson’s estate.

Of course, Sony has other businesses, too, aside from waiting for oldies radio stations to play Yellow Submarine…

It makes the ever-popular PlayStation video game consoles, on which users can play “The Beatles: Rock Band” (in addition to Microsoft’s X-Box and Nintendo’s Wii systems). Sony also makes a mass of other electronic equipment and is in the television and movie businesses.

Wall Street isn’t exactly enamored with the company at the moment. There are 12 “Buy” recommendations against 10 “Holds” and one “Sell.”

After a series of missteps, Sony isn’t expected to be profitable this year or next. But it does boast a strong film division and restructuring could result in its weak stock price rebounding.

• Electronic Arts (Nasdaq: ERTS): The company is the publisher of “The Beatles: Rock Band.” Like Viacom and Sony, Wall Street thinks it’s also going to be a Hard Day’s Night for ERTS. There are 14 analysts who believe the stock is a “Buy,” while 15 say, “Hold” and three have a “Sell” verdict.

In the face of stiff competition and few exciting new titles, Electronic Arts is expected to lose 30 cents per share this year. But in 2010, the books are expected to turn into the black, with the company projected to earn 97 cents per share, rising to $1.27 in 2011. In addition, it has over $2 billion in cash and no debt, and enjoyed recent success with its EA Sports Active.

The stock has suffered a beating, but has thus far failed to mount much of a rally, unlike many others who also took a hit in the downturn.

But should “The Beatles” and other games help turn things around, Electronic Arts might wind up being a great contrarian play.

• Gamestop (NYSE: GME): If you have a teenager, chances are they already spend Eight Days A Week browsing and playing games at Gamestop, a leading video game retailer in the United States, Europe, Canada and Australia.

The firm should benefit from increased consumer traffic related to purchases of “The Beatles,” plus a host of other games and accessories that it sells.

In contrast to the other three companies, Gamestop is much more popular, with analysts in giving it 14 “Buy” ratings and just two “Holds.” While earnings growth isn’t exactly stellar – EPS is estimated at $2.40 this year and $2.55 next year – the stock is cheap at 10 times this year’s EPS.

If you want to talk “best of breed” in the video game retailing world, Gamestop is it. Gamers can sell back or trade their games at Gamestop for other titles, which gives the company an advantage over retailers like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY). Plus, in addition to browsing the store, gamers can test-drive the games on the demo consoles and talk with employees, who are usually gaming enthusiasts, too.

Gamestop is gaining market share and is cheap enough to buy at current levels. If the upcoming holiday season is particularly strong, look for it to beat estimates and send share prices higher.

These four stocks have the potential to generate significant gains and put money in our pockets. And I hope we manage to make gobs of it. Just remember, money Can’t Buy Me Love.

Marc Lichtenfeld

Source: A New Wave of ‘Beatle Mania’… Four Ways to Profit from the Beatles: Rock Band

I guess it’s not surprising that renting his house to college kids made him a little paranoid. He often showed up at random times to make sure there was no revelry taking place. Once, he chased away some of my buddies as we were watching “Monday Night Football” (I guess the keg in the corner didn’t help our argument).

This no-nonsense, unattached attitude is the perfect way to approach the stock market and your investments. After all, most investors have had stocks that we thought were our friends, but that ultimately turned on us and caused pain.

The trick is to not become emotionally attached to them.

This is easier said than done, so if you find yourself hanging onto stocks for too long, or investing more with hope and emotion than sound reasoning, allow me to give you some tips…

When it Comes to Emotions, Adopt DeNiro’s “Heat Mentality”

I was fortunate that my stock market education started at a trading desk, where we executed trades according to how the market and stocks were performing. Period. Nobody cared if the stock had a low P/E ratio… whether the company had the next great biotech drug… or was run by a terrific management team.

To us, stocks merely represented three or four letter symbols. That’s it. In some cases, I didn’t even know the names of the companies and couldn’t have told you much about their businesses.

Sounds a bit clinical, doesn’t it?

It was. And it served me well. I learned that you shouldn’t get emotional about stocks. They’re simply investment vehicles in which to park your money. Granted, you can be in a stock for five minutes or 20 years, but you should never form a relationship with them.

As Robert De Niro’s character said in the movie, “Heat”: “Don’t allow yourself to get attached to anything you cannot walk away from in 30 seconds flat if you feel the heat around the corner.”

Think about it. Many of us have owned a favorite stock – perhaps for years. Oftentimes, the longer you hold it, the more difficult it can become to sell it – even when you know you should.

We form an emotional attachment to the business that often has nothing to do with how the stock is performing – or how much money we’re losing from it.

This can be an issue, particularly in the biotech and health care spaces …

It’s Easy to Form Emotional Attachments to Early-Stage Companies

One of the key price catalysts for a biotech or health care company is when a medical advancement is made. For example, a new cancer drug is approved, a company sees strong clinical trial results, etc.

Not only are we happy that our investment is worth more, but we also feel good about being involved with a company that saves lives or alleviates suffering.

For that reason, some investors form particularly emotional relationships with early-stage companies that show great promise.

In The Xcelerated Profits Report, I recommended Medivation (Nasdaq: MDVN). The company is currently developing one of the most promising drugs to combat Alzheimer’s Disease – Dimebon.

When I made the recommendation in August 2007, I believed Dimebon would work and that the potential reward was worth the risk. Aside from the human issues surrounding Alzheimer’s, it was strictly a financial decision. And if the drug is successful or not, the decision to recommend selling the shares will be made for financial decisions only.

You Must Separate Emotion From Reality

That said, I’ll be terribly disappointed if the drug is a dud. Not only for my subscribers, but also for millions of Alzheimer’s patients and their families. The disease runs in my family, so it’s especially personal.

However, I won’t let those emotions get in the way of taking a profit or cutting a loss. If it doesn’t work I’m not going to hang on to hope, looking for some morsel of data that justifies holding onto the stock. The bottom line is that if the drug isn’t proven to be safe and effective, I don’t want to own the stock anymore.

Biotech investors often tell me that they can’t/won’t sell a stock because they’ve become emotionally invested, as well as financially. This isn’t surprising -dreams of riches and a better world are wrapped up in these tiny companies.

But you simply cannot allow that to happen, otherwise you risk taking a double hit if things don’t pan out in your favor.

So how can you remove emotion from the equation if you’re not using a stop? Fight emotion with emotion.

Three Ways to Take the Emotions Out of Your Investment Decisions

#1: Write Down Your Reasons:

When you buy a stock, write down the reasons why you’d sell and post it somewhere near your computer. Perhaps it’s when the stock hits a certain price, or when news on a particular drug comes out.

Whatever the reason is, write it down on paper and stick it in a visible place. That way, when your catalyst hits, it will be tougher for you to justify to yourself why you’re going against your original idea.

#2: Phone a Friend:

This doesn’t just work for “Who Wants to Be a Millionaire.” Telling a friend or family member your reasons for selling a stock is even better than writing the reasons down for yourself.

After all, you’ll face some serious peer pressure if you suddenly change your mind and refuse to take profits or cut a loss. Outsiders aren’t as emotionally involved as you because it’s not their money on the line, so they should be able to make you see that your original reasons are still right.

#3: Conduct an Annual Portfolio Review:

Review your portfolio at least once a year. Take a look at every stock and ask yourself why you’re still holding it. If your answer sounds more like a justification than a legitimate reason, dump it.

Any time there is money involved, emotions run high. Of course, it’s easier to get less attached to stocks in other sectors. For example, many investors have no problem letting industrial stocks go when their trailing stops are triggered.

But it’s your job to remove as much of it as you can and focus on decisions that will benefit your portfolio.

Marc Lichtenfeld

Source: Three Ways to Stop Making Emotional Investment Decisions

I’m not someone who needs a pat on the back to feel good about my work.. However, even I’ll admit it’s nice to have my judgment validated – especially when it comes from a well-respected source like Barron’s.

That’s what happened last Saturday when the 88-year publication published a story about the small-cap healthcare stock Electro-Optical Sciences (Nasdaq: MELA). As a result, shares soared 19% on Monday.

What’s more, the author, Neil Martin, expects the stock to tack on an additional 50%, as the company’s melanoma detection device is expected to gain FDA approval and become a big hit with physicians and patients.

I couldn’t agree more. In fact, I came to the same conclusion about 18 months ago when I first recommended the stock to subscribers of my small-cap healthcare service Access. Most subscribers got in at $5.50 or below. Some even reported buying in the $3 range.

Today, the stock is trading around $9.50.

Question is: How do you find these small-cap winners – particularly in the minefield-laden healthcare and biotech sectors? Here’s the tried-and-tested method I use…

Unearthing Small-Cap Healthcare Stocks Isn’t Easy…

Unearthing mega winning small-cap healthcare stocks isn’t easy. It’s certainly not a case of just looking at a chart or some magical signal that tells me it’s time to get in. For me, it’s a multi-level process that is fairly time-intensive.

You see, I learned how to analyze stocks from two of the greatest contrarian analysts on Wall Street. Guys who demanded the best and didn’t accept anything less.

First, I had to pass rigorous exams. Then it was trial by fire. I had to sell my idea to my boss before I was even allowed to begin conducting formal research on company time.

If it wasn’t sufficiently contrarian or well below Wall Street’s radar, he’d shoot me down.

And believe me, I was shot down more times than a drunken frat boy in a room full of supermodels.

But the rejection served me well. It forced me to create a stock research methodology that would not only satisfy my boss, but also prove profitable for folks who took my advice. It’s the same process I use today to pick stocks for Access and The Xcelerated Profits Report.

It’s called the F.I.R.S.T. system. Here’s how it works…

Breaking Down the 5-Step Process of the F.I.R.S.T. System

F.I.R.S.T. is an acronym for a five-step process that ensures I cover absolutely everything before I get a recommendation out to the public.

• Financials: This is the first step. I check everything from how much cash a company has at the moment, to how much it will need in order to fund its pipeline products and operations. Before a company is even worthy of making it to the next steps, it has to pass my financial model, which estimates revenue, earnings, market size, market share, margins and a host of other variables to determine whether the potential growth will be good enough.
• Interviews: If the numbers tell me it’s a good opportunity, I move onto the interview phase. But I don’t just talk to the company’s CEO and CFO, I talk to doctors who are using the product, plus others who aren’t. I get on the phone with specialists in the field, independent experts, the warehouse foreman – anyone who can give me on-the-ground insight into the company’s performance and prospects.
• Research: If I still like what I hear, then I dig into the hardcore step – roll up your sleeves, burn the midnight oil research. I read scientific papers, journals, news articles and even blogs to establish whether the company’s products will be successful.
• Safety: Both from an investment and human interest standpoint, this is the most important step. Drug/device safety is critical. Even when drugs have successfully treated diseases, I’ve seen the FDA reject them because they couldn’t be proved safe enough. The FDA is very conservative right now and we don’t want to be in any positions where there is even a question of safety, no matter how well the drug works.
• Timing: From an investment perspective, once I know that I like a company, all that remains is a reason to invest now. I search for the catalysts that will move the stock in the next six to 12 months. At the moment, I’ve got plenty of companies on the backburner because even though I like them, investing in the shares now would be dead money for another year.

A Deeply Contrarian Investing Approach Is Critical

As I noted above, my investing experience is rooted in a deeply contrarian approach. Finding stocks that you won’t hear about anywhere else is a critical aspect of my stockpicking methodology.

For example, virtually no one was talking about MELA last year. I’ve recommended several other stocks that are also practically unknown to Wall Street. This includes a swine flu play, a bioterror therapeutic stock and two little device companies that are poised to take market share from the big boys – which should result in significant earnings growth or a buyout (or perhaps both).

When it comes to investing in small-cap stocks, conducting thorough research becomes even more critical. You really need to roll up your sleeves and put in the work because in most cases, you won’t read about them in Barron’s, see them on CNBC, or hear about them from an analyst until much later in the company’s development. And by the time everyone else notices them, we’re already sitting on nice gains.

Good investing,

Marc Lichtenfeld

Source: How to Unearth Explosive Small-Cap HealthCare Stocks

If you’ve read my columns here or in our monthly Xcelerated Profits Report newsletter, you know that I focus on the small-cap space – both in my specialist areas of healthcare and biotech and other sectors, too.

Typically, these small-cap stocks are ripe for big gains more so than income through dividends. But I’m actually a big fan of dividends, too.

So what if there were a way to load your portfolio with outstanding profit potential and generate income, too? There is – and I’ve got three stocks below that can do the job…

Digging For Dividends

I’m not a market timer so I’m not going to tell you that now is the time to get out of equities before the market turns lower.

But what I will say is that with the Nasdaq and Russell 2000 (small-cap) indexes having blasted off their lows by 58% and 67% respectively, it makes sense to get a bit more defensive.

The reason is two-fold – and very simple: Owning dividend-paying stocks generates income and improves a portfolio’s return over the long-term.

However, it’s hard to find good small-cap companies that pay dividends. Smaller companies usually pour any excess cash back into the business to help it grow, rather than distributing it back to shareholders.

In fact, of more than 7,400 stocks with market caps under $1 billion, only 1,356 pay dividends. And if you want a meaningful dividend yield – let’s say 3% – the number decreases to less than 800.

I further whittled down the list to companies with high current ratios, low debt, and profit expectations to help ensure that dividends would continue to get paid.

I also stayed away from companies that paid a very high dividend. Companies with yields approaching 10% or higher may find those payouts unsustainable if business continues to be difficult.

Yes, if you want a higher potential reward, you do need to take on more risk. But buying stocks with sky-high dividends is riskier than those with solid but more sensible yields.

Here are three of the best from my small-cap dividend stock screen…

A Trio Of Small-Cap Dividend Stocks

• WD-40 Company (Nasdaq: WDFC): The company makes everyone’s favorite industrial lubricant – WD-40 – plus household cleaners and other products. Through the first nine months of its fiscal year, it generated $18 million in profits and boasts $36 million in cash versus $21 million in debt. Earnings per share are expected to grow 13% in fiscal 2010.Current dividend yield: 3.4%

• American Ecology Corporation (Nasdaq: ECOL): The firm handles America’s hazardous waste. Not a great business if you’re the guy with the rubber gloves moving barrels of the stuff. But not bad if you’re an investor – particularly a new one, given that the shares have endured a beating over the past year.ECOL is profitable, has $24 million in cash and no debt. Over the first six months of 2009, it generated $17 million in cash from operations. So far it has paid out over $6 million in the form of dividends.Current dividend yield: 4%
• CDI Corporation (NYSE: CDI): The company provides engineering and information technology staffing services. With so many businesses cutting jobs, it’s had a tough time over the past year. But it’s still profitable, with earnings per share expected to nearly double next year. It has $77 million in cash, no debt and generated $10 million in cash from operations.Current dividend yield 3.6%.

If you have any small-caps paying dividends in your portfolio, use the “Comments” link below to let me know which ones are your favorites and I’ll run a follow-up column, featuring stocks sent in by readers. Be sure to tell me why you like the stocks, too.

Hoping your longs go up and your shorts go down.

Source: How To Grab Growth And Solid Income From The Small-Cap Sector

If you’re a regular reader of my columns, that won’t come as a surprise to you. And I’m not alone in that camp either. Analysts, strategists and investment directors all over Wall Street have been hesitant to put new capital into the markets.

For example, one hedge fund manager told me that he just can’t buy stocks at these levels – despite complaints from his partners who expect him to be fully invested.

And a technical analyst friend reports that the vast majority of his institutional clients are bearish.

And why not? We’re still hemorrhaging jobs… housing still stinks… and U.S. retail and food sales plummeted 9% in June, compared with June 2008.

But the market keeps going up.

This is what is known as climbing the wall of worry. Let me explain what this means – and what it means for us when it comes to investing…

Bulls vs. Bears In A “Pistols At Dawn” Showdown

The wall of worry is when stock prices climb, despite investor sentiment being negative and there being more reasons for them to fall than rise.

Sound familiar? It’s what we’ve got at the moment.

For example, the most recent Bull/Bear ratio among advisory services was 1.03. That means for every 1 bear there is 1.03 bulls. The average over the past 39 years is 1.73, so the current reading is rather bearish.

In fact, the American Association of Individual Investors’ (AAII) survey has turned up more bears than bulls for weeks. It was only this week that bulls outnumbered bears for the first time since June.

And the media certainly isn’t in a rush to report any good news…

Who’s Afraid Of The Big, Bad Market?

If there’s one thing the mainstream financial media does perfectly, it’s hyping news to the point where they make you scared. And they’d love to keep it that way, too. After all, if you’re scared, you’ll tune in to get additional information.

Don’t listen to ‘em. The best time to get into stocks is when things are at their worst. Because by the time they get better and the masses pile back into stocks, the majority of the gains have already been realized.

So with all that negative sentiment, does that mean you should chase this rally?

Don’t Try To Run After This Erratic Market

Take off your running shoes – don’t chase this rally.

The investment seas are still rough and we’re likely to see them get rougher.

For example, commercial real estate is a disaster. There are still financial institutions that are teetering. We have industrial overcapacity. We’re still seeing heavy job losses, too. And even many of the folks who manage to find work after layoffs are making significantly less than in their previous jobs.

Remember how bad things seemed just a few short months ago? I don’t know if we’ll get back to those depths of despair. I certainly hope not. But I do expect stocks to fall and investor sentiment to deteriorate.

And just when it seems as if things can’t get worse, another sensational buying opportunity will present itself.

Marc Lichtenfeld

Source: Why You Shouldn’t Chase the Current Stock Market Rally

Just because a company like Caterpillar crushes its estimates, it doesn’t mean the business is humming along. It just means they beat the estimate.

That said, at a time like this, it’s important to figure out why the earnings come in better than expected. Were sales higher than forecast? Did margins improve? Was it due to a lower tax rate? Lower general and administrative costs (layoffs)?

There are a number of reasons why a company might spring a surprise. Let’s take a look at a few that recently reported stronger than expected earnings and see if we can figure out why it happened…

Yahoo! (Or Not)

On Tuesday, Yahoo! (Nasdaq: YHOO) doubled up on analysts’ estimates, notching earnings per share of 16 cents, versus expectations of 8 cents. That was on a non-GAAP (Generally Accepted Accounting Practices) basis, though. Using GAAP, the company earned 10 cents per share – a penny more than in the same period last year.

Behind the flashy headline numbers, Yahoo actually experienced a 13% decline in sales. It offset that with a $120 million decrease in sales and marketing expenses and $50 million less in general and administrative expenses (most likely due to layoffs).

In addition, the company’s gross and operating margins were both lower than the corresponding earnings period in 2008. So while Yahoo did beat its estimates – and even earned more per share than it did last year – it was all due to cost-cutting and firing employees.

Starbucks Brews Up Earnings… But Are They Real?

Despite a revenue decline of 6.6% during its fiscal third quarter, as all-important same store sales dropped by 5%, Starbucks (Nasdaq: SBUX) was still able to post a profit of $151 million or 20 cents per share. That beat EPS estimates by a penny and compared to a loss of $6.7 million during the same period a year ago.

To its credit, management was able to shave operating costs at company-owned stores from 42.1% of revenue to 41.9%. But the big change to this quarter’s income statement was the roughly $175 million in cost-saving, mainly by closing stores.

It took $51.6 million in restructuring charges this quarter, versus $167.7 million a year ago.

Starbucks also had an additional $33 million benefit, due to lower interest expenses, higher interest income, plus other items when compared to last year.

But even though the company swung to profitability, a quick comparison of this quarter’s numbers versus the same data from a year earlier shows that the real story behind the profitability was because of savings from closed stores.

Still, that’s not necessarily a bad thing. Starbucks did need to cut back ( as long as they dont cut the one by my office). And if the company can show increased profitability from existing (and any new) stores in the future, then its cost-cutting moves will prove fruitful.

Right now, though, a look at Starbucks’ numbers tells us that its recovery is still early in its development. Too early, in my opinion, to make for an attractive investment.

Delta Air Lines: A Tale Of Lower Revenues And Poor Traders

Here’s another example of how the mainstream media can mislead.

Some outlets reported that Delta Air Lines’ (NYSE: DAL) revenue shot up by 27%. But some journalists didn’t take the company’s acquisition of Northwest into account. Their combined revenue actually fell by 23%.

In addition, while Delta did report better than expected numbers, losing 24 cents per share, 5 cents better than consensus estimates, it would have turned a profit if not for losses suffered when trying to hedge fuel costs.

So in Delta’s case, the airline was actually operating in the black, despite lower revenues. That was until some traders got involved and bet the wrong way on fuel prices.

I don’t love the airline business, but if Delta can show me another quarter where it manages its business efficiently, it could be an interesting recovery play. Assuming some oil traders don’t mess things up, of course.

Clearly, this is just a quick look at these companies’ earnings reports. But even then, it reveals more information than the headline numbers you see reported in the press. Unless you drill into those numbers, they can be pretty much meaningless.

Hoping your longs go up and your shorts go down.

Source:  A Trio Of Twisted Numbers… And How To Get Beyond The Fluff

That quickly turned to mania, as the media went nuts over it and fans clamored to pay their respects by buying tons of Michael Jackson merchandise. And MJ fever shows no signs of being ready to “Beat It.”

As demand for all things Michael has spiked, there’s are no doubt that many suppliers are willing to meet it. From vendors outside the Staples Center selling cheesy souvenirs, to multi-billlion dollar corporations, there are several beneficiaries of massive spending on Jackson’s music and memorabilia.

While I’m not suggesting you should unscrupulously profit from his demise, it’s a fact that some companies are enjoying a boom in Michael Jackson-related business. Here are four of them…

Four Companies At The Center Of The Michael Jackson Story

• eBay (Nasdaq: EBAY): As soon as tickets to the memorial were released, they predictably went on sale on eBay for thousands of dollars.

A search for “Michael Jackson” on eBay yielded 47,611 results, including an autographed photo for $3,200, a sealed version of “Thriller” for $1,200 and even this $1 million bill with Jackson’s face on it. And people say the Federal Reserve has recklessly printed money!

• Amazon.com (Nasdaq: AMZN) – If it’s for sale, chances are Amazon sells it. You can download the mp3 of “Thriller” for $1.29, purchase a “Michael Jackson Superstar of the 80s” outfit doll for about $1,000, or the Michael Jackson $1 million novelty notes above for $0.99 each (or 100 for $30). At that price, you can’t afford to be without your fake Michael Jackson currency.

• Sony (NYSE: SNE): Michael Jackson’s record label was Epic Records, part of Sony Entertainment. He’s sold half a million albums since his death, compared with 10,000 the week before he died. You can be sure Sony will try to capitalize on his newfound popularity with some greatest hits albums in the near future.

• Time Warner (NYSE: TWX): With the vast amount of media coverage that the story is attracting, detailing every morsel of Jackson’s life and death, one outlet is emerging from the hungry pack.

Already a well-established site for entertainment news, celebrity gossip and video, the death of the greatest entertainer since Elvis has launched TMZ.com into the stratosphere. Mainstream outlets like CNN and Fox credited TMZ with breaking the story of Jackson’s death.

TMZ is a joint venture between two TWX divisions, AOL and Telepictures Productions. Anyone looking for this type of news now has to consider TMZ the go-to website. And over the past three months, page views have jumped more than 26%, in large part due to the spike in Michael Jackson traffic just in the past few weeks.

In short, while it might be difficult to play this news directly, companies with exposure to Michael Jackson’s popularity could see a bump in revenue.

Hoping your longs go up and your shorts go down.

Marc Lichtenfeld

Source: How the Michael Jackson Story Impacts Investors

Given that home ownership is a cornerstone in almost every wealth-building plan, this is astonishing.

Even if the days of selling a house for an enormous profit are over, building equity in a home beats the pants off paying rent.

Of course, ownership is not always better than renting, but in most cases, it still is. And even if home prices are flat, building a little bit of equity makes it worth the cost of ownership, especially when you add in the tax breaks associated with owning a home.

Trouble is, some of the statistics are frightening:

• One-third of those surveyed don’t believe they’ll ever be able to afford a home.

• Forty-two percent of those who once purchased a home, but no longer own it, don’t think they’ll ever be able to afford to buy another one.

Recently, Karim Rahemtulla detailed the problem that the large number of short-sales are causing in the real estate market. Today, I’m going to give a couple of tips to both house-hunters looking for bargains and investors looking to “buy on fear.”

Buying Property With “Blood in the Streets”

There’s an old Wall Street axiom that says you should “buy when there’s blood in the streets.” And throughout the real estate market, there is clearly blood in the streets.

In some markets like in Oakland, California – where prices have dropped 32% in the past year and 75% of first quarter home sales were distressed sales – there’s not only blood in the streets, there’s a virtual river of the stuff flowing down Broadway & 17th St.

But if you’re considering buying a property – either as a primary residence, investment property, or vacation home – now is probably a good time to start looking. Desirable vacation and retirement spots such as Southern California, Miami and Naples, Florida, Phoenix, Arizona and Las Vegas, Nevada have suffered a particularly bad beating and likely contain many desperate sellers and foreclosed properties.

And even in markets that have held up relatively well compared with the rest of the nation, you can likely find some bargains…

Use Homeowner Desperation to Your Advantage

Take Asheville, North Carolina, for example…

The average sales price of a home there is only off by about 15% from the peak, but homes are now sitting on the market for an average of 144 days, up from 94 days. The number of houses sold in 2009 is down by one-third from last year.

Even Austin, Texas, which has weathered the real estate storm better than most, has seen the average price of a single-family home decline by just 3% from a year ago, but volume has slipped 25%.

As Karim suggested on Tuesday, the best strategy may be to find a desperate seller who is forced to compete with short-sales and the foreclosures. Plus, you’re likely to get the deal wrapped up in a much more timely fashion than if you’re dealing with the banks’ lawyers. Sure, you may find bargains on foreclosed properties and short-sales, but the process will take much longer.

For those of you not looking to buy a house but still like the idea of buying fear, consider this option…

Go Contrarian on Commercial Real Estate

Many experts believe commercial real estate will be the next big shoe to drop. And my colleague David Fessler, recently published some alarming statistics about it. Take a look:

• During the first quarter, businesses vacated 8.7 million square feet of retail space. Not only was that a 10-year high, it compares with 8.6 million square feet vacated for all of 2008.

• Vacancy rates at regional malls, strip malls and neighborhood centers are increasing at the highest rate in 30 years.

But if you’re looking for an uber-contrarian way to play this commercial real estate trend, consider REITs (Real Estate Investment Trusts) that specialize in commercial property.

Take a look at Kilroy Realty Corp. (NYSE: KRC). Founded in 1947, it develops and manages office and commercial property in Southern California – one of the hardest hit markets in the country.

The firm just cut its dividend to $1.40 per year, but that still equates to a beefy 7% yield. It’s cash flow positive and has a healthy return-on-equity.

Currently trading at just under $20 per share, it’s down considerably from its high of $88 back in February 2007.

And while it’s not always easy to buy when everyone else is selling, history has proven time and again that it is precisely those who are able to buy in scary times are the ones who make that make the most money.

Hoping your longs go up and your shorts go down.

Good investing,

Marc Lichtenfeld

Source: How to ‘Buy on Fear’ in Real Estate

Given that home ownership is a cornerstone in almost every wealth-building plan, this is astonishing. Even if the days of selling a house for an enormous profit are over, building equity in a home beats the pants off paying rent.

Of course, home ownership is not always better than renting, but in most cases, it still is. And even if home prices are flat, building a little bit of equity makes it worth the cost of ownership, especially when you add in the tax breaks associated with owning a home.

Home Ownership Statistics Are Disconcerting

Trouble is, some of the statistics about home ownership are frightening:

• One-third of those surveyed don’t believe they’ll ever be able to afford a home.

• 42% of those who once purchased a home, but no longer own it, don’t think they’ll ever be able to afford to buy another one.

In Tuesday’s column, Karim Rahemtulla detailed the problem that the large number of short-sales are causing in the housing market.

Today, I’m going to give a couple of tips to both house-hunters looking for bargains and investors looking to “buy on fear.”

Real Estate – Buying When There’s Blood in The Streets

There’s an old Wall Street axiom that says you should “buy when there’s blood in the streets.” And throughout the real estate market, there is clearly blood in the streets.

In some markets like in Oakland, California, where prices have dropped 32% in the past year and 75% of first quarter home sales were distressed sales, there’s not only blood in the streets, there’s a virtual river of the stuff flowing down Broadway & 17^th St.

But if you’re considering buying a property – either as a primary residence, investment property, or vacation home – now is probably a good time to start looking. Desirable vacation and retirement spots such as Southern California, Miami and Naples, Florida, Phoenix, Arizona, and Las Vegas, Nevada have suffered a particularly bad beating and likely contain many desperate sellers and foreclosed properties.

And even in markets that have held up relatively well compared with the rest of the nation, you can likely find some bargains…

Home Ownership: Use Desperation To Your Advantage

Take Asheville, North Carolina, for example…

The average sales price of a home there is only off by about 15% from the peak, but homes are now sitting on the market for an average of 144 days, up from 94 days. The number of houses sold in 2009 is down by one-third from last year.

Even Austin, Texas, which has weathered the real estate storm better than most, has seen the average price of a single-family home decline by just 3% from a year ago, but volume has slipped 25%.

As Karim suggested on Tuesday, the best strategy may be to find a desperate seller who is forced to compete with short-sales and the foreclosures. Plus, you’re likely to get the deal wrapped up in a much more timely fashion than if you’re dealing with the banks’ lawyers. Sure, you may find bargains on foreclosed properties and short-sales, but the process will take much longer.

For those of you not looking to buy a house but still like the idea of buying fear, consider this option…

Go Contrarian On Commercial Real Estate

Many experts believe commercial real estate will be the next big shoe to drop. And my colleague at Investment U, Dave Fessler, recently published some alarming statistics about the upcoming commercial real estate fallout. Take a look:

• During the first quarter, businesses vacated 8.7 million square feet of retail space. Not only was that a 10-year high, it compares with 8.6 million square feet vacated for all of 2008.

• Vacancy rates at regional malls, strip malls, and neighborhood centers are increasing at the highest rate in 30 years.

But if you’re looking for an uber-contrarian way to play this commercial real estate trend, consider REITs (Real Estate Investment Trusts) that specialize in commercial property.

Take a look at Kilroy Realty Corp. (NYSE: KRC). Founded in 1947, it develops and manages office and commercial property in Southern California – one of the hardest hit markets in the country.

The firm just cut its dividend to $1.40 per year, but that still equates to a beefy 6.9% yield. It’s cash flow positive and has a healthy return-on-equity.

Currently trading around $21 per share, it’s down considerably from its high of $88 back in February 2007.

And while it’s not always easy to buy when everyone else is selling, history has proven time and again that it is precisely those who are able to buy in scary times are the ones who make that make the most money.

Hoping your longs go up and your shorts go down.

Marc Lichtenfeld

Source: Do You Have the Courage to Buy into this Housing Market?