But sometimes, we make exceptions – especially when their over-zealous attitude causes a stock to blast higher and hand us triple-digit gains.

I remember one such occurrence in particular with a high-tech company that we own in our Xclerated Profits Report portfolio. Thanks to some giddy CNBC analysts pumping up the price, the stock surged from $6 to $20 and we took half our position off the table for a gain of more than 100%.

The small-cap stock has suffered along with the broader market, but there’s no doubt that its business is viable. It’s leading the way in the field of touch screen and force-feedback technology – otherwise known as “haptics.” In short, this simplifies and enhances human interaction with technology in a variety of ways.

Cellphones… Games… Cars… Healthcare… This Technology is Everywhere

You’ve probably used the company’s tactile feedback technology and don’t even know it.

• For example, its technology is what causes cellphones to vibrate when they ring, or you get a message. And the company has licensed the technology to major firms like Nokia (NYSE:NOK), Samsung, Motorola (NYSE:MOT), and LG.
• It’s also present in video games, which gives gamers a more interactive, realistic experience, as the action on the screen is “forced” back into the controller.
• Elsewhere, it’s used in the auto industry in dashboard instruments, the casino industry in gaming machines, and the medical industry, in helping to train surgeons and doctors by replicating the behavior of the human body.

The company holds hundreds of patents and it recently signed a deal with a major chip company, a move that an influential analyst called a “game changer.”

In short, we spotted the vast potential well before Wall Street and we’re looking for another triple-digit win on the stock. And if that happens, we’ll adopt the same practice that we always do – one that you should use in your own investing…

The Name of the Game is Profits

We have a hard and fast rule at the Xcelerated Profits Report: We don’t discriminate when it comes to profits. That means if we have a winner of 100%-plus, we take our money off the table. This is true for stocks or options.

We did this last week when we sold half our shares in the gold company Golden Star Resources (NYSE: GSS) for a cool 103% gain in just a couple of months. But what makes this trade even sweeter is that we bought the shares using the proceeds from call options that we sold on another gold stock we’ve owned for a while – Yamana Gold (NYSE: AUY).

Come options expiration in January, if Yamana is trading above $6.75 per share or thereabouts (it’s currently close to $11), we’ll have essentially bought the shares of GSS for nothing.

And speaking of gold, I’ve made another play in the upcoming October Xcelerated Profits Report issue, due out at the end of this week. But it’s a play with a twist – we’re taking a “show me” stance on gold prices, arguing that gold is either going to soar or plunge from current levels. What’s more, we’ll make it do so for about $3. If you’re looking for exposure to gold, or to hedge against a price drop, you don’t want to miss it.

The bottom line is that we don’t just make picks. We take our ideas and then figure out how to turn them into “xcelerated” profits by using straightforward investment strategies that many other investors don’t know about. We teach, then we trade.

Good investing,

Karim Rahemtulla

Source: How to Turn Ordinary Profits into ‘Xcelerated’ Profits

After the Commerce Department reported last week that retail sales fell 0.1% in July from June, and 8.3% year-over-year, retailers will stay in the limelight this week as several high-profile companies report second-quarter earnings. Target Corp. (NYSE: TGT), Limited Brands Inc. (NYSE: LTD), and Gap Stores (NYSE: GPS) are among the big-name retailers set to report.

Meanwhile, the Hewlett-Packard Co’s (NYSE: HPQ) report will provide a further glimpse into the world of technology, and The Home Depot Co.’s (NYSE: HD) results will confirm or counter claims that the recent housing rebound is for real.  On that note, the upcoming economic releases include July housing starts and existing home sales, while the wholesale inflation gauge may show that price pressures are not yet creeping into the producers’ side of the equation either.

Market Matters

While many more bearish analysts continue to proclaim “gloom and doom” and a drop back to the March-lows in equities, at least one noted naysayer may have shifted to the other team.  Hedge fund manager John Paulson purchased over $165 million shares of Bank of America Corp. (NYSE: BAC) to become the banking giant’s fourth largest shareholder.  Paulson was among the select few who predicted the subprime debacle, so his allocation into financials may be interpreted as a nice vote of confidence from an unexpected source.

Meanwhile, the U.S. Federal Reserve made a few bold moves to promote its case for recovery as well.  Following the policy meeting, Federal Reserve Chairman Ben S. Bernanke announced his intent to cease the program of buying up to $300 billion of Treasuries in October, as a major economic lifeline may have served its purpose well.  Additionally, banks have scaled back borrowing from the Fed’s emergency short-term lending facility, a sign that the frozen credit markets have thawed considerably.

Finally, the Car Allowance Rebate System (CARS), popularly known as “Cash for Clunkers,” was expanded, allowing car buyers to receive vouchers for future purchases as automakers report dwindling inventories.

Retailers took center stage in the earnings game as Wal-Mart Stores Inc. (NYSE: WMT) and Kohl’s Corp. (KSS) beat expectations, but still offered cautious projections for the months ahead (including the upcoming holiday season).  Macy’s Inc. (NYSE: M) posted a declining profit, but gave an optimistic outlook, as it benefits from cost-cutting measures.  Liz Claiborne Inc. (NYSE: LIZ), on the other hand, reported a wider loss and new streamlining plans and J.C. Penney Co. (NYSE: JCP) issued some pessimistic comments about the state of the consumer.

Seemingly recession-proof McDonalds Corp. (NYSE: MCD) announced strong July same-store sales as its coffee drinks competed effectively with the “big boys.”  On the transactional front, China continued its expansion into the global commodities markets as China National Petroleum Corp. and CNOOC Ltd. (NYSE ADR: CEO) have eyes on the Argentinean unit of Repsol YPF SA’s (NYSE: REP) to the tune of $17 billion. Microsoft Corp. (NYSE: MSFT) and Nokia Corp. (NYSE ADR: NOK) are teaming up to take on PDA leader Research in Motion Ltd. (Nasdaq: RIMM) in an alliance that brings the popular software together with a solid cellular player.

Fixed income investors got a boost from a successful 30-year bond auction, as $75 billion in new Treasury securities were well-received during the week.  The Treasury also announced a plan to issue more TIPS (inflation-adjusted bonds), a move aimed at alleviating concerns in China (the largest foreign holder of U.S. debt) that the government would allow a surge in inflation as it tries to finance the stimulus plans.

Higher inflation would increase the yields on TIPS and result in greater costs for the government.  Bond prices fell mid-week after the Fed announced its intent to end its Treasury purchase program, though the auction news was a welcome relief and a late-week flight-to-quality also ensued.

Investors focused on the lackluster consumer activity – illustrated by both earnings and economic releases – and worried that economic growth will be stunted as long as shoppers remain in hibernation.

Despite favorable reviews by the Fed, major equity indexes gave up slight ground during the week with the Standard & Poor’s 500 Index and Nasdaq Composite Index still flirting with 1,000 and 2,000 respectively.

Economically Speaking

No rest for the weary (especially when auditioning to keep a job).  Fed Chief Bernanke guided the latest Fed policy meeting that saw strong signs (and language) pointing to the recession nearing an end.  The Fed claimed the economy is “leveling out” and felt the Treasury purchase program could go away with no material detriment to the nation’s financial system.

The accompanying statement also indicated that the funds rate would remain just above zero for “an extended period” as many anticipate the recovery will be slow to take hold.  Noted economists apparently have Bernanke’s back as a recent survey revealed that most prefer he remain on as Fed Chair for another four-year term and President Barack Obama should reappoint him based on his strong performance in righting the ship during the worst economic downturn since the Great Depression

Treasury Secretary Timothy F. Geithner shared some tough talk as he objected to certain concerns that major financial companies have not learned their lessons and the recent profits are indications of pre-crisis-like risk-taking.

The economic data of the week offered mixed signals as retail sales surprisingly declined in July despite the popularity of the “clunker” program, though continuous claims for unemployment benefits fell to the lowest level since April.

The anticipated rebirth of the consumer may be on hold for now as the Reuters/U. of Michigan sentiment index fell again and individuals continue to worry about the state of the job market.

While the trade deficit increased in June, exports climbed for the second consecutive month and manufacturers experienced increased demand for products like semiconductors and telecommunication devises.  Likewise, industrial production rose in July as the “new and improved” domestic automakers attempt to get back on track.

On another favorable note, inflation remains a non-issue as the consumer price index (CPI) was unchanged from June and prices have fallen by 2.1% over the past year.  On the global stage, the French and German economies posted surprising growth in the second quarter and, though the broader Eurozone countries continue to contract, the recovery is already taking hold in that region of the world.

Weekly Economic Calendar

Source: Will This Week’s Earnings Reports Reflect a Recovery or a Relapse for the U.S. Economy?

Source: Investment News Briefs Thursday, August 13, 2009

Bank of America Corp. (BAC), which reports today (Monday), remains among the last financials of note that has yet to announce its first-quarter performance, and the big bank figures to get a lot of attention as investors look to see how well Merrill Lynch & Co. Inc. (formerly known as “The Bull”) and Countrywide Financial Corp. have fit into the BofA family fold.

International Business Machines Corp. (IBM) (today) and Apple Inc. (AAPL) (Wednesday) will give investors a better idea of just how well the tech sector – which up to now has been quite hot – is really doing. Amazon.com Inc. (AMZN) (Thursday) will give investors an inside look at the health of the retail sector – especially the online variety.

Coca-Cola Inc. (KO), which reports tomorrow (Tuesday) and McDonalds Corp. (MCD) (Wednesday) should help us see whether consumers are so gassed that they can  even afford dollar sodas and burgers (or are buying more in lieu of dining at more-expensive restaurants).

Several economic reports will be worth a look, too. Home sales data for March highlight the economic calendar and analysts are eager to see whether February’s enhanced activity was the start of a trend or just an anomaly.  Interest rates are down; home prices are low, first-time buyers have tax incentives to buy.  Could the February and March numbers represent the start (continuation) of a housing rebound?  It’s going to happen at some point, and don’t forget that housing expert Andrew Waite, the publisher of the Personal Real Estate Investor magazine, recently told Money Morning that the recovery is already under way.

Market Matters

Strike up the band; let the good times roll; banks are making money again (or not losing quite as much). Earnings season moved along and financials led the charge with (somewhat) favorable reports.  Both Goldman Sachs Group Inc. (GS) and JP Morgan-Chase & Co. Inc. (JPM) announced better-than-expected quarters and key execs insisted they will pay back those TARP (Troubled Asset Relief Plan) dollars sooner than later.  While Goldman appears set to raise funds through a new stock offering (which will dilute current shareholders), JP Morgan insisted no similar issuance will be necessary.  With its $1.5 billion profit, Citigroup Inc. (C) looked quite promising relative to its $5 billion shortfall a year ago.  Still, some analysts claim the recent results reek of income-statement “shINTCenanigans” (and unsustainable bond trading gains), which is why they say that they will await the results of the independent stress tests in a few weeks, figuring that these  results will paint a more accurate picture of these banks’ operations.

Turning to techs, Intel Corp. (INTC) and Google Inc. (GOOG) reported stronger-than-anticipated quarters, but with caveats.  Despite claiming that the ailing computer industry may be “bottoming,” Intel refused to offer an outlook for the current quarter.  Google, on the other hand, enjoyed net-income growth, although the company experienced a decline in revenue (from the fourth-quarter 2008) for the first time in it five-year history as a public company.  While cell phone giant Nokia Inc. (ADR: NOK) suffered a drop in earnings, management reported optimistic signs of greater stability in the industry.  Conglomerate General Electric Co. (GE) posted a 35% decline in earnings, but still beat the Street outlook.  Airlines did not fare quite as well as both American Airlines parent AMR Corp. (AMR) and Southwest Airlines Co. (LUV) posted troubling losses, and warned of more turbulence to come.

In non-earnings news, The Procter & Gamble Co. (PG) bucked the recent cost-cutting trend and announced a dividend increase.  Mall owner General Growth Properties Inc. (GGP) filed for the biggest bankruptcy-protection case in the history of the real estate industry as the Chicago-based company attempts to restructure its debt positions, a move that underscores the concerns Money Morning recently raised as part of an investigation into the looming problems in the commercial real estate sector.

International Business Machines Corp. (IBM) moved beyond new Sun Microsystems Inc. (JAVA) overtures, claiming a reluctance to be drawn into a long antitrust battle.  Despite that failed deal, the boardrooms appear a bit more active these days as transactions highlighted the business news of the week.

American International Group Inc. (AIG) is selling its personal auto insurance line to Zurich Financial Services (OTC ADR: ZFSVY) for slightly less than $2 billion, the first of many such moves for the bailed-out insurer.

Express-Scripts Inc. (ESRX) will acquire WellPoint Inc. (WLP) for $4.68 billion to better compete with industry leader Medco Health Solutions Inc. (MHS) in the pharmaceutical-benefits-management space.

Rosetta Stone Inc., a language-education specialist, underwent an initial public stock offering (IPO) that reminded some of the “Go-Go” dot-com days as its stock soared about 40% on the first day of trading, the most successful offering in a year.

After five straight weeks of positive stock returns, U.S. stock experienced an early-week pullback, before charging ahead on the financials’ earnings reports.  “Six weeks and counting” have investors surmising that the rise may actually be more than a short-lived bear market rally (though the Nasdaq Composite Index remains the only key index in positive territory for the year).

Economically Speaking

Perhaps taking advice from spin-doctors, both U.S. President Barack Obama and Federal Reserve Chairman Ben S. Bernanke last week put a more optimistic (though realistic) face on the current state of the economy.

Said Bernanke: “Today’s economic conditions are difficult, but the foundations of our economy are strong, and we face no problems that cannot be overcome with insight, patience, and persistence.”

Said President Obama: “By no means are we out of the woods just yet, but from where we stand, for the very first time, we are beginning to see glimmers of hope.”

Additionally, the Fed Beige Book reported an ongoing contraction throughout the country, but implied that certain regions “saw signs that activity in some sectors was stabilizing at a low level”

President Obama also welcomed Cuba back into the global economy (to a limited degree) by lifting trade restrictions (telecommunications-related) and allowing increased travel and additional financial payments from Cuban-Americans to family members.

A hectic week on the economic calendar brought some mixed – and confusing – results, as usual. After a few stronger months of consumer activity, retailers struggled again in March as sales took a surprising tumble across most categories. Industrial production fell for the fifth straight month, revealing that manufacturers have a long way to go before declaring recovery.

On the other hand, while housing starts declined in March, the losses were attributed to apartment construction, and single-family residential activity was reported flat (similar to February); some optimistic analysts – like magazine publisher Waite – predicted the worst had ended for the housing sector.

Both the retail and wholesale inflation gauges dropped in March with the consumer price index (CPI) experiencing its first consecutive 12-month decline in prices since mid-1955.  While some pessimists in the bunch were quick to play the deflation card again, most seemed content to proclaim that price pressures are simply one aspect of the economy that warrants little to no worry in the present environment.

Weekly Economic Calendar

Source: Earnings Reports Will Play a Key Role This Week

This from Money Morning:

Research in Motion Ltd. (Nasdaq:RIMM) – maker of the ubiquitous BlackBerry – is likely to consolidate and increase its market share.

Almost all of our “Buy, Sell or Hold” recommended stocks started out on the right foot here in the New Year.  And our strategy of building up a position gradually up to year-end – to avoid the downward pressure of tax-loss selling, and other volatility – seems to have worked. This has left some cash on the sidelines to take advantage of any sell-offs that are sure to come in the first quarter.

In this environment, plagued with uncertainties, we are going to focus on companies that have bulletproof balance sheets (meaning they require no outside financing), enjoy a sustainable competitive advantage, regularly record high profit margins, and execute their strategies well.

The Waterloo, Ontario-based Research in Motion meets all of these requirements and pops up in our quantitative and qualitative screens prominently. And it helps a lot to have seen this Canadian company handily beat its third-quarter results.

RIMM has a solid, highly defensible franchise in its core market, the enterprise mobile phone segment. You see, the Blackberry line of smartphones has become the “must-have” gadget of managers in Corporate America. And not just because it’s a cool sign of corporate status – the phones are true productivity enhancers among corporate systems managers.

I called the experts just to verify this.  First, I queried a friend who runs systems for a Fortune 50 firm. For obvious reasons, my friend requested anonymity, both individually and for the company.

“If I had to implement a system now, the BlackBerry is the safest choice,” my friend explained.

And because the BlackBerry was specifically designed for this audience – a lucrative market segment – the device features many capabilities that just aren’t available in competing products. And if they are available, the features aren’t as well integrated into those rivaling devices.

To further buttress my research, I also called my good friend Brenda Lewis, a principal with the Greenwich, CT-based Transactions Marketing Inc., and a venture manager who has launched many mission-critical wireless businesses and who lives and breathes mobile phones.

Lewis is an independent thinker and isn’t “married” to any particular technology, and she was equally bullish: “RIMM has been innovative – ahead of IT officers’ requirements in security and in their ability to accommodate corporate applications.”

And not only did she confirm the technological edge and superior capabilities that the Blackberry platform has over the competition, she went on to elaborate on a market rumor that has been going around for some time – that Microsoft Corp. (Nasdaq:MSFT) will buy RIMM.

“The probability of Microsoft acquiring RIMM is exceptionally low,” Lewis said.

I am not sure I concur, since the Windows and Blackberry market shares would comprise a very small percentage of the overall market.  Earlier in 2008 the market shares were hit by:

“lack of personal discretionary income in most markets.”
She was right.

Subsequently, industry researcher Gartner Inc. (NYSE:IT) predicted that global sales of mobile phones would dip between 1.0% and 4.0% – even with 308 million mobile phones being shipped in the third quarter. Gartner’s forecast was consistent with a forecast by IT researcher IDC.  IDC predicted a drop of more than 2% globally, despite a 9.0% sales pickup in smartphones for 2009.

But even in a generally cautious environment for wireless devices, this pickup in smartphone sales bodes well for the rulers of the space: Apple Inc. (Nasdaq:AAPL) and Research in Motion. Apple had been outpacing RIMM in sales the quarter before, but RIMM’s launching of three new “must have” Blackberry models should pay some major dividends. The BlackBerry Storm – RIMM’s first touch-screen smartphone – is a direct counterpunch to Apple’s iPhone 3G, which allegedly poses some security risks that become problematic in the corporate environment.  And the Storm, together with the BlackBerry Storm 9000 and the BlackBerry Pearl Flip 8220 will probably propel RIMM as the major market share gainer in the market in the current quarter, as evidenced by the success of the Storm on Black Friday.

In fact, with this early success already well underway, RIMM projected a large increase in revenue this quarter, to as much as $3.3 to $3.5 billion.  Both Apple and RIMM trail mobile device king Nokia Corp. (NYSE ADR:NOK) in market share. With its focus on the consumer – and not the corporate – market, Nokia leads the world with a 40% market share in the smartphone market, followed by Apple with 17% and Research in Motion with 15%.  So the bottom line for both Apple and RIMM is that they will gain market share from Nokia and other makers in a smartphone market that is growing at a 9.0% annual clip.
Research in Motion is poised to do very well for the follow reasons:

• It’s selling into a market segment that’s continuing to grow at a hefty single-digit pace.
• It is technologically dominant in the big-spending corporate market.
• It stands to boost its market share in both the overall smartphone segment and in the corporate segment.
• It has three new models on the market in the BlackBerry Storm the BlackBerry Storm 9000 and the BlackBerry Pearl Flip 8220 – which should enable it to snag additional market share.

All in all, these factors and others should enable Research in Motion should do well in this quarter, and throughout this year in general – despite the negative developments in the global economy.

RIMM shares bottomed at about $36 on Dec. 3, the day it downgraded its outlook. It has rallied some 20% from that quick bottom and has since been repeatedly testing these levels.  At these levels, the stock is already back to the range out of which it started 2007 and proceeded to log in a 250% climb.

Research in Motion shares closed Friday at $41.92, and have traded as high as $148.13 in the past 52 weeks.

So with all the aforementioned competitive advantages, the stock correction that seems to have run its course and a valuation that results in the lowest PEG (Price/Earnings to Earnings Growth Rate) ratio among its comparable peers (Apple, Nokia and Microsoft), RIMM is a compelling buy.

Recommendation: Buy RIMM shares immediately. But don’t purchase your entire intended position all at once. Leave some firepower to buy a second block of shares during a strong pullback in the stock or in the general market – should one occur – or after the company reports results from the current quarter.

Source: Buy, Sell or Hold: Research in Motion is Poised to Dial up Profits

This from Smart Profits Report:

Congratulations… you’ve almost survived the most volatile stock market of our generation.

At least for 2008 anyway.

And if you’re asking yourself whether it’s time to buy stocks as the CBOE Volatility Index (VIX) is receding and valuations are at record lows, I offer this: Before jumping back in the water, be sure the sharks have fattened up and left the area. Forget “blood in the streets”… make sure there’s no “blood in the water.”

And amid the gloom and doom, I’m also going to offer up a more bullish, optimistic outlook: While the economic outlook remains very weak, the stock market is, after all, a market.

By that, I mean that the main factor that drives prices up or down is supply and demand (with a hearty dose of fear and greed tossed in for good measure, too, of course). So what do we really know about supply and demand? And more importantly, how can we profit from it?

Look Forward, Not Back

Let me put it this way: The view ahead is better than the one in the rear view mirror. In fact, even over the past week, we’ve seen many examples of how the lack of supply for stocks is driving prices higher – even in the face of terrible fundamental news.

The issues are worth noting, in order to keep the impact in context…

• On the political front, we’ve seen the bribery of government officials in an attempt to sell a decision-making seat in one of our top governing bodies.
• We’ve seen one of the most highly regarded hedge fund managers be exposed as a charlatan, wiping out individual and seasoned professional investors alike.
• On the economic front, we’ve seen massive job losses that were substantially worse than expectations – and while this is a backward looking indicator, economists are now talking about double-digit unemployment.
• The Federal Reserve has hacked interest rates to the lowest level ever in what seems like the latest in a series of desperate reactionary tools to stave off the expanding and increasingly ugly recession.

The current climate resembles a rugby scrum, with each new issue piling on top of other existing ones. And they throw up questions about the very stability of our investing framework.

But underneath the bad news, there is still some resilience…

So Much For Selling Pressure: These Two Stocks Reported Awful Bad News… And Investors Loved It!

For example, we’ve recently seen Texas Instruments (NYSE:TXN) and Nokia (NYSE:NOK) dramatically reduce their earnings estimates for the current quarter and offer a dour outlook for 2009.

Specifically, Texas Instruments expects revenues to slump by 26% to 32% sequentially. Yet investors “rewarded” the stock with a 5% boost the day after the announcement.

Nokia has reduced its guidance twice so far this quarter – once on the earnings call and again at its capital market day on December 4. Expectations for fourth-quarter handset shipments are now a negative 5%. And while the stock initially dropped by 3%, it’s up 6% since the latest reduction.

What does this say? To me, it’s clear that the downward pressure on stock prices that we’ve seen from forced selling is over. So is this just cause to get back in the investing saddle? Consider these three reasons…

Three Reasons To Resume Your Investing… But With A Caveat

• All three major stock indexes closed above their 50-day moving averages for two straight days – the first time that’s happened since August.
• There’s also a lack of selling pressure for tax-loss purposes.
• Dow Jones reports that 344 funds liquidated in the third quarter. That was the first time on record that more funds disappeared than launched. It also means that there’s likely to be less selling pressure ahead.

All three of these reasons for buying stocks are valid. But beware… with a potentially disastrous earnings season on the horizon and volume drying up as we head into the Christmas season, short sellers may take the opportunity to drive stocks back below their 50-day moving averages if for no other reason than a lack of buyers. Larger funds may also take the opportunity to reduce potentially volatile positions.

Corporate America’s New Tagline: Aim Low!

At this time of year, thoughts turn to the jolly fat man who represents gift-giving and good cheer. Question is: Will he hit Wall Street this year?

Investors are hoping for the oft-mentioned “Santa Claus Rally,” but in a thin market like this one, it’s easy to be shaken out of a 10% stop-loss simply due to increased volatility.

The next fundamental opportunity to invest will be after we have a feel for what first quarter corporate earnings will bring in terms of growth rates and profit levels.

The January earnings will provide management teams with the opportunity to reduce expectations to a point where they will be easily achievable. Once the bar is set low enough and investors are comfortable with growth rates, they will begin to take longer-term positions and the stock market will likely stop behaving like a casino.

If you prefer to look at the technicals, simply wait until the indexes prove they can hold their 50-day moving averages under increased volume – and be ready to sell if earnings season proves to be worse than we are currently expecting.

Source: As Wall Street Selling Pressure Eases, Three Reasons To Invest Cautiously

One of the world’s most highly watched phone manufacturers, Research in Motion (NASDAQ:RIMM), and its Blackberry lineup, is losing ground to competitors like Apple (NASDAQ:AAPL) and Nokia (NYSE:NOK). The proof is in the company’s latest earnings estimates.

Earlier today, RIMM drastically revised its fiscal third-quarter guidance. The company had forecast quarterly earnings per share in the range of $0.89 to $0.97, but today announced significantly lower expectations of just $0.81 to $0.83.

The company blames a slow economy and detrimental changes in exchange rates for the decline, but smart investors will look beneath this financial façade and realize Blackberry has some serious competition.

A Blackberry? That is so 2006

As the predominant first-entrant to the “business-class” phone market, RIMM enjoyed a strong leadership position. It had a recognizable brand and relied on its image to sell its products. But now that Apple has its powerful iPhone with features that blow away any Blackberry and Nokia’s just-introduced N97, RIMM is far from a dominating powerhouse.

In fact, it is merely another player in an overcrowded market. That means the company had better work on its basic business skills. If not, its investors are in trouble.

Ever since the Blackberry hit the market, RIMM’s less-than-stellar management team has had its share of tribulations. I cannot count the number of times the company’s email-delivering capabilities have been shut down. And the recent delay of its two latest models, the Bold and the Storm, only highlight this company has serious internal speed bumps.

Those problems were overlooked when competition was scarce and brand power was carrying the company. But now that the enemy is knocking down RIMM’s fort one brick at a time, the situation is far from attractive.

Right now, RIMM expects its sales to grow by 65%. That is a huge figure investors better not get used to. Just like every other mature company, eventually the days of single-digit growth creep in and profits stagnate.

For proof, just look at Google (NASDAQ:GOOG). The company has reached maturity and growth is incredibly hard to come by. Investors are feeling the pain as shares dropped from over $720 to less than $280 today.

Maturity is overrated

RIMM investors should expect the same. As each quarter of financial results hits the Street, investors are going to flee the company in larger and larger herds. While the rest of the market rebounds from this recession, RIMM will be a laggard.

If you want to make money in this industry, invest in Nokia. It has the best shot at beating its competitors and increasing its market share. Apple is appealing, but is far too brand dependent and directly linked to the consumer. The company’s best days are behind it.

The economy is evolving and repositioning. As it does, a whole new set of winners and losers will emerge. Brands that used to be powerful will crumble, taking unwitting investors with them.

Source: Research in Motion (NASDAQ:RIMM) disappoints once again

If you want to invest in video games there are, essentially, four ways to do it…

• Investing in video game publishers.
• Investing in video game retailers.
• Investing in companies that make video game consoles.
• Investing in companies that make video game accessories.

Game Publishers

These are the companies that make the games. And Electronic Arts Inc. (NASDAQ:ERTS) and Activision Blizzard (NASDAQ:ATVI) are the best bets right now.

Electronic Arts is the publisher of the popular Madden franchise, which gives it a consistent intake every year. Adding to its arsenal with a game like Spore will no doubt boost its bottom line even further.

Activision Blizzard is another strong contender. Guitar Hero has proven extremely popular, as has World of Warcraft. And while the new Call of Duty probably won’t sell as well as its hugely successful predecessor, Call of Duty 4, it will no doubt turn a respectable profit.

Avoid THQ Inc. (NASDAQ:THQI), which seems to have forgotten what games are and Take-Two Interactive (NASDAQ:TTWO), which is overly reliant on its controversial Grand Theft Auto series. Take-Two also had a good opportunity to be taken over by the much larger Elecrtonic Arts, but a deal never got done, which raises questions about the company’s management.

Accessories

As the unrivaled success of the Wii showed, innovation in video game accessories can pay off. For every console, as well as the PC, there are multiple games that can be enhanced by the use of a new input medium.

Games such as Guitar Hero, a game where you use a guitar shaped controller to play along with music, Flight Simulator X – the premiere flight simulator game is greatly enhanced by the use of a joystick, and the Dance Dance Revolution series, which features games that are best played with a dance pad, are always emerging on the market.

While, most of the accessories are made by the company of the game that requires them, there are external controllers that are always there competing for the market. Some companies that make these include MadCatz Interactive Inc. (AMEX:MCZ), a peripheral company specializing in mainly console accessories and Logitech International (NASDAQ:LOGI) a Swiss company that specializes in mostly in PC peripherals.

Retailers

While many electronics stores and retailers sell video games, there are some specifically designed to do so. The biggest of these in the world is GameStop Corp. (NYSE:GME). GameStop stocks new, used and old games, as well as multiple accessories and consoles. The largest video game retailer in Europe is GAME Group PLC (London:GMG). They operate similarly to GameStop.

Consoles

More than $9 billion was spent on video game consoles last year. Nintendo, Microsoft, and Sony all have new systems on the market, and they’ve all proved formidable.

[...] All of these companies are reasonably solid investments, but, in terms of gaming, Sony Corp. (NYSE:SNE) and Nintendo Co. (Pink Sheets:NTDOY) look like they are going to have some very good years.

Sony has got an amazing games division that is producing very high quality games for its console.  And Nintendo is always going to be in demand, though it needs to start making more games for the Wii and DS.

Microsoft Corp. (NASDAQ: MSFT), on the other hand, needs to acquire more exclusives, plus this report has nothing to do with the upcoming Windows 7, which is the biggest part of Microsoft’s business.

Hon Hai Precision Industry Co.

Hon Hai Precision Industry Co. (OTC: FXCNF) is a technology company based in Taiwan. It manufactures the Mac mini, the iPhone and the iPod for Apple Inc. (AAPL), cell phones for Nokia Corp. (NOK), and motherboards for Intel Corp. (INTC).

Of course, it also manufactures PS2, PS3, Xbox 360, and Wii – the four most popular gaming consoles – making it a tremendous play on the video game industry.

Emerging Markets: The Future of the Gaming Industry

The Middle East, China, India, Africa, and South America all have extreme pirating problems where video games are concerned. Thus, most companies have trouble expanding into these markets.

The Chinese market is a rapidly growing area for video games. However, the video games that the Chinese are enjoying are not what the West is enjoying. Chinese consumers love MMORPGs. While an average Western MMORPG, like Everquest for example, will reach 500,000 users. An AVERAGE Chinese MMORPG will attract well over 1,000,000 users very quickly.

Of World of Warcraft’s 10 million subscribers, 1.5 million live in China. Analysts estimate that the WoW Chinese market, alone, could eventually have 10 million users.

Most Chinese play MMORPGs in internet cafés (since most of them have limited Internet access). A large percentage of Chinese, however, do play free MMORPG’s. Free MMORPGs usually are completely free to play, but players can pay money to expand the gaming experience (bigger map to play on, more areas etc.) or improve their character (items, weapons character stats, etc.). While this doesn’t seem to like it would make a lot of money, it actually does, thanks to the addictive nature of most MMORPGs.

Some of the bigger names in the Chinese MMORPG market are Giant Interactive Group Inc. (NYSE:GA), Perfect World Co. Ltd. (Nasdaq:PWRD), Shanda Interactive Entertainment Ltd. (Nasdaq:SNDA), and The9 Ltd. (Nasdaq:NCTY).

Unfortunately, China is China. As such, the government always thinks of something ‘imaginative’ to do with the gaming market. The ‘Fatigue System’ is a means by which the government gets to control how long its citizens spend online playing games.

This system requests that games stop rewarding players after three hours of play in one day. Additionally, the system also requests an ID for players so as to be able to control their play more easily. While the system was originally meant for all gamers, it has been limited to gamers under the age of 18, due to the initial outcry it garnered.

China is also notorious for having the largest game sweatshop industry in the world. A game sweatshop is where a person is paid to play a game intensively and to make an extremely good character in it. That character is then sold to whomever wants it.

Chinese censorship is surprisingly low as the government only censors games that are anti-Chinese or portray Tibet and Taiwan as independent nations.

India’s market has yet to fully realize the potential of video games (putting the pirating aside). India is regularly compared to China in 2001. The online video games market is picking up but the overall market is still small. The few Indians who do game, do so like the Chinese: in Internet cafés. Unfortunately, there aren’t any enormous MMORPG makers (or equivalents) in India, yet.

The Middle East is generally also a pirating heaven though there are some legitimate shops usually selling games that haven’t been translated. Countries like Saudi Arabia also tend to ban certain games that are conceived as anti-Muslim.

If you wanted to invest in one of the Chinese MMORPG makers, the one that looks the best thanks to its pricing model and quality of games is Giant Interactive.

PS. This is an excerpt from a three-part guide to investing in the video game industry. For the complete version, please go to Money Morning’s archive pages.

Source: The Investor’s Guide to The Video Game Industry – Page 2

This from Money Morning:

Apple Inc. (Nasdaq: AAPL) used to rule its niche world and will continue to do so, with lots of room to grow.

As Coldplay’s “I used to rule the world…” played softly on the outside stereo speakers of my sailboat “Southern Cross” as my family and I pleasantly glided by Execution Rock on a gorgeous Sunday afternoon in the Long Island Sound, I could not stop myself from thinking how the song got there.  It was coming out of my daughters’ Apple iPod, interfacing with the boat’s new iPod-ready stereo system.  And I was wondering whether it was time to get into Apple’s stock.  Yes … even on a weekend sail.

Strong Results

A few days after my family’s sailboat outing, I saw that Apple had posted its strongest results ever. The Cupertino, Calif.-based company said that it’s launching its next generation of Apple computers at higher prices – justified, as usual, by the uniqueness and hard-earned “coolness” factor that’s inherent in Apple machines.

Additionally, Apple just got Best Buy Co. Inc. (NYSE: BBY) to start selling its popular Apple iPhone in its chain of Best Buy electronics stores. And with Apple currently sitting on a $25 billion cash hoard, and having no debt, the speculation now is that Apple will launch a huge stock buyback.  After all, given Apple’s uniqueness and innovation excellence, there is little out there that could complement the company and it has a history of eschewing acquisitions.

At Friday’s closing price of $98.24, Apple shares are down about 52% from their 12-month high of $202.96. The stock is trading at 20 times earnings, but with its consistent high earnings growth, the company’s Price/Earnings/Growth Rate (PEG) ratio is less than 1.0, meaning the shares are right now priced at bargain levels.

If those consistent, predictable earnings continue, this stock is an absolute steal. But that raises the question: Will those predictable earnings continue?

For now, at least, the company seems to have all its “ducks in a row.”

While Dell Inc. (Nasdaq: DELL) and other PC makers are suffering, Apple is on a roll.  The iPod continues to rule the MP3 player market and has given birth to an entirely new, higher-end, higher-margin product, the iPhone.  The iPhone – and to a lesser, but still-important extent, Apple computers – have each been a tremendous success.

In the last quarter, Apple sold nearly 7 million units, more than five times the number of phones than in the same quarter last year.  This points to major market share gains from the estimates as recent as May. For a look at these market-share estimates, let’s take a look at Chart I:

Chart I: Wireless Phone Market Shares (By Brand)

56% Symbian (primarily Nokia)
13% Windows Mobile
12% RIMM Blackberry
9% LINUX
7% MAC (iPhone)
2% Palm
1% other
Source: Industry statistics, Money Morning Staff Research.

More importantly, Apple has recently been selling more units than the king of the enterprise-mobile phone segment, Research in Motion Ltd. (Nasdaq: RIMM) lately.  The mobile phone market is huge and has been almost doubling in size year after year.  And although growth is expected to slow a bit in the future, the profit possibilities remain huge.  Could these market growth numbers and Apple’s share gains be maintained?

To get a better idea, I started by studying the worldwide market-share sales projections for the “smartphone” market. Admittedly, these statistics harken back from before the current financial crisis really took hold in the past month or so. Still, it’s a good starting point. Let’s take a look at Chart II:

Chart II: Projected Global “Smartphone” Sales

The year-by-year and projected annual breakdown of global smartphone sales between both the high-end consumer and conventional corporate users (in millions of units).

Year Corporate          High End Consumer
2006 :                     12            +              39
2007                       21            +              77
2008                       40            +            134
2009                       74            +            219
2010                     111            +            300
Sources: Industry Statistics, Money Morning staff research.

The Competitive Landscape

To make some sense of the competitive landscape the Apple iPhone is facing, I called my friend Brenda Lewis, principal in Transactions Marketing, Inc., and a venture manager who has launched many mission-critical wireless businesses and who lives and breathes mobile phones.  I wanted to validate the industry forecasts for growth in “smartphones” – both for high-end consumers and for enterprise users.  I shared my forecasts and what I heard from Brenda was eye opening. “These forecasts for the high-end consumer are far too high now, especially given the lack of personal discretionary income in most markets,” she told me.

Of course, she is right.  Personal discretionary income has likely gone negative in the U.S. market because of high household debt and the need to replace lost retirement savings. But it’s also severely reduced in Europe and Japan, because of lower trade flows and job losses due to the global downturn.

Even so, there are roughly $5 trillion worth of stimulus packages that have been committed to the overall global economy by various governments around the world.  And we can expect to start seeing the benefits of those liquidity infusions very soon.

So the picture and slowdown we are feeling right now will “surprisingly” improve in about six months. In the meantime, economic numbers will be very tough, since the financial freeze brought the economy to an abrupt stop and unemployment is likely to spike – even from the already-increased levels we’re seeing right now.

Economic inertia is hard to shift quickly.

So until the economy turns around, it’s wise to consider other possible catalysts. For instance, what about the possibility that corporate users could adopt the Apple iPhone?  My hopes for being the discoverer of that as-yet-unknown-by-Wall Street catalyst were likely dimmed by Brenda, who said that corporate chief information officers (CIOs) “will likely use the downturn as a reason to reduce the number of devices permitted for enterprise use and to consolidate central CIO control of current business unit devices, a continuation of a trend of the past five years.”

Again, the enterprise-market segment, which she knows intimately, has two main concerns:

• Total cost of ownership, which includes the initial price for the phone, as well as the service and, very importantly the maintenance.

• Data security.

The latter one is a killer for the iPhone in the enterprise market, since corporate IT departments cannot remotely shut down iPhones that are lost or are stolen as they are able to do with Research in Motion-made Blackberries. In addition, the locked nature of the iPhone makes it very difficult for IT departments to customize solutions for company use.

So, while the iPhone is superb from the consumer standpoint for its “coolness” factor and functionality, and for the fashion statement they make for those who wear them in visible locations, Blackberries actually accomplishes many more business-critical functions for corporations, and at a lower cost. This means that Apple’s traditional consumer focus – a niche that it dominates – is shrewdly placed.

Competitive Threats for the iPhone

What about risks to the Apple iPhone’s success in its own turf – the high-end consumer?

Well, for starters, Apple faces many brewing challenges: For instance, Wal-Mart Stores Inc. (NYSE: WMT) is starting its own online music-download service, and will undercut the Apple iTunes prices by about 25%.

Wireless phone heavyweight Nokia Corp. (ADR: NOK) is operating a similar story overseas, and it is unclear how long it will take them to come to the U.S. market. More ominous is the ultra-secret plans of Internet-search behemoth Google Inc. (Nasdaq: GOOG), which has launched its own branded Google Phone, which will be sold by Walmart at a discounted price of  $148 (compared with a price of $199.99 for the Apple iPhone at Best Buy, for example).

The Google Phone is revolutionary and appeals to the spirit of the U.S. “techie” crowd: freedom.  It is designed with an operating system, called Android, that’s been tagged with the marketing slogan – “apps (applications) without walls.” The whole goal of the device is to speed up users’ ability to access and surf the Web via a mobile phone – all too often a very slow process, right now.

The Google phone also emphasizes the hottest trend in phones today, with the ability to provide “location services,” such as customized weather forecasts, directions and listings of nearby businesses and attractions.  Finally, the operating system is, unlike Apple’s, is “open source.” This means that it will be extremely easy for anyone to develop new applications for the phone and for corporate IT departments to create customized applications for their employees to use on the phones. There’s even an alliance of software developers – called the “Open Handset Alliance” – whose chief goal is to encourage such custom developments.

As if this new threat were not enough, Nokia, the king of the mobile consumer market, announced its Nokia Tube (5800). Research in Motion is adding to its Blackberry lineup with a newly launched iPhone competitor called Bold. And Samsung Electronics Ltd. is coming out with its entrant, Instinct, a touch-screen phone with some features that are not available in the iPhone, like streaming TV.

And even Garmin Ltd. (Nasdaq: GRMN), the ruler of the GPS device world – and the topic of a recent, well-read “Buy, Sell or Hold” feature here in Money Morning, has launched its nüvifone, that, unlike the iPhone, gives you turn-by-turn directions.

My conclusion is that Apple’s iPhone business will continue its strong growth, but that the growth won’t be as strong as Wall Street recently projected. There will be market growth concerns in the near future, and with rivals ganging up on the successful iPhone, some of the market-share-gain momentum that we’ve recently seen will be blunted a bit in the future, although Apple will keep gaining absolute market share.

What about their computers?  Enjoying the synergistic “halo effect” from its iPod, iPhone and iTunes strategy, Apple keeps gaining market share in the computer market. Another Apple hit was its adoption of Intel chips that can run the Mac OS X, Leopard, and Windows Vista operating systems in the same machine, even simultaneously, with virtualization software.

I am encouraged by these machines, but not exuberantly so. Apple now faces very serious price competition from Windows-only systems.  But on the other hand, the segmentation of the market is critical and the ease of use, maintenance, fast recovery from hibernation, advantage in graphic-intensive tasks, intuitive use and virus-free environment make a Mac irresistible for its traditional constituents, provided they will keep paying the very steep Mac premium pricing.

The conclusion is that, moving forward, with 41% of sales coming from abroad and very small absolute market shares in its key iPhone and Mac businesses, Apple is very likely to be able to continue to gain market share, albeit at lesser pace. Also, given its consumer-centric focus, as the consumer gets hit in developed countries, sales growth will wither, while growth in emerging markets actually can accelerate.

Apple is not a pure computer company any longer, but is instead a consumer products company – and one that possesses a very cohesive strategy. That’s what will allow it to continue to survive and thrive.

The stock – with a PEG ratio of less than 1.0, is a bargain right here. But in the highly volatile environment, wait for weakness to start accumulating it, and take your time.  Apple’s results are much less dependent on the iPod today, and thus the soon-to-be revealed disappointing Christmas season is nowhere as important as it used to be.  So I would buy two-thirds of my position prior to year-end and the remaining third over the subsequent three months in the first quarter, as the bad news over the economy keep trickling in.

ACTION TO TAKE: BUY Apple Inc. (Nasdaq: AAPL), but do so with some care. Purchase two-thirds of your position between now and year-end, and the final third during the first quarter of the New Year.

Source: Buy, Sell or Hold: Apple Inc.

• Google Inc. (GOOG) said yesterday (Thursday) that profit climbed 26% to $1.35 billion, or $4.24 per share in the third quarter, up from $1.07 billion, or $3.38 per share, at the same time last year. Revenue soared 31% to $5.54 billion.

• Initial claims for unemployment insurance last week fell 16,000 to a seasonally adjusted level of 461,000 the Labor Department reported yesterday (Thursday). However, the four-week average, which is less volatile, increased slightly to 483,250 – a seven-year high. The number of people continuing to receive jobless benefits rose 40,000 to 3.7 million.

• Peabody Energy Corp. (BTU), the St. Louis-based company that fuels about one-tenth of all U.S. electricity generation and more than 2% worldwide reported net income of $369 million, or $1.36 cents per share, in the third quarter. That compares with $32.3 million, or 12 cents per share, a year ago.

• Nucor Corp.’s (NUE) third-quarter profit nearly doubled, the Charlotte, N.C.-based steelmaker said yesterday (Thursday). The company reported profit of $734.6 million, or $2.31 per share, compared to $381.2 million, or $1.29 per share, in 2007. Quarterly sales jumped 75 percent to a record $7.45 billion.

• Nokia Corp. (ADR: NOK) announced yesterday (Thursday) that third quarter net profit dropped to $2.7 billion (1.09 billion euros) from 1.56 billion euros a year earlier. Net sales for the Finland-based cell phone maker declined 5% to $16.6 billion (12.2 billion euros) from 12.9 billion euros, BusinessWeek reported.

• Advanced Micro Devices Inc. (AMD) yesterday (Thursday) announced a third quarter loss of $67 million, or 11 cents per share. For the same period the year prior, the memory-chip maker lost $396 million, or 71 cents per share, MarketWatch reported.

• The Hershey Co. (HSY) yesterday (Thursday) announced that its third quarter profit was $124.5 million, or 54 cents per share, up from $62.8 million, or 28 cents per share, in the third quarter of 2007. The domestic candy maker’s revenue increased 6.4% to $1.49 billion due to 25% price increases to help offset higher raw ingredient costs, The Wall Street Journal reported.

• Citigroup Inc. (C) yesterday (Thursday) announced a $2.8 billion loss for the third quarter. North American credit-card loan charge offs increased by $311 million in the quarter, reflecting slower payment rates, higher bankruptcies, rising unemployment and lower recoveries on bad debt, Citigroup Chief Financial Officer Crittenden said on a conference call, Bloomberg News reported. Citi shares lost 33 cents each, or 2.03%, to close at $15.90.

Source: Global Investing Roundups Friday, October 17th, 2008