JC Penney Q1 Meets Estimates, Shares Off on Q2, Year View

Shares of JC Penney (JCP) are off 49 cents, or 1.7%, at $27.68, after the company reported Q1 revenue and EPS exactly as expected, at $9.3 billion and 25 cents per share.

The company forecast this quarter’s profit below estimates, however, at 10 cents to 13 cents versus 13 cents expected, on sales that are forecast to be roughly in line at $4.02 to $4.03 billion, as operating expenses rise 4.5%.

A bit disappointing, given that JCP showed a marked improvement in April same-store sales when it reported on May 6, according to a Thomson-Reuters report at the time.

For the full year, the company forecast $1.64 per share in profit, up from $1.55, though that’s still below the $1.65 per share analysts have been forecasting.

Sales rose 1.2% on a 1.3% rise in same-store sales, the company said, as gross profit rose almost a percentage point and operating expenses fell as a percentage of revenue.

Q2 same-store sales are expected to rise 2.5% to 3%.

Decision Day Dawns For Best Buy Founder Schulze. Buyout Offer Must Come Thursday

If Best Buy Founder Richard Schulze wants to make an offer for the company, he�ll need to do so by midnight tonight. That�s the deadline Best Buy gave him more than two and a half months ago. Since then, of course, he has fallen silent.

Schulze now seems more interested in regaining the chairmanship, The Star-Tribune reports. He lost the position when he was ousted last year over a scandal with then CEO Brian Dunn. Schulze, still the largest shareholder, is hoping to increase his ownership stake and hold more power on the board.

Best Buy extended the timeline so Schulze could look at the holiday figures. The early numbers Best Buy released were a surprise. They showed a halt to the slide in U.S. sales that have plagued the company. Best Buy originally planned to report full fourth-quarter numbers this afternoon, but decided to delay until tomorrow so that Schulze had the full day to scrutinize his plans.

Shares of Best Buy fell 2.1% to $16.25 in early afternoon trading.

Schulze last summer said he was interested in purchasing the Minnesota company he founded in 1966. Analysts and observers have speculated Schulze may be having trouble securing the financing for the bid. The deal could total as much as $11 billion. Instead, Schulze may be mulling a way to increase his stake in Best Buy.

The company experienced an revolving carousel of executives last year as it continued to struggle to chart a new path. The man who started the year as CEO, Dunn, was fired for an inappropriate relationship with a female employee. His interim replacement, director G. Michael Mikan, was replaced by the current CEO, Hubert Joly. While Joly doesn�t have any retail experience, he does have turnaround clout.

A skill set that Best Buy badly needs. Joly calls his transition efforts �Renew Blue.� They focus on combating showrooming, when customers visit Best Buy�s stores and use their smartphone to find a better price online. Best Buy now has a broad price-match policy that could help it better compete with Amazon.com, Walmart.com and Target.com. And Best Buy is emphasizing its customer service personnel: the Geek Squad. Best Buy is betting that real, live humans that can provide instant, in-person advice can help make it seem a better destination than visiting Amazon.com.

Bobby V: Back to School

Getty Images

Bobby Valentine

Fairfield, Conn.�All was beautiful for Bobby Valentine again. There he was, on a February morning in Connecticut, sitting before a pretty red background, introduced as the next executive director of intercollegiate athletics at Sacred Heart University. He was the out-of-the-box choice. But an intriguing choice. He was why this big room was packed. Here was Bobby Valentine. Bobby V! Sixty-two years old and looking terrific. He wore an impeccable gray suit and a blue tie and his teeth were bright and flawless. His teeth could host an awards show.

He spoke. He took questions. His answers swerved from humble and gracious to worldly and pointed. This, of course, is part of the Bobby V experience. Bobby Valentine answers questions in a way that shows why canned answers were invented. He pauses and sidetracks in a way that makes you hold your breath, but sometimes, he really sticks the landing. When Valentine talked about his new job, he offered a quote straight out of a glossy, parent-pleasing brochure.

"I hope that I can be a brother to some, a father to others, a mentor to those in need, and a friend to everyone here on campus," he said.

Swoon. You could hear the administration's knees buckle. Valentine couldn't have said it better. This was really going to be great. Sacred Heart student-athletes jammed the back of the room, wearing their Pioneer red sweatsuits, hoping to catch a glimpse of the new boss. This was not just an AD. This was celebrity. A brand name. The camera phones went up. Click.

Was this supposedly curious hire really so curious? Valentine was a guy from the neighborhood, down the road in Stamford, Conn. He was not a stranger to Sacred Heart. Went way back with the school's retiring AD. The university began talking to Valentine and the idea started making a lot of sense, even if the candidate had no experience running an athletic program at a Division I school. Bobby V! Native son. Grand return. How do you pass that story?

"We're known as the Pioneers, and once again, we are pioneers�we're doing something unconventional�with the appointment of Bobby as our AD," said the bow-tied university president John Petillo.

Fifteen months ago a similarly enthusiastic scene had played out in Boston. The Red Sox hired Valentine as manager to replace Terry Francona, a two-time World Series winner brushed out the door like a stray cat. Francona's 2011 Red Sox had crumbled in September, and the team was surly and unlikable, humiliated by comical reports of mid-game chicken and beer soirees in the clubhouse.

Valentine would polish that up. Once more he was an outlier�it had been a decade since he'd managed in the majors for the Mets; his most recent iteration had been as a blunt analyst on ESPN�but the Red Sox made it sound so sensible. Boston needed an unflinching boss, who would tell put an end to the millionaire mishigas. Bobby V was going to open a window, and let the fresh air rush right in.

It didn't go well. At all. Valentine maintains he did a respectable job in Boston under lousy circumstances, but it never felt like a fit. The whining and surliness continued and festered. Boston's lavish roster was eventually gutted, its expensive parts dumped upon Los Angeles. The final months of the season felt like a lost walk through a corn maze. In October Valentine was dismissed.

He said he was over it. Setbacks were part of the Bobby V narrative. He reminded that he had risen and fallen, with plenty of detours, including tours as a manager in Japan. People thought he'd never last there, but Bobby V wound up thriving overseas.

"One thing you can't teach is experience, and I have a boat load of life's experiences," he said. "I have lived in five different counties. I have spoken different languages. I've been fired. I've been up. I've been broke. I've been rich. I have things that I think every person in life wants to experience. I can't experience those things for anyone here, but I think I can share my experiences and make the situation better."

He said he was learning what it needed to be done. A man who has walked the hot coals in Boston and New York will be fundraising and studying NCAA regulations and trying to figure out where the women's lacrosse team can practice if it can't practice outside. Was he really all-in for this new career path? "Some people ask if this is kind of a joke," a reporter said to Valentine.

"Ouch," Valentine said. He acted wounded, as if this was the first time anyone had ever suggested this move was unusual. "I'm a guy who loves challenges," he said, launching into an answer that was virtuosic in its Valentine-osity: "You know, I was a ballroom dancer during the Babe Ruth League state and regional championships. I was a third base coach, first day of a season, and I'd never coached third base before. I was a manager at 35 years old and I'd never managed before. I opened up a restaurant in 1980 and I'd never flipped a hamburger before."

Now he was an AD, as of July 1. Why not? To question his motivation was to be narrow-minded about the curvature of life. Why define yourself? Not long ago Valentine had been the Director of Public Safety in Stamford. He had taken the Mets to a World Series but also had a claim as the inventor of the wrap sandwich. Didn't everyone know these things?

Valentine was asked what he would do if a Major League team called. He gave a digressive answer about contracts and how he once had a lifetime contract in Japan, or so he thought. "I found out it was the lifetime of the owner's dog," he said. The room broke up in laughter.

"Some team calls? I always answer the phone," he continued. "That doesn't mean I am going to rush to judgment and run away from a situation I think is a very good situation."

This was where the road had arrived. Bobby Valentine is going to be a college athletic director. The journey continues. It all sounded fun.

Write to Jason Gay at jason.gay@wsj.com

Getting Anchored to a Number

One of the more common behavioral mistakes we make when it comes to investment decisions is the tendency to anchor to a certain value or price. When we focus on, or anchor to, a price, it can lead to costly blunders. Here are a few examples:

1. Imagine you bought your home at the height of the housing boom. You paid $800,000, and a few years later you needed to sell it. We have a tendency to feel like we should at least be able to get what we paid for it. So you insisted upon listing it for $800,000, even though the market value is less than that. You passed on offers around $775,000 and then rode the market all the way down to the point where you hoped to get $650,000 a year later. Now that first offer looks like a dream.

The reality is that the market doesn't care what you paid for your house. It doesn't care how much you put into it or what it cost you to landscape. All that matters is what it's worth today.

2. You buy a stock for $50 a share, and six months later it's $30. You decide that you really shouldn't own it anymore but you want to wait until you "get back to even" before you sell. This idea of holding on to an investment that is no longer appropriate, or may have been a mistake in the first place, until you get back to even makes no sense. The fact that you paid $50 has no bearing whatsoever on what you should do now.

Source: BehaviorGap.com.

In fact, I think it is fair to say that getting back to even is never a good reason to hold on to an investment. If you find yourself saying that, it's time to reevaluate.

3. Your portfolio was worth $500,000 at the top of the tech bubble in early 2000, and you still think about that value each time you open your statement and see that it's worth less than that. You just want to get back to your high-water mark of $500,000.

This may not have any impact on your decisions, but it sure is affecting your life. I know people like this, still holding on to a value in the past. It is like that guy next door who is still telling stories of his glory days in high school football.

The past is the past. All that matters now is making the correct decision for today.

A version of this post appeared previously at The New York Times.

Carl�Richards is a financial planner and�the director of investor education for the�BAM ALLIANCE, a community of more than 130 independent wealth management firms throughout the United States. Visit�Behavior Gap�for more of Carl's sketches and writings.

The Motley Fool has a�disclosure policy.

link

When It Comes to Online Travel, Buy American

A couple of years ago it seemed as if overseas speedsters were the smart bets for growth investors playing the online travel revolution.

China's Ctrip.com (NASDAQ: CTRP  ) and India's MakeMyTrip (NASDAQ: MMYT  ) were posting explosive results, tantalizing the market with the opportunity to ride the inevitable economic bursts of the world's two most populous nations.

It didn't matter that both companies still did a lot of business the old-fashioned -- you know, offline -- way. It didn't matter that they commanded lofty valuations. As China and India blossom as economic hubs, this would be the place to be.

Well, both of the stocks are trading in the teens these days, just as priceline.com (NASDAQ: PCLN  ) soars today after another market-thumping report.

Yes, the "name your own price" portal is still rocking. Revenue climbed 20% in its latest quarter as gross bookings soared 33%. Priceline's adjusted profit of $6.77 a share blew past the $6.53 a share that Wall Street was targeting.

The near-term outlook is solid. Priceline's aiming for 30% to 37% in gross travel bookings during the current quarter.

How are Ctrip and MakeMyTrip holding up in comparison? Well, Ctrip just tapped a new CEO last week, and analysts see profitability declining for all of 2013.

MakeMyTrip is faring even worse. It posted quarterly results earlier this month, and it wasn't pretty. Reported revenue and bookings may have grown sharply, but revenue after service costs actually declined on a year-over-year basis. MakeMyTrip also posted a quarterly loss, reversing a year-ago profit.

The good news for investors is that they don't need Ctrip or MakeMyTrip for some skin overseas. Priceline is a global juggernaut. A whopping $5.5 billion of Priceline's $6.6 billion in gross bookings during this past quarter were international.

Larger rival Expedia (NASDAQ: EXPE  ) isn't the same kind of globetrotter, but a healthy $3.3 billion of its $7.5 billion gross travel bookings in its latest quarter originated internationally.

It would seem that investors can get the best of both worlds by buying into Priceline or Expedia, shaving the risks of country-specific exposure while still grabbing fast-growing companies.

Investors can also choose for smarter country-specific plays. India is still too early in its online migration for investors to cash in, but there's an interesting online travel play in China through Baidu (NASDAQ: BIDU  ) .

China's leading search engine also happens to own Qunar, the travel website that surpassed Ctrip late last year to become the country's largest online retailer of airline tickets. Qunar is more Web-centric than Ctrip, which still relies on old-school call centers for a sizable chunk of its bookings.

Unlike Ctrip, Baidu is expected to grow its bottom line at a healthy double-digit clip this year.

There's a world of opportunities for investors in online travel; you just need to know where to look.

Take over the world without leaving home
Regardless of your short-term view on the Chinese economy, there may be opportunity in Baidu (aka the "Chinese Google"). Our new premium report breaks down the dominant Chinese search provider's strengths and weaknesses. Just click here to access it now.

Nordstrom OKs $800 mln in buybacks, ups dividend

Nordstrom Inc.'s JWN board has authorized up to $800 million in additional share repurchases and also increased its quarterly dividend by 11%, as the high-end shoe and apparel retailer looks to boost shareholder returns.

The company said its latest buyback authorization, which runs through March 1, 2015, will be funded from existing cash on hand. The authorization is in addition to its existing repurchase program, which was approved by the board last year and has $344 million outstanding, as of Tuesday.

Nordstrom also said it is raising its quarterly dividend by three cents to 30 cents a share. The dividend carries a yield of 2.2%, based on Wednesday's closing price.

The company had about $1.29 billion in cash and cash equivalents and about 202.4 million shares outstanding at the end of the fourth quarter.

Nordstrom, benefiting from revived demand for its designer merchandise after a slump from 2008 to 2009 amid the global economic crisis, has generally seen profits grow. Its off-price Rack clearance stores continue to perform well, although customers have returned to buying full-priced merchandise in recent quarters.

Last week, Nordstrom reported its fiscal fourth-quarter earnings rose 40% as the high-end department store operator logged higher sales, benefiting from an extra week in the period.

Shares were up 1.3% to $54.60 after hours. The stock is flat over the past 12 months.

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Index giant Vanguard lays out the case for — active funds?

It's not usually newsworthy when a mutual fund company rolls out a study extolling the virtues of its active managers. When that mutual fund company is best known for its passively managed investments, however, it's a bit more of an eye-opener.

That's why, when The Vanguard Group Inc. recently made the case for its actively managed equity funds in a newly published report, it may have caused some advisers to do a double take.

Vanguard, of course, is the largest provider of index funds, which are the antithesis of active management.

“We're almost synonymous with indexing, but a quarter of our equity assets are in active funds. Not a lot of people know that,” said Daniel Wallick, principal in the investment strategy group and co-author of the research paper.

Passively managed index funds and exchange-traded funds make up the bulk of Vanguard's $2 trillion-plus in assets, but they also have approximately $350 billion in active equity funds.

As a group, Vanguard's active equity funds have outperformed their respective benchmarks by an average of 88 basis points a year over the past 10 years, according to Vanguard. Assuming that the average index fund or ETF has an expense ratio in the 15- to 20-basis-point range, the active funds' outperformance jumps closer to a 1% outperformance annualized.

The key to the active funds' success, says Vanguard, is finding top talent at a low cost. The low cost focus shouldn't sound new since it's one of the cornerstones of Vanguard's arguments for passive index funds and ETFs.

Vanguard's research shows that the lower a fund's cost, the better chance of it beating its benchmark.

Mutual funds with the lowest cost, those with expense ratios in the bottom 10th percentile, have beaten their benchmark 32% of the time, while funds with costs in the lowest 50th percentile have beaten their benchmark just 23% of the time.

There's also an added twist to Vanguard's active funds. They come with performance fees, which only 3% of all active funds currently have, according to Strategic Insight. The performance fee structure ties a manager's fee to its performance. So the fee is higher when it's outperforming and lower when it's underperforming.

Picking a fund with a low expense ratio is only part of the process in selecting the right managers, though. Vanguard knows how tough that can be. The majority of its active funds are subadvised by other asset managers, rather than run in-house.

“You can't just look at track records,” Mr. Wallick said. “You need to get beyond the numbers and understand how they operate and why they operate that way.”

Mr. Wallick stressed that investing in active funds isn't for the faint-hearted, despite the report's findings.

“You have to be comfortable with the variability of returns and willing to hold on over a long time period,” he said. “There's no consistency in alpha. No one should expect that.”

Even if you're comfortable with a potential roller coaster ride to benchmark-beating returns, Vanguard's process isn't foolproof.

The Vanguard Growth Equity Fund (VGEQX), for example, has 10- and five-year returns that rank in the bottom half of all large-cap-equity funds, according to Morningstar Inc.

“You'll have variations in performance,” Mr. Wallick said. “We looked at things on an aggregate basis. Your experience might be very different depending on the fund.”

In other words, you may want to stick to an index fund if you're not such a big fan of the rollercoaster.

Jason KephartEmail Jason@twitterLinkedInGoogle

Jason Kephart covers mutual funds, ETFs and investing. In a perfect world, he would be quarterback of the Miami Dolphins.

How Dividends Change the Game for Merck Investors

The wealth-building power of compound interest will never cease to amaze me. It's a story of patience and attention to detail, where small differences in the short term add up to massive divergence over decades. In the end, the biggest winners don't always deliver the fattest share-price returns.

Today, I'm looking at a blue-chip stock with a generous yield -- but not the most generous of dividend increase histories.

Owning Merck (NYSE: MRK  ) in the last five years has been a tale of two returns. On the basis of straight-up price appreciation, the pharma giant has trailed its peers on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) . But if you reinvested dividends along the way, you'd be slightly ahead of the game:

MRK data by YCharts.

Now, the difference isn't as dramatic as the dividend-powered boosts you see in Dow peers Verizon (NYSE: VZ  ) and Walt Disney (NYSE: DIS  ) , for example. The big red telecom stock's dividends turned a respectable 26.7% five-year return into a smashing 67.5% gain. The House of Mouse added another 11.6% on top of an already fantastic 62.8% price-appreciation. Both of these stocks have a tendency to raise their payouts on a regular basis. That has not been one of Merck's strong points, historically speaking.

But Merck did indeed juice its payouts recently, breaking a seven-year streak of unchanged dividends. Two modest bumps add up to a 13% increase over two years -- hardly the kind of generosity that crowns a dividend king, but a start nonetheless. For comparison, Disney raised its payouts by 25% over the same period. Verizon lagged with a tiny 8.4% increase.

MRK Dividend data by YCharts.

Today, Merck sports a hefty 4.1% yield -- one of the richest payouts you'll find on the Dow. But the yield used to be even stronger, rising as high as 5% in 2011 and nearly 7% during the depressed share prices of 2008's economy meltdown. Management doesn't seem terribly interested in protecting the yield, judging by the anemic payout improvements.

Can Merck beat the patent cliff?
This titan of the pharmaceutical industry stumbled into 2013 and continues to battle patent expirations and pipeline problems. Is Merck still a solid dividend play, or should investors be looking elsewhere? In a new premium research report on Merck, The Fool tackles all of the company's moving parts, its major market opportunities, and reasons both to buy and to sell. To find out more -- and get a full year of free updates -- click here to claim your copy today.

Caesar’s, Boyd Up After New Jersey Approves Online Gambling

APRolling the dice

New Jersey is boosting at least two stocks this morning, with Caesar’s Entertainment (CZR) and Boyd Gaming (BYD) up as much as 4% after the state approved a law to allow online gambling.

The move is important for casino stocks for two reasons: New Jersey is the biggest state yet to approve Internet gambling, and the law may establish a framework for other states to easily adopt. As WSJ’s Alexandra Berzon explains:

The law, passed by the legislature and signed Tuesday by Gov. Chris Christie, for now requires bettors to be physically present in the state, which industry executives and regulators believe can be verified with technology that tracks a user’s location. But bets could conceivably be placed from any device with an Internet connection.

New Jersey’s move marks a significant turning point in the debate over online gambling in the U.S., which has been raging for more than a decade. But while it could encourage similar measures in other states, big hurdles remain to widespread acceptance of such gambling.

Until a year ago, the federal government considered such gambling illegal and targeted online-gambling companies and their partners with criminal and civil lawsuits. But in 2011 the Justice Department reversed itself, prompting many states to consider legalizing online gambling and lottery directors to start selling tickets online.

Berzon adds that online gambling networks should be up and running in Nevada and Delaware later this year. The new hubs may also try to become centers of interstate networks, she notes:

Such agreements, modeled after lottery compacts that create pooled drawings for games such as Powerball or Mega Millions, could be particularly useful for smaller states operating online poker by giving them access to more players.

Nevada and New Jersey may try to become regulatory hubs for other regions, officials and industry watchers say, allowing their licensed companies to have an advantage in other jurisdictions while sharing the revenues with other states.

Yet while simple in theory, creating interstate networks is likely to be tough since gambling is regulated state by state in varying ways, say people working on the issue. A state’s gambling interests would be unlikely to want their state government to enter into deals that would put them at a disadvantage to interests in other states.

While casino owners Ceasar’s and Boyd are obvious beneficiaries of New Jersey’s new law, this piece in The Street suggests Zynga (ZNGA) could also reap rewards:

Zynga may stand to benefit, due in large part to its popular Texas Hold ‘Em app, Zynga Poker. Last June, Zynga Poker had 30 million monthly average users, according to Mike Gupta, the company’s then treasurer and vice president of finance. Gupta also told TheStreet that online gambling was on the company’s radar. “It is something we’re exploring,” he said. “We think it’s an interesting adjacency to what we do in our core business.”

Zynga’s stock is up 2.5% this morning after falling 2% yesterday.

 

Will Apple Boost Its Dividend Today?

All eyes are on Apple (NASDAQ: AAPL  ) , which holds its annual meeting today. History says not to expect much from the two-hour meeting near the company's Cupertino headquarters. Nonetheless, rumors of Apple tripling its dividend yield or splitting the stock abound.

What are the chances of either coming to pass? The Motley Fool's Alison Southwick asks Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova for his perspective in the video below. Please watch, and then leave a comment to let us know what you think.

Want more analysis on Apple? I invite you try our newest premium research service. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, will tell you whether Apple is a buy now and what opportunities remain for the company (and your portfolio) going forward. Better yet, it comes with a year of updates. Just click here now to get instant access to his latest analysis.

Know When to Cut Your Losses

It was the spring of 2010. I had arrived in Vegas early on a Friday morning for a bachelor party. All of my friends, having come in the night before, were asleep in the casino hotel. Last time I was there, I'd gone home with a nice chunk of change; I was looking to reproduce the result.

And yet, after an hour at the blackjack table, I was down $200. "No problem," I said to myself confidently, as I strode to the ATM machine to take out $200 more. "My luck will soon change."

The problem is, it didn't. I had deluded myself into thinking that winning was a sure thing. I ignored the fact that long-term trends were on the house's side, and kept upping my bets along the way. By the time my friends awoke, I had lost a lot of money.

There's a name for my problem that day in Vegas: escalation of commitment. Over the past week, I've been investigating�lots of different biases. Today, I'll tell you how escalation of commitment can hurt you, and what you can do about it.

Escalation in the investing world
Simply put, an error in decision-making -- by way of an escalation of commitment -- occurs when a person decides to invest more money into a company to justify a past investment decision. I learned this lesson the hard way with Rosetta Stone (NYSE: RST  ) .

One of the other jobs I take on at the Fool is offering my opinion on what stocks should be deemed "Best Buys Now" for Stock Advisor. I had written heavily in 2010 about why the stock should succeed, and I kept thinking it deserved a spot on the list. At the same time, I kept adding it to my personal portfolio.

The problem was that performance had deteriorated.�I wasn't paying close enough attention to this; I ignored the fact that the company wasn't penetrating certain markets, and that there were serious issues in the executive suite.�

It wouldn't have been so bad except for the fact that I had kept escalating my investment. Eventually, my total position was five times my initial investment.�When all was said and done and I sold in late 2011, I had lost 55% of my investment.

How I'm learning from this
These days, I work hard to combat this tendency. As I've said in my articles on other biases, the key is to admit daily�that there's more that you don't know than that which you do. For this bias in particular, it's helpful to ask yourself: Would I invest in this now if I had never invested in this before?

Hopefully, these simple steps can eliminate a lot of problems. �If you think you've got the bias under control, consider checking out our top pick for 2013.

Our chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Tibco: Longbow Cuts Rating On Valuation, Tougher Compares

Longbow Research analyst Steve Koenig this morning cut his rating on Tibco (TIBX) to Neutral from Buy.

“Our downgrade stems from TIBX�s rapid achievement of our 12-month target price objectives, coupled with significant increases in consensus expectations for TIBX’s revenue and EPS performance following the company’s 3Q earnings report,” he writes in a research note.

“We think TIBX will continue to see market share gains from a revamped product line-up and sharp management focus on sales capacity and execution, but these factors look to be more fairly incorporated in the TIBX share price and we expect year-over-year comparisons to become more difficult in FY 2011 as the TIBX license recovery anniversaries,” he adds.

TIBX is down 45 cents, or 2.5%, to $17.66.

Van Rompuy: Worst is over for Euro Zone

WARSAW--The worst has passed for the euro zone but member states shouldn't become complacent, the president of the European Council, Hermann Van Rompuy, said Wednesday in Warsaw.

Mr. Van Rompuy added that the euro zone is no longer in existential threat mode, but time is needed for financial stability to translate into growth and lower unemployment.

"We should not become complacent--neither in member states nor at the level of the European Union and the euro zone," Mr. Van Rompuy said. "There is no way back. For any of the countries of the euro zone."

The comments come days after a stalemate election result in Italy rekindled market worries about a reawakening of the euro zone's debt crisis and months of uncertainty ahead.

The European Commission recently cut its gross domestic product forecast for the single-currency bloc to a contraction of 0.3% for 2013, from its earlier expectation of 0.1% growth.

Top Stocks To Buy For 2/27/2013-4

SuccessFactors, Inc. (NYSE:SFSF) witnessed volume of 8.19 million shares during last trade however it holds an average trading capacity of 2.13 million shares. SFSF last trade opened at $30.00 reached intraday low of $27.09 and went +14.12% up to close at $28.85.

SFSF has a market capitalization $2.28 billion and an enterprise value at $1.63 billion. Trailing twelve months price to sales ratio of the stock was 8.73 while price to book ratio in most recent quarter was 6.83. In profitability ratios, net profit margin in past twelve months appeared at -2.63% whereas operating profit margin for the same period at -13.03%.

The company made a return on asset of -3.78% in past twelve months and return on equity of -2.44% for similar period. In the period of trailing 12 months it generated revenue amounted to $228.79 million gaining $3.04 revenue per share. Its year over year, quarterly growth of revenue was 51.10%.

According to preceding quarter balance sheet results, the company had $367.49 million cash in hand making cash per share at 4.65. Moreover its current ratio according to same quarter results was 1.73 and book value per share was 3.70.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 11.81% where the stock current price exhibited down beat from its 50 day moving average price of $29.18 and remained below from its 200 Day Moving Average price of $33.22.

SFSF holds 79.02 million outstanding shares with 78.42 million floating shares where insider possessed 5.44% and institutions kept 105.00%.

SEC Names McKessy to Head Whistleblower Office

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The Securities and Exchange Commission (SEC) on Friday named Sean McKessy as the new head of its Whistleblower Office, which is housed within the agency's Division of Enforcement.

Under the Dodd-Frank Act, the SEC is required to pay rewards to individuals who voluntarily provide the Commission with original information that leads to successful SEC enforcement actions and certain related actions. The SEC says that it’s in the process of developing rules that will guide the whistleblower program.

Harry Markopolos, the securities professional turned full-time fraud investigator who repeatedly warned the SEC that Bernie Madoff was a fraud, is reportedly helping the agency develop its Whistleblower program.

“Sean is uniquely positioned to oversee the Commission’s whistleblower program,” said Robert Khuzami (left), Director of the SEC’s Division of Enforcement, in a statement. “The Enforcement Division and whistleblowers alike will greatly benefit from Sean’s first-hand experience in bringing enforcement cases, handling whistleblower complaints and understanding the workings of internal corporate compliance programs.”

McKessy will lead a program charged with “working with whistleblowers, handling their tips and complaints, and helping the Commission determine the awards for individuals who provide the agency with information that leads to successful enforcement actions,” the SEC said in the release announcing his appointment.

McKessy rejoins the SEC, where he was a senior counsel in the Division of Enforcement from 1997 to 2000. More recently, he served as corporate secretary for both Altria Group, Inc. and AOL Inc., and as securities counsel for Caterpillar, Inc. In these roles, McKessy developed and supervised internal compliance and reporting programs related to the federal securities laws, served as corporate compliance officer, and coordinated the reporting of potential violations to boards of directors.

Apple to Settle Lawsuit Filed by Parents

SAN JOSE, Calif. (AP) -- Apple (NASDAQ: AAPL  ) has agreed to give more than $100 million in iTunes store credits to settle a lawsuit alleging that the iPhone and iPad maker improperly charged kids for playing games on their mobile devices.

The 2-year-old case centers on allegations that Apple didn't create adequate parental controls to prevent children from buying extra features while playing free games on iPhones and iPads in 2010 and 2011. Parents who filed the lawsuit in 2011 said they didn't realize their children were racking up the charges until they received bills or other notifications after the purchases were made. The games that had been downloaded were designed for kids as young as 4 years old, according to the lawsuit.

Apple introduced more stringent controls governing in-game purchases as part of a March 2011 update to the software that runs its mobile devices.

Under an agreement filed in federal court last week, Apple has agreed to award an iTunes credit of $5 to each of the estimated 23 million account-holders who may have been affected. Parents could receive more if they can show their bills exceeded $5. If the charges exceeded $30, cash refunds will be offered.

The lawyers who sued Apple said it's still too early to determine how many people ultimately will qualify for the iTunes credits and cash refunds. As part of the settlement, the attorneys are seeking $1.3 million in fees, which would be paid by Apple.

Apple, which is based in Cupertino, Calif., declined to comment Tuesday.

A hearing on the proposed settlement is scheduled Friday in San Jose, Calf.

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Impax Laboratories Beats on Both Top and Bottom Lines

Impax Laboratories (Nasdaq: IPXL  ) reported earnings on Feb. 25. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Impax Laboratories beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue dropped. Non-GAAP earnings per share dropped significantly. GAAP earnings per share dropped significantly.

Margins dropped across the board.

Revenue details
Impax Laboratories logged revenue of $141.1 million. The 13 analysts polled by S&P Capital IQ expected net sales of $126.6 million on the same basis. GAAP reported sales were 11% lower than the prior-year quarter's $158.6 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.30. The 13 earnings estimates compiled by S&P Capital IQ predicted $0.19 per share. Non-GAAP EPS of $0.30 for Q4 were 17% lower than the prior-year quarter's $0.36 per share. GAAP EPS of $0.07 for Q4 were 78% lower than the prior-year quarter's $0.32 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 45.5%, 330 basis points worse than the prior-year quarter. Operating margin was 5.7%, much worse than the prior-year quarter. Net margin was 3.4%, much worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $142.9 million. On the bottom line, the average EPS estimate is $0.22.

Next year's average estimate for revenue is $569.1 million. The average EPS estimate is $0.73.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 167 members out of 180 rating the stock outperform, and 13 members rating it underperform. Among 55 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 52 give Impax Laboratories a green thumbs-up, and three give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Impax Laboratories is outperform, with an average price target of $25.44.

• Add Impax Laboratories to My Watchlist.

Carrizo Oil & Gas Beats Up on Analysts Yet Again

Carrizo Oil & Gas (Nasdaq: CRZO  ) reported earnings on Feb. 26. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Carrizo Oil & Gas beat expectations on revenues and crushed expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly. Non-GAAP earnings per share increased significantly. GAAP earnings per share expanded significantly.

Margins grew across the board.

Revenue details
Carrizo Oil & Gas booked revenue of $116.7 million. The 10 analysts polled by S&P Capital IQ wanted to see sales of $105.7 million on the same basis. GAAP reported sales were much higher than the prior-year quarter's $55.8 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.54. The 13 earnings estimates compiled by S&P Capital IQ anticipated $0.35 per share. Non-GAAP EPS of $0.54 for Q4 were 135% higher than the prior-year quarter's $0.23 per share. GAAP EPS of $0.46 for Q4 were 188% higher than the prior-year quarter's $0.16 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 89.1%, 500 basis points better than the prior-year quarter. Operating margin was 40.0%, much better than the prior-year quarter. Net margin was 15.8%, 410 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $106.9 million. On the bottom line, the average EPS estimate is $0.42.

Next year's average estimate for revenue is $481.0 million. The average EPS estimate is $1.86.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 261 members out of 291 rating the stock outperform, and 30 members rating it underperform. Among 63 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 55 give Carrizo Oil & Gas a green thumbs-up, and eight give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Carrizo Oil & Gas is outperform, with an average price target of $32.61.

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• Add Carrizo Oil & Gas to My Watchlist.

Auxilium Pharmaceuticals Beats Analyst Estimates on EPS

Auxilium Pharmaceuticals (Nasdaq: AUXL  ) reported earnings on Feb. 26. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Auxilium Pharmaceuticals met expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly. GAAP earnings per share increased.

Margins grew across the board.

Revenue details
Auxilium Pharmaceuticals recorded revenue of $172.5 million. The eight analysts polled by S&P Capital IQ wanted to see a top line of $172.5 million on the same basis. GAAP reported sales were much higher than the prior-year quarter's $73.3 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $1.83. The seven earnings estimates compiled by S&P Capital IQ averaged $1.71 per share. GAAP EPS were $1.83 for Q4 versus -$0.25 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 83.7%, 620 basis points better than the prior-year quarter. Operating margin was 52.5%, much better than the prior-year quarter. Net margin was 52.5%, much better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $81.1 million. On the bottom line, the average EPS estimate is $0.08.

Next year's average estimate for revenue is $344.4 million. The average EPS estimate is $0.11.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 132 members out of 187 rating the stock outperform, and 55 members rating it underperform. Among 57 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 32 give Auxilium Pharmaceuticals a green thumbs-up, and 25 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Auxilium Pharmaceuticals is outperform, with an average price target of $22.45.

• Add Auxilium Pharmaceuticals to My Watchlist.

Apple Surges Amidst Split Rumors; Better Than iPrefs, Says Oracle Investment

Shares of Apple (AAPL) made a substantial recovery this afternoon, rising from a low of $437.66, near their 52-week low of $435, to rise $7, or 1.6%, to close at $449.80.

Seabreeze Partners's Doug Kass notes in a missive this afternoon that his sources are muttering something about a stock-split being unveiled tomorrow at the company's annual shareholder meeting at its headquarters in Cupertino. However, Kass observes that Apple would have to get shareholder approval for anything beyond a two-for-one stock split.

There are, however, those that are urging a split as a better option than the “iPrefs” preferred shares that hedgie David Einhorn has been promoting of late. Oracle Investment Research's Laurence Isaac Balter, after reviewing retail versus institutional block trading, opines that creating what amounts to a retirement vehicle with preferred shares is a waste of time.

Instead, he suggests a 10-for-1 split as giving the shares a psychological lift among retail investors:

With all due respect to Mr. Einhorn, I do not see how bleeding Apple�s cash flow to support anyone but those domiciled in the Cayman Islands with a tax-free dividend into perpetuity (and a 10% tax equivalent yield). Income investors and retirees in the US don�t look to the technology sector for a secure retirement. You see, the real problem with Apple shares is that we in the business know the stock is super cheap based on any valuation metrics you like.But retail doesn�t understand [...] Reviewing our Money Flow charts, we see a fascinating phenomenon. Retail non-block money flow is accelerating at a rapid rate, yet institutional block purchases have increased or stayed steady. The problem is that the average American retail investor doesn�t buy P/E ratios. They buy (or sell) share price action. And in the past 6 months, non-block money flow selling has accelerated. That�s right; your neighbor gets scared when share prices fall (but you knew that already.)So I offer a solution that doesn�t cost a dime (well almost). A 10:1 stock split. Mathematically it does nothing except make for a low price. Valuation-wise it�s neutral. Financially, it saves the company from having to dole out billions it needs to fend off its competition from ever getting a stranglehold. More importantly however, psychologically it�s everything. The average retail shareholder will be attracted to a reachable and cheaper share price, as retail is not an insignificant owner [...] By enacting a perpetual preferred share, you hurt Apple in the bad years (which inevitably will happen). And then what do you have left? A hedge fund in the Cayman Islands collecting a 10% tax equivalent dividend forever, and US shareholders end up paying dearly for the privilege.

 

Is Bank of America Under-Reserved?

Is Bank of America (NYSE: BAC  ) facing tens of billions of dollars in legal liability above what it's prepared to absorb? That's the question making its way around the financial blogosphere over the last two weeks. And if you're to believe the accounts, the answer to this question is "yes."

The issue was raised at the end of last week in a guest post by Sunesis Capital's Manal Mehta on the popular financial blog The Big Picture. It then gained momentum yesterday when the prominent bank analyst Mike Mayo of Credit Agricole released a report suggesting the same thing.

The substance of both arguments is the same. In the middle of last year, the bank entered into an agreement with 22 institutional investors and the Bank of New York Mellon (NYSE: BK  ) to pay $8.5 billion to resolve mortgage put-back claims related to $409 billion in mortgage-backed securities issued by Countrywide Financial between 2004 and 2008. That settlement is now being challenged in court by other investors in the securities, and both Mehta and Mayo are arguing that B of A hasn't set aside enough capital to cover the losses if the settlement is set aside by the court.

Mehta and Mayo are right ... kind of. As I discussed at length in this series on B of A's remaining legal liability, the so-called BONY settlement is a central piece of B of A's legal strategy. The nation's second largest bank by assets has already paid out more than $35 billion, excluding legal fees, to settle claims related to Countrywide's malfeasance in the lead-up to the financial crisis. In addition, by my estimate, it still has somewhere between $15 billion and $25 billion in exposure beyond stated reserves that it needs to clean up before all is said and done.

This is assuming the BONY settlement is approved. If it isn't, as Mehta and Mayo point out, the damages could be significantly higher. Of the $409 billion in mortgages that Countrywide securitized and sold to private investors between 2004 and 2008, a full $113 billion of them have subsequently either gone into default or are severely delinquent -- that is, more than 90 days past due. This translates into roughly $30 billion in liability, according to an analysis of "some mortgage and account experts" cited by Mayo. That's $21.5 billion more than the $8.5 billion that B of A set aside for the settlement.

If this is to be believed, then it's safe to say that B of A is grossly under-reserved as Mehta and Mayo assert. However, there are two critical problems with their rationale. The first is semantic but extremely important. In accordance with applicable accounting guidance, banks set aside reserves for litigation and regulatory matters only when those matters present loss contingencies which are both "probable and estimable." Thus, the fact that a bank faces liability beyond allocated reserves doesn't necessarily mean that it's under-reserved. It could mean that. But it could also mean that the loss contingency isn't both probable and estimable. And in B of A's case, it's the latter explanation that seems to be most accurate.

It's tempting to conclude that B of A must have steamrolled its adversaries in the BONY settlement. How else could the latter have agreed to accept only $8.5 billion in exchange for the release of $30 billion in legal liability? This conclusion, however, simply doesn't square with the facts. Among the 22 institutional investors involved in the BONY settlement are BlackRock (NYSE: BLK  ) and Pimco, two of the largest, most admired, most sophisticated financial firms in the world. According to Ralph Schlosstein, CEO of investment bank Evercore Partners (emphasis added): "BlackRock is one of, if not the, most influential financial institutions in the world." With this in mind, B of A's reliance on the BONY settlement to inform its reserve levels seems entirely reasonable. In fact, I'd go so far as to say that doing otherwise, as Mehta and Mayo suggest, may run afoul of accounting guidelines.

The second problem with Mehta and Mayo's rationale concerns their fixation on the methodology used by the Bank of New York Mellon's experts to arrive at the $8.5 billion figure. According to an account of Mayo's report, the consultant "appears to have used a faulty methodology," may have been conflicted due to previous work at Merrill Lynch, and that his firm "is comprised of four people who lack impressive credentials and expensive office space." While all of these may be legitimate concerns, absent the observation about the cost of the firm's office space, they're nevertheless peripheral issues.

The central question in the BONY settlement legal challenge, which is predicated on trust law, isn't whether or not the settlement is fair per se. The issue is rather whether or not Bank of New York Mellon, acting in its capacity as the trustee for roughly 500 mortgage-backed securities, erred in the exercise in its discretion when entering into the $8.5 billion agreement. Again, while this may appear to be merely semantic, it's fundamental, as Reuter's Alison Frankel explains (emphasis added):

Under trust law, the bar for blocking a decision by the trustee is incredibly high. Anyone with an interest in the trust has a right to challenge the trustee's decision. But unless objectors can show that the trustee, in this case BoNY, abused its discretion, acted unreasonably, or otherwise breached its fiduciary duty to the trusts' beneficiaries, the court is not supposed to interfere with the trustee's power.

This puts the challengers of the settlement at an incredible disadvantage vis-a-vis B of A. Does it mean they will lose? Not necessarily. But it does mean that the odds are stacked in B of A's favor. Thus, to get back to Mehta and Mayo's arguments, this legal reality lends further credibility to B of A's reliance on the BONY settlement to calibrate its reserves.

The Foolish bottom line
At the end of the day, as I discussed at length in this series on B of A's legal liability, there's no question that the bank faces many billions of dollars in additional exposure for the sins of Countrywide Financial -- I estimate the figure at between $15 billion and $25 billion in excess of allocated reserves. And there's also no question that a rejection of the BONY settlement could dramatically add to this range. But that's a far cry from saying B of A is under-reserved, and both Mehta and Mayo should know better than to make that mistake.

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Golf Clap for URS

URS (NYSE: URS  ) reported earnings on Feb. 25. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 28 (Q4), URS met expectations on revenues and met expectations on earnings per share.

Compared to the prior-year quarter, revenue increased significantly. GAAP earnings per share grew significantly.

Gross margins dropped, operating margins shrank, net margins grew.

Revenue details
URS logged revenue of $2.97 billion. The 10 analysts polled by S&P Capital IQ wanted to see revenue of $2.94 billion on the same basis. GAAP reported sales were 24% higher than the prior-year quarter's $2.39 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.95. The 12 earnings estimates compiled by S&P Capital IQ forecast $0.96 per share. GAAP EPS of $0.95 for Q4 were 157% higher than the prior-year quarter's $0.37 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 5.5%, 800 basis points worse than the prior-year quarter. Operating margin was 4.7%, 10 basis points worse than the prior-year quarter. Net margin was 2.4%, 120 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $2.93 billion. On the bottom line, the average EPS estimate is $1.14.

Next year's average estimate for revenue is $11.78 billion. The average EPS estimate is $4.56.

Investor sentiment

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on URS is outperform, with an average price target of $48.08.

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• Add URS to My Watchlist.

Guidewire Software Beats on Both Top and Bottom Lines

Guidewire Software (NYSE: GWRE  ) reported earnings on Feb. 26. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Jan. 31 (Q2), Guidewire Software beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly. Non-GAAP earnings per share grew significantly. GAAP earnings per share grew.

Gross margins dropped, operating margins shrank, net margins increased.

Revenue details
Guidewire Software chalked up revenue of $72.2 million. The five analysts polled by S&P Capital IQ wanted to see a top line of $64.3 million on the same basis. GAAP reported sales were 31% higher than the prior-year quarter's $55.1 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.21. The six earnings estimates compiled by S&P Capital IQ averaged $0.02 per share. Non-GAAP EPS of $0.21 for Q2 were 31% higher than the prior-year quarter's $0.16 per share. GAAP EPS of $0.09 for Q2 were 29% higher than the prior-year quarter's $0.07 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 56.5%, 590 basis points worse than the prior-year quarter. Operating margin was 7.0%, 270 basis points worse than the prior-year quarter. Net margin was 7.6%, 90 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $69.5 million. On the bottom line, the average EPS estimate is $0.03.

Next year's average estimate for revenue is $284.7 million. The average EPS estimate is $0.29.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 15 members out of 29 rating the stock outperform, and 14 members rating it underperform. Among 13 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), three give Guidewire Software a green thumbs-up, and 10 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Guidewire Software is outperform, with an average price target of $35.50.

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• Add Guidewire Software to My Watchlist.

Big Data and Big Banks: What’s the Big Deal?

Big data is big news, as businesses of all stripes rush to mine the treasure troves of consumer information that will make targeting their specific products so much easier and more profitable. Big banks are looking to cash in on this new marketing tool, as well -- but the fruits of such a revolution may be a very long way off.

Information right at their fingertips
For banks, the idea of big data seems like a no-brainer. Not only do they have much sensitive personal information obtained through the account-opening process, but they also have access to so much more. If you want to know what a customer's shopping proclivities are, where better to look than at their credit card, debit card, and checking account statements?

So far, however, it has not been so easy. Although banks generate boatloads of data about their customers, they seem at a loss as for how to use it. A recent study�by Celent notes that banks should start with their own reams of data before attempting to parse information gathered by outside entities. For example, why not parse data gathered through the aforementioned bank accounts before trying to make marketing sense of social media chatter?

A hefty investment is needed to utilize big data
Another thing that may have held banks back is cost. As many big banks have cut expenses and streamlined operations, that sort of investment may have been seen as too high. Analysts note�that it is not inexpensive to collect, store, and scrutinize the type of data that banks typically collect. The technology investment can be sizable, which is probably why the trend is starting with the biggest banks.

The Wall Street Journal�reports that Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , JPMorgan Chase (NYSE: JPM  ) , and Wells Fargo (NYSE: WFC  ) are leading the way in the use of big data, crunching consumer information to discover which of their customers will make the best consumer of additional banking products. JPMorgan is also using analyzed credit card information in conjunction with government statistics to create reports on consumer behavior for some of their clients.

Bank of America, meanwhile, admits to using only about 1% of the 65 petabytes�-- each unit of which is equal to 1,000 terabytes�-- of information it has on its customers. The bank recently used at least some of this vast amount of data to rejigger its cash management offerings to better suit customers. For its part, Citi has used big data to help its international clients better assess which emerging markets to move into.

Will Big Data help plump the bottom line?
The marketing potential seems endless here, but it will obviously take some time for banks to see some real profits from Big Data analytics. Big banks have already begun, however, and new products to aid them in their quest for more structured data are on the way.

One such platform, Looop, should be available soon. The product, which was created by banking IT specialists, promises to help banks see "granular detail," of customers' credit card use. Once they learn how to use it effectively, banks may find that they need look no further for data than their own backyard.�

Citigroup's stock looks tantalizingly cheap. Yet the bank's balance sheet is still in need of more repair, and there's a considerable amount of uncertainty after a shocking management shakeup. Should investors be treading carefully, or jumping on an opportunity to buy? To help figure out whether Citigroup deserves a spot on your watchlist, I invite you to read our premium research report on the bank today.�We'll fill you in on both reasons to buy and reasons to sell Citigroup, and what areas that Citigroup�investors need to watch going forward.�Click here now�for instant access to our best expert's take on Citigroup.

Teva Pharmaceutical Earnings: An Early Look

Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Teva Pharmaceutical (NYSE: TEVA  ) . The drug company has a unique balance, profiting from generics on one hand yet having its own proprietary drugs on the other. Let's take an early look at what's been happening with Teva Pharmaceutical over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Teva Pharmaceutical

Analyst EPS Estimate	$1.33
Change from Year-Ago EPS	(16%)
Revenue Estimate	$5.26 billion
Change from Year-Ago Revenue	(7.4%)
Earnings Beats in Past 4 Quarters	3

Source: Yahoo! Finance.

Will Teva Pharmaceutical stay healthy?
Analysts have been pretty certain about their estimates for Teva Pharmaceutical in the just-concluded quarter, but over the past three months, they've pulled in their estimates for the first quarter and full-year 2013 sharply. The stock has been equally pessimistic, falling almost 8% since early November.

Teva is best known for its generic versions of off-patent drugs. Given how much less expensive generic versions are compared to their branded equivalents, health-care advocates argue that they're essential to keeping drug costs down, even though they also discourage innovation. Teva hasn't been content to stick with generics solely, though, also working on branded drugs. Its blockbuster drug is Copaxone, which is a treatment for multiple sclerosis.

For Copaxone, though, competition is on the horizon. Teva filed what's known as a citizen's petition with the FDA to try to delay approval of Biogen Idec's (NASDAQ: BIIB  ) BG-12 treatment for MS, which will go up directly against Copaxone if approved.

Meanwhile, Teva is looking to for future growth from biosimilars, which currently represents an untapped market. Biologic drugs have been a promising area for branded-drug makers, and Teva is a player in that field, with its Tbo-filgrastim set to launch late this year to go up against Amgen's (NASDAQ: AMGN  ) Neupogen. But if biosimilars -- essentially generic versions of biologics -- work as well as generic drugs have, then Teva could pioneer a whole new profit center.

In Teva's quarterly report, investors need to watch how the company plans to address the trend toward branded-drug makers marketing their own post-patent generic versions to retain sales. Pfizer (NYSE: PFE  ) did that extremely well when Lipitor went off-patent, and if others follow suit, Teva needs a better plan than just cost savings to come out the competitive winner in the space.

Find the best stocks
Regardless of whether you like drug stocks, the best investing approach is to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of.�Click here now�to keep reading.

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Seven reasons why Europe matters to U.S. markets

While Italian elections rocked global financial markets this week, there are more problems in Europe than Italy. All of them matter to U.S. investors because what happens in Europe won't stay in Europe.

No matter how hard we try to ignore it, Europe is a sinking ship.

On numerous occasions, economist Nouriel Roubini has referred to the euro zone as a "slow motion train wreck." Many investors might believe that Europe's problems are Europe's problems and not ours, but, unfortunately, nothing could be further from the truth.

Here's why what happens in Europe matters to U.S. investors:

1. In 2011, the United States exported $319 billion in goods to the 17-nation euro zone, which makes it our biggest trading partner. American exports to the broader 27-nation European Union totaled $463 billion during that year.

2. Europe represents more than 10% of S&P 500 revenue, and 20% of the Gross World Product comes from the euro zone. According to the IMF, the 27-nation European Union had a GDP of over �12.629 trillion (US$17.578 trillion) in 2011, making it the world's largest economy.

3. The euro zone has been in recession since the second quarter of 2012, when its economy contracted by 0.2%. On Feb. 14, Eurostat reported that the euro-zone recession deepened as fourth-quarter GDP fell by 0.6% in the 17-nation euro area (EA 17) and by 0.5% in the broader 27-nation European Union (EU 27). A Feb. 25 report from the European Commission forecasts the euro-zone economy will contract by 0.3% in 2013.

4. The "core" of Europe is shrinking as France and Britain are in recession, and even Germany, the euro zone's strongest economy, is starting to sink with a 0.4% contraction during the fourth quarter.

5. Italy was the big newsmaker this week, and the election outcome casts a longer shadow over the future of the country and Europe as a whole. Italy is important because of its gigantic debt load, second only to Greece in terms of high debt-to-GDP ratio. At just over $2 trillion American dollars, Italy has the third largest amount of outstanding government debt in the world and the largest amount of debt in Europe.

U.S. banks have "moderate exposure" to Italy, according to Fed Chairman Bernanke's testimony to Congress on Tuesday, and the prospect of a hung Parliament puts the country's austerity programs in jeopardy. Bond yields are spiking, a sovereign default is a more likely possibility, and this is bad news for countries like Germany which owns over $40 billion worth of Italian bonds. A look at iShares Italy ETF EWI �tells us all we need to know about Italy:

PIMCO’s El-Erian: Arab World Strife Fuels Short-Term Stagflation, Long-Term Stability

PIMCO CEO Mohamed El-Erian wrote in a Tuesday op-ed in The Financial Times that while global markets initially paid little attention to the unfolding events in Tunisia and Egypt, those countries have sparked a region-wide “tipping point” for change in the global economy that is beyond the control of Western nations.

El-Erian (left) pointed out that, although the two nations that saw the beginning of social unrest now spreading throughout the region were not significant players in the world economy, they have been “catalysts for a broader phenomenon of change that is gaining systemic importance.” He went on to cite two developments that he said were of particular importance “when it comes to global demand and price dynamics.”

First is the increase in oil prices because of the involvement of oil exporter Libya and the global response to greater supply uncertainty. Second is the change in dynamics, as demonstrations that were popular in Tunisia and Egypt gave way to violence in other Middle Eastern/North African (MENA) nations with governments responding to protests with force.

In the short run, said El-Erian, the result will be stagflationary, thanks to three factors: “First, higher oil prices will increase production costs and act as a tax on consumers. Second, greater precautionary stockpiling around the world will intensify pressures on commodities as a whole, aggravating the impact of demand-supply imbalances and large injections of liquidity. Third, the region will be a smaller market for other countries’ exports.”

While Western nations can do little but watch ongoing protests, he continued, they can take a more active role in the emerging democratic movements in Tunisia and Egypt. However, financially, Western economies “have little room left for further demand stimulus.”

Yet higher commodity prices, coupled with higher risk aversion in the markets, said El-Erian, would ease off “as the impact of greater long-term stability in a key part of the world is felt. In the long term, after all, democracy and individual freedoms are the best drivers of prosperity.”

Indications: Stock futures up; Bernanke, Italy in focus

MADRID (MarketWatch) � Attempting to shake off Italy-inspired global market turmoil, U.S. stock index futures pointed to a slightly higher open Tuesday with investors eyeing upcoming testimony from Federal Reserve Chief Ben Bernanke and data expected to show a rise in new-home sales and consumer confidence.

On the earnings front, Home Depot Inc. HD beat Wall Street earnings expectations.

Futures for the Dow Jones Industrial Average DJH3 rose 19 points, or 0.1%, to 13,807, while those for the Standard & Poor�s 500 index SPH3 rose 1.8 points, or 0.1%, to 1,489. Futures for the Nasdaq 100 index NDH3 rose 1.75 points to 2,704.

Click to Play Dow suffers worst session of 2013

Blue-chip stocks headed toward their third decline in four sessions as Italian election exit polls raised fears the country might abandon austerity measures. Paul Vigna has details on The News Hub.

Gains came as heavy selling hit most risk-assets with Europe and Asia markets tumbling after an inconclusive Italian election result triggered renewed fears of political instability in the euro zone. Gold and the yen were among the few assets gaining. For Wall Street, a sharp bout of selling came just before the close on Monday.

Strategists said it would be hard for U.S. investors to step around the Italy mess for Tuesday.

�A revival of the European debt crisis as a consequence of the Italian elections yesterday will definitely make investors worry more, and I think we�ll see a period of time here where the major feeling will be risk off instead of risk on,� said Henrik Drusebjerg, senior strategist at Nordea Bank.

Drusebjerg said futures may not hold on to those gains much longer, though consumer confidence data may provide some support for Wall Street if it comes in as expected. The Conference Board�s consumer confidence index is due for release at 10 a.m. Eastern time and economists expect the gauge to bounce back from 58.6 to a reading of 62.3 for February. The Tell: What to watch on the U.S. economy on Tuesday.

It is one of a number of reports, but the one that will be the most closely watched on Tuesday. At 9 a.m. Eastern, there are two housing reports due, Case-Shiller and the FHFA home price index. The Case-Shiller index showed home prices declined slightly in November, but rose 5.5% against the same period a year ago.

Also at 10 a.m. Eastern, data on new-home sales is expected to show a rise to a seasonally-adjusted annual rate of 384,000 in January from 369,000 in December, according to a survey from MarketWatch.

And the Fed�s Bernanke goes before the Senate Banking Committee at the same time for the first of two days of testimony on the U.S. economic outlook. Read: Bernanke may push back against hawkish talk and Bernanke bump: Stocks tend to rally on testimony.

Looming spending cuts in the U.S. were another reason the Dow Jones Industrial Average DJIA had its worst session of the year on Monday, closing down 216.40 points, or 1.6%, to 13,784.17. March 1 is the deadline for U.S. lawmakers to reach a deal to avoid automatic spending cuts, known as sequestration. Read: U.S. stocks slide as Italy, sequestration hit.

The other reason was Italy�s parliamentary election. Turmoil swept through Europe markets for a second day on Tuesday after voters in Europe�s third-largest economy delivered an inconclusive result. See The Tell: ECB bond-buying program might not be there to save Italy.

AFP/Getty Images Enlarge Image Former Italian Prime Minister Silvio Berlusconi speaks at a rally earlier this month.

In a sign of backlash by Italian voters over austerity programs, former comedian Beppe Grillo�s antiausterity 5-Star movement was the largest single vote winner with around 25% of all votes. Former Prime Minister Silvio Berlusconi�s center-right alliance narrowly missed winning enough votes to form a majority in the Senate, while a center-left alliance headed by Pier Luigi Bersani won a narrow majority in the lower house.

Economist Nouriel Roubini tweeted this Tuesday: �Italy is headed to new elections within six months as election results make Italy ungovernable. It is political, economic [and] financial chaos.� Read: 'Ungovernable' Italy: Debt crisis back on table.

�Yesterday, markets took a play that the Italians would vote sensible, but they didn�t,� Drusebjerg said. �Nobody expected that. That�s one surprise. The previous surprise is that Berlusconi has any kind of chance to return to politics.�

The Stoxx Europe 600 index XX:SXXP fell 1.2%, while Italy�s benchmark FTSE MIB index XX:FTSEMIB sank 4.4% as Italian banks tumbled. Read: Italian election gridlock rattles European markets.

Yields on Italian bonds surged, while the euro was getting close to its January low versus the dollar. Read: Euro slides further as Italy vote rattles markets.

Investors moved toward the Japanese yen and gold for safe-haven cover, while crude oil prices also dropped 83 cents to $92.28 a barrel. Also read: Goldman Sachs cuts 2013 price forecast.

In corporate news, Home Depot HD reported fourth-quarter profit rose 32%, but the home-improvement retailer said it expected 2013 fiscal year earnings of around $3.37, below the$3.49 consensus forecast. Shares rose 1% in premarket action. See: Home Depot's net jumps 32% on extra week results.

In other corporate news, RadioShack Corp. RSH said it swung to a loss of $63 million, or 63 cents a share, in the fourth quarter, while same-store sales dropped 7%. See: RadioShack swings to loss in Q4, misses views.

R.R. Donnelley & Sons Co. RRD said its fourth-quarter loss widened as the largest U.S. commercial printer posted higher impairment charges and said revenue shrank. See: R.R. Donnelley loss widens on impairment charges.

Is Naughty Behavior Keeping Bank of America Down Today?

It's lunch time on this drab Monday, and it looks like both the Dow�and the S&P 500 (SNPINDEX: ^GSPC  ) are sleeping in, with both indices looking pretty peaked at the moment.

In the financial sector, doom and gloom is all around, too. Bank of America (NYSE: BAC  ) is down by 1.44%, and fellows JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) are in the dumps, too, with a drop of 0.78% for the former and a decrease of 1.14% for the latter.

What's the problem today?
As fans of the TBTF sector are doubtless aware, B of A had a rough road last week, which many have attributed to the announcement that CEO Brian Moynihan had been handed a nice, fat raise. Not that the man doesn't deserve it -- when's the last time you saw a capital ratio of 9.25%? Still, the news did seem to cause a dip in the stock's price.

However, that was then, and this is now. Surely, the pay raise doesn't still rankle, as investors have had the weekend to chew and digest that particular nugget. And what to make of the malaise evident in the other two big banks?

I think a couple of other news bites are to blame for the sluggishness in the banking sector today. One is the news regarding the bank's progress on the $25 billion fraudulent foreclosure settlement, and the other has to do with payday loans.

Banks again are seen as stepping on customers
While banks have certainly made headway in the above referenced settlement, the news that less of the money set aside to put wrong to right is helping troubled borrowers doesn't put banks in a very good light. Bloomberg reports that banks have made heavy use of short sales, which gets the job done, but also put people out of their homes. Needless to say, these types of sales are much more lucrative for banks.

In another instance of bad behavior, The New York Times reported over the weekend that major banks such as B of A, JPMorgan, and Wells Fargo have been assisting shady payday lenders in their quest to invade customers' accounts in order to secure repayment -- essentially by ignoring customers' requests to halt automatic withdrawals by these operators.

Are banks now suffering for their nefarious ways? It's certainly possible, with B of A suffering more with the additional drag of last week's news. Tomorrow's another day, though, so stay tuned.

As Foolish, long-term investors, we recognize the need to keep the one-day jumps and jives of a stock in perspective. Even stocks have good days and bad days, so it's important to realize that sometimes they're not portents of dire news, but merely squiggles that we can safely ignore.�

Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy, and as an added bonus, you'll receive a full year of FREE updates and expert guidance as key news breaks.

Should You Buy CRH?

LONDON -- I think investors should shift out of�CRH� (LSE: CRH  ) owing to its seriously lofty valuation. I expect earnings growth to remain under pressure for some time due to a patchy outlook for the American and European building markets, and prospective dividends could come under heavy fire as a result.

Broker Liberum Capital last week affirmed a 1,150 pence price target for CRH's stock, a rating that is down almost 20% from current levels.

Market weakness continues to increase
CRH, which supplies and distributes building materials globally, warned in its November interims that organic sales growth in North America had shrunk substantially during the third quarter. The firm also admitted the rate of decline had also accelerated in Europe.

It all meant sales were 3% lower than the corresponding period of 2011.

The company now expects earnings before interest, taxes, depreciation and amortization to dip to 1.6 billion euro in 2012 from the 1.65 billion euro achieved the previous year. The results for 2012 are scheduled for release tomorrow.

Although CRH continues to build its exposure to emerging markets such as India, China, and Eastern Europe, these operations are not currently meaty enough to offset the ongoing difficulties reported within its key Western markets.

Premium price built on shaky foundations
City analysts expect earnings per share (EPS) to nosedive 62% in 2012 to $0.73. EPS for 2013 is put at $0.85, a 16% bounce-back, and experts predict a further 32% gain in 2014 to $1.12.

Meanwhile, a forecast P/E ratio of 18.8 and 14.2, respectively, for 2013 and 2014 -- although down from 21.7 last year -- remains too elevated, in my opinion, given the huge earnings risk.

You see, I believe that subdued industry conditions should continue to depress CRH's performance over the medium-to-long term and put even these modest numbers under pressure.

Perilous payout potential
CRH does at least offer investors a dividend yield north of the FTSE 100 average of 3.5%. A reading of 3.9% is anticipated by City analysts at present, although this figure is down from the 4.3% yield available last year. A yield of 3.9% and 4%, respectively, are estimated for this year and the next.

But in my opinion, further earnings collapses could, once again, place future dividends in jeopardy. Indeed, the payout is covered only 1.3 and 1.7 times for 2013 and 2014, respectively. A figure under 2 is usually categorized as particularly risky.

Instead of CRH, I recommend you take a look at this�exclusive, in-depth report�about a FTSE 100 high-income opportunity that could really propel the income from your stock portfolio.�The blue chip in question offers a 5.7% income, might be worth 850 pence vs. around 700 pence now, and has just been declared "The Motley Fool's Top Income Stock for 2013."�Just click here�to download the report --�it's absolutely free.

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Best Buy Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Best Buy (NYSE: BBY  ) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Best Buy has suffered greatly from the shift toward online commerce and its impact on the big-box electronics industry. Let's take an early look at what's been happening with Best Buy over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Best Buy

Analyst EPS Estimate	$1.53
Change From Year-Ago EPS	(38%)
Revenue Estimate	$16.32 billion
Change From Year-Ago Revenue	(2.1%)
Earnings Beats in Past 4 Quarters	2

Source: Yahoo! Finance.

Will Best Buy finally move forward?
Analysts have seen a mixed picture for Best Buy in recent months, having added a penny to their earnings-per-share estimates for the just-ended quarter but having slightly cut their full-year fiscal 2014 projections for the company. The stock, though, has soared nearly 50% as shareholders hope for an easy exit through a takeover bid.

Best Buy has been the highest-profile victim of the showroom phenomenon, whereby customers come into its stores to see products in person, only then to buy them online at cheaper prices. Although retailers across the spectrum have felt the pressure from Amazon.com and other online sellers, the high-priced nature of electronics makes the stakes especially high for Best Buy.

But Best Buy has seen better conditions recently, with promotion of mobile devices and its own direct-to-consumer sales channel resulting in strong holiday traffic. It's also fighting back by offering a price-match policy that will include not just retail locations but also online sites, including Amazon. The strategy will inevitably compress margins on the sales that Best Buy is able to make, but the company hopes that customers will at least make the purchases at Best Buy rather than going elsewhere, losing every bit of business for the big-box company.

Hanging over investors, though, is what co-founder Richard Schulze will do. After Schulze discussed making a buyout bid for the whole company, some now believe he'll settle for adding to his existing stake. That won't give shareholders the immediate payoff they would have gotten, but it would allow them to benefit if Best Buy continues to recover.

In Best Buy's quarterly report, look closely to see how much discounting the retailer had to do to drive traffic over the holidays. Best Buy is fighting hard, but it still faces an uphill battle in fending off its strong competition.

Get the full story on Best Buy from the Fool's premium research report on Best Buy, in which we examine the brick-and-mortar company from all sides. Our top retail analysts answers whether the future looks brighter for Best Buy with an in-depth look at the company. Get your copy today, along with a free year of updates -- just click here now to claim your comprehensive report today.

Click here to add Best Buy to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

What Will Drive Bank Stocks This Week?

In the following video, Motley Fool financial analyst David Hanson tells us about three major announcements coming up this week that banking investors are going to want to keep up with.

First, on Tuesday at 9 a.m. ET, the Federal Housing Finance Agency and Case-Shiller announce housing numbers, which will be big for the three biggest players in the mortgage origination market, Wells Fargo (NYSE: WFC  ) , JPMorgan Chase (NYSE: JPM  ) , and Bank of America (NYSE: BAC  ) . Next, Ben Bernanke will make a pair of announcements -- one at 10 a.m. on Tuesday to the Senate Banking Committee, and another at 10 a.m. on Wednesday to the House Financial Services Committee. Many will be listening closely to those announcements after the Fed released its minutes last week, which suggested that QE3 may be coming to an end sooner than previously thought. If so, it could have a wide range of impacts on the banking sector.

Finally, we get a few more broad economic stats, as we hear on Thursday the jobless claims and GDP numbers. In the video, David tells investors what the key things will be to listen for in these announcements, and how to interpret the numbers.

Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, financials bureau chief, lift the veil on the bank's operations, including three reasons to buy and three reasons to sell. Click here now to claim your copy, and as a bonus, you'll receive a full year of free updates and expert guidance as key news breaks.

Why Buffett Bought H.J. Heinz

LONDON -- As we age, we change.�Warren Buffett�is quite a different investor from his early days. His investing style has evolved. In his callow youth, Buffett started out investing in smaller, unloved, discarded companies -- the so-called "cigar butts" that his mentor�Ben Graham�was so keen on.

Later, he started to buy into companies that weren't cigar butts, but that appealed to his value and contrarian instincts. This was Buffett's Golden Age, when he churned out astonishing rates of return year after year.

More out of necessity than choice
But as Buffett turned�Berkshire Hathaway�from a dilapidated textile mill to the investing equivalent of the Sistine Chapel, the Oracle of Omaha was faced with a big difficulty. More out of necessity rather than choice, his investment style had to change.

When his investment funds numbered in the millions of dollars, he could basically invest as any private investor would. But when his investment funds numbered in the tens of billions, this was no longer possible. If you have $10 billion to shell out every year, there are only so many $100 million companies you can buy.

So when you get bigger, investing gets more difficult; potential opportunities are fewer and farther between. I think this is one of the major reasons why Buffett's investment return over the past decade, although still decent, is less than half the average return he achieved throughout the length of his career.

Turning it around
So, on to�Heinz� (NYSE: HNZ  ) . On the face of it, not a good deal. After all, why would the notoriously miserly Buffett splash out billions to buy a run-of-the-mill consumer goods company at a rather pricey P/E ratio of 21?

Well, it's quite simple, really: He didn't. Out of the $13 billion he has paid for, $9 billion is in the form of preference shares and only the remainder is in equity. It is thought that Buffett will receive a yield of 9% from these preference shares, which outperforms the dividends paid by pretty much any high-yielding blue chip you can think of. In the next few years, Buffett will be banking the bulk of Heinz's profits. This is a deal that only someone with the financial muscle of a Berkshire Hathaway could pull off.

Quite simply, Buffett has figured out that while Berkshire Hathaway's size is a disadvantage as far as traditional value investing is concerned, he can draw on Berkshire's financial clout to get the best deals in terms of preference shares. He pulled off the trick with�Goldman Sachs,�Bank of America, and now Heinz.

Perhaps we should not be surprised to see that, with typical panache, Warren Buffett has turned his main disadvantage to a singular advantage. His ability to spot trends early, and to capitalize on them, and to coolly work out a company's potential and ignore the noise, has been the secret to his investing success.

It has also led him across the Atlantic to invest in a particular British company. Find out about "The British Business That Warren Buffett Loves"�in this�free report.

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