One of the best feelings you can experience as an investor is waking up and reading about the acquisition of one of your stocks. I enjoyed this recently with Met-Pro (MPR), which I held in my Top 20 Model Portfolio and was one of my largest positions in my Conservative Growth/Balanced Model Portfolio at Invest By Model. Unfortunately, this type of windfall hasn't been that frequent of late, at least for me.

While I don't typically make potential acquisition my central thesis, it is a factor that I take into consideration. One part of the market that I think could see some M&A activity is the retailer industry. While retailers don't typically buy other retailers, though there are exceptions, retailers are often acquired by private equity firms. Most recently, True Religion (TRLG) announced that it will be acquired by TowerBrook Capital (5/10 announcement). Earlier this year, Hot

In what can only be described as a two-minute drill, Medical Marijuana Inc. (MJNA.PK) delivered on its promise to get its Q1 OTC filing with audited Q1 results posted by 5/15, as the company had indicated in its 4/30 press release. I am going to give it a double-asterisk: One for the fact that it posted just a few minutes before midnight in California (where the company is based) and another for the fact that it posted incompletely, with the footnote 4 truncated and numbers 5-12 missing.

Like any report, investors will have different takeaways. The bottom-line from my perspective is that there were many negatives, but I also see some promise in improved transparency. The stock sold off after initially opening a bit higher, but it had run up over the past few days, perhaps due to TD Ameritrade apparently lifting its DTC Chill that prevented its

Looking at stock returns over very long periods reveals two key determinants of price: Earnings and interest rates. While everyone will probably agree that earnings are important, many find the relationship between interest rates and stocks to be confusing. Many believe that low interest rates now are causing stocks to be bid up too aggressively and fear that the possible end of quantitative easing by the Federal Reserve could lead to a correction in the S&P 500 (SPY) or even a new bear market. Charts like this surely suggest we should fear the end of easy money:

(click to enlarge)

This is from Jeff Gundlach's presentation this week. A quick glance at this chart, which shows how the market rallied every single time the Fed was engaged in QE, and it's obvious that the entire rally from 2009 has been built by Fed manipulation, right? I believe that correlation

I have been so focused on transparency and accounting issues that I have missed what may be an even bigger part of the story: Medical Marijuana Inc. (MJNA.PK) gets no benefit from sales of Dixie Elixirs and other Dixie products in Colorado. I first learned of this on a message board where "StevenRisk" suggested this idea. Given that this certainly wasn't apparent to me after almost three months of studying various aspects of the company, I went back to the filings and press releases in order to understand the relationship better.

While it seems that management doesn't go out of its way to clarify the issue, it's all there in black and white: MJNA owns the brand only (60% actually) and not the company. This is very important because many investors seem to equate success of Dixie Elixirs with potential success for the stock, mistakenly assuming that sales

With a rallying market that has been driven more by valuation expansion than by earnings growth, bargains are getting more and more difficult to find. With little evidence of earnings acceleration and stocks more fairly valued in aggregate now, the hunt for value is more challenging and requires more effort. One area that has intrigued me recently with respect to potential opportunities is when companies have separate operating units performing differently from one another or have engaged in M&A with near-term dilution (which isn't always negative!). Because most investors apply valuation metrics to the overall company, this can lead them to miss out on a potential bargain, especially among smaller and less widely followed names. As I will describe, the opportunities arise potentially from M&A, expensive internal development or sub-par performance at an operating unit.

An Exaggerated Example

To illustrate the point, let's consider a hypothetical company that has:

• 10mm

I first learned of Medical Marijuana, Inc. (MJNA.PK) in February, when anonymous, self-proclaimed short "Infitialis" called the company a "fraud heaped on top of folly." Fascinated by the story, I spent that weekend learning more about the company and other marijuana-related names, quickly concluding that the stocks were in a bubble. I have followed up with a series of articles that question the company's financials, most recently describing how Medical Marijuana, Inc. appears to have used very aggressive revenue recognition in the fourth quarter last year.

As I continue to dig deeper to better understand this company's history, I am becoming more confident that the management team has indeed been dishonest. While Infitialis raised a lot of issues about the backgrounds of some of the people involved, the article failed to point to what may be the single most alarming aspect of the story: Hemp Deposit

The healthcare sector is leading the way in 2013, up almost 19%, and 8% ahead of the S&P 500's 10.94% price return. The third largest sector of the S&P 500 (after Technology and Financials) has 53 members, but the performance has been quite varied. Several biotechs are soaring, and almost all of the stocks are up. The rising tide, though, is failing to bring along these five:

(click to enlarge)

I have sorted the list on the basis of YTD return and included a few more attributes, including a look at the balance sheet performance over the past year, the PE ratio and how it compares to the median of the past 10 years, earnings growth, earnings revisions and the dividend yield. What ails these laggards? Let's look at each of them to evaluate the prospects for a speedy recovery.

Edwards Lifesciences (EW)

(click to enlarge)

EW was hammered following

Medical Marijuana Inc. (MJNA.PK) has been selling off for the past two months despite an abundance of good news, including bullish guidance for 2013 and 2014 and a strong Q1. Not even the 4/20 celebration was able to shake the stock out of its downward trajectory, as the stock just tested the low price since rocketing to .50 earlier this year, trading as low as .185 as it sold off on massive volume before closing near .21:

(click to enlarge)

For some background, I have written about MJNA several times since mid-February:

• 2/18: Industry Bubble
• 3/5: Questionable Transaction with CannaVEST
• 4/12: Why MJNA Has Been Weak

My thesis has been that the company has questionable financials, and that is the issue I want to explore more closely now that they have amended their Annual Statement as of 4/24. In my last article, I had suggested that we need to wait

After two nasty dividend cuts on S&P 500 stocks earlier this year, it's not surprising that investors are questioning the likelihood of Pitney Bowes (PBI), which offers the 2nd-highest yield in the S&P 500 at 10.5%, sustaining this generous payout. While the CenturyLink (CTL) and Cliffs Natural Resources (CLF) reductions announced on February 13th were surprises that led to sharp declines in their stocks, there has been significant discussion about PBI already. Adding fuel to the fire regarding a potential reduction, the company skipped raising it in January, breaking from its historical practice in recent years. I believe that the recent pullback reflects nervousness regarding this issue, as the company will be reporting Q1 EPS on 4/30 and hosting an Investor Meeting on 5/3. While PBI's board could decide to reduce the payment, it would be unnecessary in my view. Given some concern perhaps that they might be about to

International Business Machines (IBM) was hammered on Friday after reporting weak Q1 results. Curious about the implications for the market and to learn if this is one of those inevitable dips that offer an opportunity for entry into a blue-chip name, I turned to the conference call transcript to gain insight. What I learned was very surprising, but it had nothing to do with what was said or even what was not said. Rather, I was disappointed to discover that CEO Ginni Rometty wasn't on the call. Now, I don't follow IBM closely, so I wasn't aware, but this was business as usual. Since becoming CEO over a year ago, she is now 0 for 5! To her credit, she does write a nice annual letter.

I guess it's not so unprecedented for a CEO to disregard the common practice of participating in quarterly conference calls. A great

When the market and the economy plunged into an abyss in 2009, we knew we were in a new world. It didn't take too long for PIMCO to coin the term "New Normal", which was its description of what a post-apocalypse economy might look like (and a fairly accurate one!). Investors took their cue and anointed two assets as "safe": bonds and gold. Both of those asset classes provided very strong returns, but in 2011 the "anything but equities" crowd shifted into a single stock that many discussed as a potential "asset class", Apple (AAPL). The fear trade has eroded, but reflation is far from being fully embraced. Once again, investors are crowding into a part of the market seen as insulated from the risks of global economic contraction, Consumer Staples (XLP).

XLP Goes Parabolic

The story of Q1 was the dominance of non-cyclicals, with Healthcare (XLV), Utilities

Medical Marijuana Inc. (MJNA.PK) is one of the leading stocks in the burgeoning industry that captured investor attention following the elections last year. Many of the other stocks in the sector have given up most of their gains, but MJNA is still trading at 2.5X its year-end close despite losing almost 50% since its February peak:

(click to enlarge)

I first wrote about MJNA when I examined the industry in mid-February and declared pot stocks to be an investing bubble. I shared my negative sentiment on the stock in that article in advance of their shareholder update, which was delayed a couple of days from the 2/17 date that they had previously indicated it would be released.

That release was actually very positive on the surface, as I described in early March when I detailed their questionable transaction with CannaVEST (CANV.OB). Specifically, the company suggested that sales in

In March, Walgreen (WAG) announced a new distribution agreement with AmerisourceBergen (ABC). Described by both parties as transformational, the news sent both stocks soaring subsequently. For every winner, though, is a loser, and in this case Cardinal Health (CAH), which lost the contract, was hit hard, dropping more than 10% over the next two days. Clearly this was a surprise to the market, but investors were aware of the possibility of contract loss or renewal at a lower price, and it appears that the stock may have overreacted. CAH, up just 3% in 2013 and rather flat over the past two years, has trailed peers and the Healthcare sector in general and offers a good entry for conservative growth investors, with the potential for 34% price appreciation over the next year if it can attain a P/E of 15X.

What Happened?

WAG escalated its earnings call by a week in

Master Limited Partnerships ("MLPs") are hot. The Alerian index surged in Q1, rising 18% in price with a 19.7% total return, beating both the S&P 500's 10.61% total return and the Barclays Aggregate Bond Market index decline of 0.12%. I can't think of a better structure for these times - high dividends (actually distributions) tied to the powerful trend of infrastructure build-out in the oil & gas industries. With that said, I sense that there are several potential roadblocks ahead and that many investors may be chasing yield.

I published my interview of Malcom Day in September, and this long-time expert and institutional investor shared some wise advice about not focusing just on the yield but rather on the growth in distributions too. He forecast 10-12% long-term returns for the sector based on yield and growth in distributions, so the price run-up, which has resulted in a 23%

The market posted a great quarter, with stocks rising 10% as measured by the S&P 500. One could argue that they did even better, except that Apple (AAPL) dragged them down, though this isn't as big a deal as many suggest (I calculate the decline in AAPL is worth about 0.5%). Market leadership looks broad. I put together this chart of the S&P 500 that shows a very favorable skew:

In case it's not clear, the S&P 500 rose in price by 10%, but 59% of the stocks in the S&P 500 rose more than 10%, while 41% rose less than 10%. The stocks that gained 10% more than the market (i.e. up 20% or more) outnumbered those that ended up more than 10% behind the market (i.e. fell), and those in the 10-20% bucket outnumbered those in the 0-10% bucket rather considerably. Of course, this is confirmed by looking

While speculative stocks are certainly not my main focus, I run across interesting ideas all the time. I shared some basic guidelines for speculation in February, when I declared that "speculation isn't inherently bad." Here were the thoughts I had about smarter speculation:

• Restrict speculation to a limited amount of available capital
• Restrict position sizes within speculative part of portfolio
• Make sure risk/reward is understood in some sort of analytical frame-work
• Remember stocks aren't pieces of paper
• Make sure that the company is capitalized adequately
• Look for insider ownership
• Look for signs of smart management
• Try to avoid "all-or-nothing"
• Look for signs of excessive investor interest (bubble)
• Avoid speculating on margin

In that same article, after explaining each of these points, I shared an example of Vringo (VRNG), which was a formerly overly-hyped speculative name that failed to live up to the billing but that I think has

The 10% jump (and 10.6% total return) for the S&P 500 (SPY) in Q1 was off-the-charts, literally, as the close of 1569 was an all-time closing high. This marks the fourth consecutive year of a strong start to the year, a topic I raised in January when I discussed the new seasonal trade and predicted the rally would persist. Of course, this Q1 wasn't as good as the first quarter of 2012, which saw a 12.6% total return, but it was one of the best quarters since the rally began in 2009, which had two very strong quarters in the middle of the year as the rally began, with a 14.6% gain in Q2 and a 15.6% advance in Q3. More recently, Q4-2011 saw an 11.8% return, and Q4-2010 saw a 10.8% return on the back of an 11.3% return in Q3-2010.

With the market up a lot and

As Q1 comes to an end, window-dressing, a practice where institutional investors dump losers and buy or at least retain winners in order to "look smart" to their investors, has likely almost ended, making it potentially a good time to focus on some of the laggards of late. Given how many stocks bounced back from the dead this quarter, like Netflix (NFLX), BlackBerry (BBRY), Best Buy (BBY), Sunpower (SPWR) and SUPERVALU (SVU), I thought it might make some sense to focus on stocks that have performed very poorly that could be due for a big bounce.

395 of the Russell 3000 members (>13%) trade at least 30% below their 52-week highs. Given that I am a little concerned about the market's rally being a bit extended, which could lead to a bit of rotation, I decided to screen this universe for a few other signs of a potential resurrection:

• >3%

PriceSmart (PSMT) has been on my watchlist for a couple of years now. For the past year, I have been watching the stock go sideways in a bull market after jumping sharply in early in 2012. I last discussed this dynamic, unique company right before that jump. Given the sideways action that has reduced the valuation somewhat as PSMT has continued to grow EPS rapidly, I wanted to review the name to see if there is an opportunity. While the stock may seem expensive at about 25X forward EPS, the long-term growth potential is quite high as the company is expanding geographically. I like too that the company has dramatically improved its investor relations efforts, including implementing a quarterly conference call for the first time last April when it reviewed its fiscal 2012-Q2 results. With just five analysts covering it, PSMT is somewhat of a hidden gem. The bottom

Williams-Sonoma (WSM) is perhaps the best multi-channel retailer, excelling with catalogs, online or through its stores across several different brands. The company wrapped up a challenging fourth quarter with a solid beat driven by a robust performance in January and provided reasonably strong guidance for 2013 and beyond, setting the stage for what will likely be a breakout to all-time highs based on after-hours trading. Based on continued execution and modest valuation expansion due to a better appreciation for several growth drivers, the stock could appreciate to 62 over the next year.

Background

Based in San Francisco, WSM was founded in 1956 by Chuck Williams, who still serves as a Director Emeritus, as a single store in Sonoma, Ca. The company launched its first catalog in 1972 and began its e-commerce website and bridal and gift registry in 1999. Williams-Sonoma is focused on cookware. At year-end, there were 253 stores,