We all are looking for the perfect dividend stock. In a utopian world, the perfect dividend stock would be one that is both high-yield and provides a high dividend growth rate. Its share price would appreciate ratable with its increasing dividend. All of this would be driven by increasing earnings and cash flow.

Nelnet (NNI), the student loan provider, said it will reinstate its 7-cent quarterly dividend in the current quarter after suspending the payout in the second quarter of 2008. The news comes after Nebraska-based Nelnet said its third-quarter beat analysts' estimates. The new dividend will be payable to shareholders of record on December 15.

For-profit education provider DeVry (DV) joined the education dividend party by announcing it would raise its annual dividend by 25% to 20 cents a share from 16 cents. DeVry also said it will repurchase $50 million of its shares.

Let the bubble blow.

That’s the signal the Federal Reserve gave to commodities markets and the stock market Wednesday after keeping interest rates unchanged at historic lows and making no noise about when its policy of easy money will end.

A couple of weeks ago we added a position of DeVry (DV) after they posted excellent earnings and discussed a rosy outlook. That was on the heels of the announcement that Apollo (APOL) was being investigated over some of their accounting practices related to student recruitment.

While we do like DeVry as well as some of the other names in the sector such as Corinthian (COCO) and ITT Education (ESI), there was a great deal of weakness that these names showed after the Apollo news. We felt that there were a few possible scenarios that could play out.

As noted earlier, Friday marks the two-year anniversary of the S&P 500's closing peak. As of Thursday's close (10/8), only 57 of the 500 stocks currently in the index are up since then. Needless to say, it has been a lousy two years. Below we highlight the 25 best performing stocks in the index over the last two years. As shown, sectors which are the most heavily represented include Technology (7), Energy (6), Consumer Discretionary (5), and Health Care (5). Check back Friday morning for a list of the top performing Mid and Small Cap stocks since 10/9/07.

click to enlarge

To be sure, there was a fair amount of good news last week, with retail sales beating their numbers handily, the New York Manufacturing Index doing the same, and Chairman Bernanke declaring that the recession is very likely over. So as one might expect, the market was up for the week. However, by the time most of this good news was made public (on Thursday), the market went down.

By Mike Yamamoto

The bulls stampeded back to school yesterday, getting long Apollo Group (APOL) and other education stocks.

Guy Spier of Aquamarine Capital is a noted value investor and speaker on investment management. Guy’s willingness to share his insights with fellow value investors reminds us of Buffett’s penchant for sharing his wisdom with those eager to benefit from it. Last November, Guy spoke on global value investing at the Darden Value Investing Conference in Charlottesville, Virginia. This past May, he was at the Value Investing Congress in Pasadena, California, making a case for global for-profit education providers Estácio (Brazil: ESTC3) and Raffles Education (Singapore: E6D). Earlier this month, Guy presented at the Value Investing Seminar in Molfetta, Italy, highlighting an opportunity in London Mining (Oslo Axess: LOND). His speech was entitled, Navigating Between Fear & Greed Using Checklists.

On The Investment Process

The Manual of Ideas: Your fund has outperformed the market indices by a wide margin since inception, posting a cumulative net return of 115% from September 1997 through June 2009, compared to cumulative returns of 9% for the Dow Jones Industrial Average, 0% for the S&P 500 Index and -13% for the FT 100. Do you use short-selling or leverage in the portfolio and how concentrated is your fund typically?

• BoA to consumers: Feel free to sue... Bank of America (BAC) is dropping a requirement that forced consumers with disputes on credit cards or other accounts to enter into arbitration. The move, which comes as the government pushes for stronger consumer financial protection, is considered a win for consumers, as many faulted the arbitration process for being biased. Consumers will now be able to file lawsuits directly against the bank if they suspect unfair or illegal practices. American Express (AXP) and JPMorgan Chase (JPM) both say they're evaluating changes to their policies on resolving consumer disputes as well.
• ...and BoA does some suing of its own. Bank of America (BAC) won a restraining order preventing Colonial BancGroup (CNB) from selling or disposing of more than $1B in cash and loans held by Colonial. Following an announcement by Colonial that it may be put into receivership, Bank of America had filed suit earlier in the week, alleging the funds are being held in custodianship for Ocala Funding, the commercial-paper vehicle backed by Taylor, Bean & Whitaker. Bank of America also filed a lawsuit against Shelbourne Development Group, which has stopped construction on a 150-floor Chicago condominium tower, alleging the company has defaulted on a loan.
• Fed demands CIT plan. CIT Group (CIT) signed an agreement giving the Federal Reserve strong oversight over its operations, and pledging to submit a recapitalization plan and to strengthen its management and operational controls. CIT has 15 days to craft its plan for raising capital and meeting its debt obligations, and 60 days to review how it manages credit risk. CIT must also get permission from the Fed before paying dividends or pursuing other transactions. (Read the Fed agreement (.pdf))
• China opens its internet dam. China has given up its controversial plans to force filtering software to be installed on all computers produced or sold in the country. A government minister said "we will fully respect everyone’s freedom of choice and will absolutely not force the installation on all PCs sold," although the filter, called Green Dam/Youth Escort, will still be installed on computers in schools, internet cafes and other public spaces.
• That's all, Volks! After nearly a year of takeover attempts and negotiations, Volkswagen (VLKAY.PK) will pay around €3.3B ($4.7B) for a 42% stake in Porsche's core sports-car division, ahead of a full merger to take place in 2011. To help pay for the purchase, Volkswagen will issue new preferred shares in the first half of next year. The combined automaker's operating profit is expected to rise by €700M annually.
• Conflicting stories on Opel deal. Magna International (MGA) said it reached an agreement in principle with General Motors to buy 55% of Opel. Magna co-CEO Siegfried Wolf said some changes were made in the more than 600-page-long offer but "roughly speaking there are no unresolved issues with management any more." GM's top negotiator denied Magna's assertions and said no deal has yet been reached.
• Ford ups production on rising demand. Ford (F) plans to increase its Q3 production by 10,000 vehicles to 495,000 as cash-for-clunkers drives demand. Ford's production will be 18% higher than the same quarter in 2008, and the company set a Q4 production target of 570,000 vehicles, which would be a 33% increase on the previous year. Meanwhile, the White House loosened the cash-for-clunkers rules yesterday, allowing consumers to apply vouchers to cars that are out of stock.
• No new frontiers for Southwest. Southwest Airlines (LUV) lost its bankruptcy auction bid for Frontier Airlines to smaller company Republic Airways Holdings (RJET), losing an opportunity to operate flights outside the U.S. for the first time. Southwest said a 'key reason' it lost the bid was because it wouldn't drop its requirement that Frontier's pilot union reach an agreement with Southwest's pilots.
• Retail sales miss. July's retail sales came in at -0.1% vs. consensus of +0.8%. Excluding automotive, sales were down 0.6% vs. +0.1% consensus. Gas station sales were down 32.5% from a year ago (-2.1% M/M). Building material and garden equipment sales were 14.7% lower (-2.1% M/M). Health and personal sales (+4.1%) and restaurants (+1%) were the only retail components to post positive sales growth over the past year. Overall, sales are 8.3% lower than a year ago.
• Jobless claims rise. Initial jobless claims were 558K, up 4K from a week ago, and worse than the 545K consensus. Continuing claims fell 141K to 6.202M.
• Import prices drop. July's Import Price Index fell 0.7% vs. consensus of -0.5%, primarily due to a fall in petroleum prices. Import prices are down 19.3% vs. a year ago. Export prices fell 0.3%.

Earnings: Friday Before Open

• Abercrombie & Fitch (ANF): Q2 EPS of -$0.30 vs. consensus of -$0.07. Revenue of $648M (-23.3%) in-line. (PR)

Earnings: Thursday After Close

• American Apparel (APP): Q2 EPS of $0.06 beats by $0.03. Revenue of $136M (+2%) vs. $140M. Sees full-year revenue of $540M-555M vs. $568M and expects to open 25-30 new stores. (PR)
• Autodesk (ADSK): Q2 EPS of $0.24 beats by $0.05. Revenue of $415M (-33%) vs. $414M. (PR)
• Blockbuster (BBI): Q2 EPS of -$0.19 misses by $0.07. Revenue of $1B (-22%) vs. $1.1B. (PR)
• Darling International (DAR): Q2 EPS of $0.14 in-line. Revenue of $155M (-30%) vs. $160M. (PR)
• DeVry (DV): FQ4 EPS of $0.51 in-line. Revenue of $396M (+43%) vs. $377M. (PR)
• Elizabeth Arden (RDEN): FQ4 EPS of -$0.07 beats by $0.01. Revenue of $213M (-10%) in-line. Sees FY10 EPS of $0.50-0.65 vs. $0.72. (PR)
• Nordstrom (JWN): Q2 EPS of $0.48 in-line. Revenue of $2.1B (-6%) in-line. Same-store sales down 12.3%. Raises full-year EPS guidance to $1.50-1.65 from $1.25-1.50 vs. consensus of $1.48. Sees full-year same-store sales down 9-12%. (PR)
• Red Robin Gourmet Burgers (RRGB): Q2 EPS of $0.41 beats by $0.04. Revenue of $201M (-3%) vs. $206M. (PR)
• SatCon Technology (SATC): Q2 EPS of -$0.13 misses by $0.05. Revenue of $9M (-31%) vs. $15M. (PR)
• Ticketmaster (TKTM): Q2 EPS of $0.20 misses by $0.04. Revenue of $312M (-18%) vs. $396M. (PR)

Today's Markets

Overseas markets were mostly higher Friday, while U.S. futures have traded in a tight range.

F4Q09 (Qtr End 6/30/09) Earnings Call

August 13, 2009 4:30 pm ET

Steve Mandel of Lone Pine Capital and Jim Chanos of Kynikos Associates expressed starkly different views on the investment merit of for-profit education providers at this year's Ira Sohn Investment Conference. Mandel has disclosed holdings in Apollo Group (APOL) and Strayer Education (STRA), while Chanos has presumably sold short shares in those companies or other for-profit education providers, such as ITT Education Services (ESI), DeVry (DV), Career Education (CECO), Corinthian Colleges (COCO), and Capella Education (CPLA).

DeVry (DV) is one of the largest for-profit education companies. DeVry University offers undergraduate and graduate programs in business and technology fields (77% of revenue). Under its health-care segment, Ross University offers medical and veterinarian programs, and Chamberlain College offers nursing degrees. Recently acquired schools add allied health programs. Its professional segment offers review courses through its Becker CPA review and Stalla CFA review programs.

-Company profile by Morningstar

After my recent posts on university enrollments and affordability (see Enrollment Drops at Private Colleges and The Future of U.S. Higher Education), I received an email from Marc Scheer, author of No Sucker Left Behind: Avoiding the Great College Ripoff. On his site I found a link to a recent Wall Street Journal article (see Weighing Price and Value when Picking a College) that describes some of the very same effects that I anticipated in my earlier posts.

According to the Wall Street Journal:

Given my interest in the history and development of universities and colleges, I found today’s article about private college enrollments interesting, though not entirely unexpected (see Enrollment to Drop at a Third of Private Colleges). According to Bloomberg:

Almost a third of U.S. private colleges expect freshman enrollment to decline in the 2009-2010 school year as families struggle to pay bills and hold down debt, according to a survey.

Noted value investor Guy Spier, CEO of Aquamarine Capital, gave a presentation at the Value Investing Seminar in Italy yesterday, entitled Navigating Between Fear & Greed Using Checklists. Our first-hand notes from his speech follow:

Importance of Neurology in Investing

• Human brain has different parts, each leading to different behavioral responses when engaged, eg the neocortex elicits a rational response whereas the "reptilian" part of the brain responds to greed and fear
• Great investors (Soros, Buffett, Klarman etc) are "wired" to engage the necortex while others are susceptible to enaging the reptilian brain when faced with the same situation
• Value investing is the art of using the neocortex
• Studies have shown that when thinking about making money, for most people the same part of the brain responds as when thinking about gambling, drugs, sex
• A lot of very smart investors lose money because they lose discipline and become guided by their reptilian brain (eg Isaac Newton's losses in the South See bubble in early 18th century)

Examples of Companies "Targeting" the Reptilian Brain

Below examples are all about companies/management who have figured out different ways to tap into our reptilian brain ranging from nearly criminal to very subtle.

July 6th, 2009

“Capitalism is the legitimate racket of the ruling class.” - Al Capone 1899-1947

In recent blog posts I've talked about the Dow effect and Russell effect, so I decided I would devote this post to the S&P effect. The S&P 500, much like the Dow, has a committee which selects the stocks in the index. I believe it's only a matter of time before Visa (V) is added to the S&P 500.

I believe this because Visa is the last credit card giant not listed in the index, not to mention Visa is larger and more profitable than all four of the similar companies currently listed in the index. These companies are: American Express (AXP), Capital One (COF), Discover Financial (DFS), and (Mastercard (MA)).Visa's current market cap is actually bigger than any two of the four added together.

By Steven Ralston, CFA

Standard & Poor's announced on Monday that DeVry Inc. (DV) will replace General Motors (GM) in the S&P 500 stock index after the close today. Obviously, the bankruptcy filing motivated the Committee to remove GM from the index, but the decision to add DeVry has many implications.

• GM in bankruptcy court. Bankrupt General Motors (GM) won court approval to auction its assets, with the lead bid coming from the Treasury and the goal of closing a sale in July. GM was also approved to borrow $15B of a planned $33.3B bankruptcy loan, and asked for permission to void seven corporate jet leases. The bankruptcy filing showed GM has more than 100,000 creditors and has debt of $172.8B, more than twice its assets. The automaker plans to launch a new company in 60-90 days, while the court supervises the sale or liquidation of unprofitable brands. GM said it reached a tentative deal with an undisclosed buyer to sell its Hummer brand at an undisclosed price. (Read Obama's remarks on the GM filing)
• Citi, GM booted from Dow. Citigroup (C) and General Motors (GM) were dropped from the Dow Jones Industrial Average, replaced by The Travelers Companies (TRV) and Cisco Systems (CSCO), respectively. Citi was dropped because the size of the government's intervention may prevent the stock from accurately reflecting industry trends. GM will be removed from the S&P 500 as well following the end of trading today, and will be replaced by DeVry (DV). Premarket: C -3.2%, CSCO +1.0% (7:00 ET).
• Prudential snubs bailout funds. Prudential Financial (PRU) became the latest life insurer to say it wasn't going to accept TARP funds, following the lead of Ameriprise Financial (AMP) and Allstate (ALL). The company plans to raise $1.25B through a common stock offering.
• JPMorgan, AmEx to repay TARP. JPMorgan Chase (JPM) and American Express (AXP) will sell $5B and $500M of common stock, respectively, in order to repay TARP. Both companies were stress-tested last month and told they don't need new capital, but the Fed said yesterday any firm seeking to repay bailout funds must first tap equity markets. Though still waiting for formal repayment approval, JPMorgan CEO Jamie Dimon said he would be 'very surprised' if they weren't able to refund the government in full by the end of the month. AmEx will make a partial repayment, and may increase its planned sale by $75M if demand is strong. Premarket: JPM -0.4%, AXP -1.5% (7:00 ET).
• Fed sets repayment rules. As some banks clamor to repay TARP funds, the Federal Reserve has promised to announce an 'initial set' of banks that were approved for repayment by next week. In addition to the Fed's new requirement that big banks must first sell common stock to private investors, firms will also have to maintain an extra capital cushion against market shocks and prove they can raise money without relying on FDIC loss-guarantees. (Read the Fed's repayment criteria)
• SunTrust plans stock offering. SunTrust Banks (STI) announced plans to sell $1.4B of common stock and buy back $1B of preferred shares and hybrid securities. Proceeds will be used to boost SunTrust's Tier 1 capital and help close the $2.2B capital hole identified in last month's stress tests. Shares -2.2% premarket (7:00 ET).
• EMC unexpectedly outbids NetApp. EMC Corp. (EMC) made an unsolicited bid to acquire Data Domain (DDUP) for $1.8B in cash, topping a bid by NetApp (NTAP) which agreed to buy the company two weeks ago for $1.5B. EMC, the largest maker of storage computers, wants Data Domain to expand in the market for systems that reduce the amount of disk space needed for data storage. EMC says it can pay for the deal in cash, while NetApp would have to offer more stock to meet EMC's offer. Premarket: DDUP +12.0% (7:00 ET).
• Citigroup freezes severance payments. Citigroup (C) is reportedly halting tens of millions of dollars in promised severance payments to five former top executives. Citigroup has already paid out more than half of the roughly $100M it promised the former executives, but has decided not to pay the balance in order to avoid even the possibility of a public backlash over the money. Although Citi is contractually obligated to pay the money, sources say the bank is betting the former execs will choose to avoid the public embarrassment of filing a lawsuit against the struggling, taxpayer-backed bank.
• Abu Dhabi sells Barclays stake. International Petroleum Investment Co., an investment vehicle of the Abu Dhabi royal family, plans to offload 1.3B shares in Barclays (BCS), pocketing a large profit in the process. IPIC made its £3.5B ($5.2B) investment in Barclays less than seven months ago, and gave the impression at the time of being a strategic long-term investor in the bank. IPIC will retain warrants that can be exercised for over 700M shares, and £1.5B in securities resembling preference shares. Barclays -12.2% premarket (7:00 ET).
• Personal income rises. Personal income rose 0.5% ($58.2B) in April vs. -0.2% consensus. Personal consumption expenditures fell 0.1% ($5.4B) vs. -0.2% consensus. Personal saving as a percentage of disposable personal income rose to 5.7% in April vs. 4.5% in March. However, it's "a seriously flawed metric when you can jam up the cost of necessities that people have to buy and then point to the increased spending on necessities as signs of a recovery."
• Manufacturing contracts. The ISM Manufacturing Index came in at 42.8 in May vs. 42 consensus, its 16th consecutive month of contraction. The overall economy grew after seven months of decline. Nonmetallic Minerals and Plastics & Rubbers reported growth. Textile Mills and Furniture led the laggards.
• Construction spending increases (.pdf). Construction spending rose 0.8% in April M/M vs. -0.8% consensus and -10.7% Y/Y. For the first four months of the year, construction spending fell 11.3% vs. the year earlier period.

Today's Markets

Asian markets closed slightly up, while European markets take a breather from yesterday's gains.
• In Asia, Nikkei closed +0.3% to 9,704. Hang Seng -2.6% to 18,389. Shanghai +0.1% to 2,724. BSE +0.2% to 14,875.
• In Europe at midday, London -0.6%. Paris -0.05%. Frankfurt +0.1%.
• U.S. futures: Dow +0.1%. S&P +0.2%. Nasdaq +0.3%. Crude -0.5% to $68.20. Gold -0.01% to $978.50.

Tuesday's Economic Calendar

• Motor Vehicle Sales
  7:45 ICSC Retail Store Sales
  8:55 Redbook
  10:00 Pending Home Sales
  5:00 PM ABC Consumer Confidence Index
• Notable earnings after Tuesday's close: HOV, SNDA, PAY

Seeking Alpha editor Eli Hoffmann contributed to this post.