The Ultimate Stealth Bull Market: XTO Energy (XTO), Apple (AAPL), Microsoft (MSFT), Apache (APA), Occidental Petroleum (OXY), BP (BP), Burlington Northern (BNI), CSX (CSX), Union Pacific (UNP), Altria (MO), Coca Cola (KO), ConEd (ED)

Tobacco companies are hated by the public but the stocks are very tempting financially. Over the weekend, Barron’s looked at Altria (MO):

At around 18.50, Altria has one of the lowest price/earnings ratios in the global cigarette industry. It also has one of the highest dividend yields: 7.3%. The stock trades for 10.6 times projected 2009 profits of $1.77 a share and 10 times estimated 2010 earnings of $1.87. Even Reynolds American (RAI), with weaker brands, sports a slightly higher P/E on a 2010 basis.

• Northrop unloads TASC. Northrop Grumman (NOC) agreed to sell its TASC consulting unit to a pair of private-equity firms - KKR and General Atlantic - for $1.65B. TASC unit provides engineering and consulting services to the U.S. military and state governments. Northrop said it expects the sale to generate net cash proceeds of $1.1B, which it will use to repurchase shares. The deal is the latest in a recent uptick in LBO acquisitions which have returned after a two-year dry stretch. Still, with four banks - Barclays (BCS), Royal Bank Of Canada (RY), Deutsche Bank (DB) and a lending unit of the CPP - combining to put up senior debt of well under $1B, today's deals are still a far cry from the mega-mergers of the credit boom.
• G-20 keeps drip open. G-20 leaders said it's too early to withdraw global stimulus efforts despite signs that a global economic recovery is underway. "Economic and financial conditions have improved following our coordinated response to the crisis," officials said in a communique (.pdf) following a two-day gathering in St. Andrews. "However, the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern. To restore the global economic and financial system to health, we agree to maintain support for the recovery until it is assured." Stocks, commodities and futures rallied Monday: "Markets don't need to be worried that these governments and central banks are suddenly going to take away all the stimulus measures," one strategist said. "Risk appetite should remain supported into the end of the year."
• Put up or shut up day for Kraft. Kraft (KFT) could raise the cash portion of its bid for Cadbury (CBY) to 400p ahead of today's deadline, and is expected to take the bid directly to Cadbury's shareholders. Kraft has enlisted Royal Bank of Scotland (RBS), Credit Suisse (CS), Barclays (BCS) and BNP Paribas to help provide a £5.5B bridge loan. Kraft's initial bid of 300p and 0.2589 KFT shares per CBY share was valued at 745p/share, but is now worth about 720p with the decline in Kraft's stock. According to U.K. takeover rules, by launching an offer today Kraft would set in motion a 28-day deadline to publish a prospectus on the offer for Cadbury shareholders, and would have 60 days to collect enough shares to clinch a deal.
• Healthcare bill: next stop Senate. The Obama healthcare overhaul passed a House vote by a narrow margin Saturday (220-215), setting up a fractious debate in the Senate - where Democrats don't enjoy the same broad majority - this week. The bill would cost $1.05T over a decade to provide health insurance to another 36M Americans. It requires most Americans to carry insurance, creates a new exchange where they can shop for it, and gives low income earners tax credits to help them pay for it. In an appearance Sunday, Obama said he is "absolutely confident" a healthcare bill will also pass through the Senate.
• Sprint group to pour another $1.5B into Clearwire. Sources say Sprint Nextel (S) and a number of its Clearwire JV (CLWR) partners are preparing to pump another $1.5B or more into the wireless broadband provider. The Sprint group first invested $3.2B in Clearwire 18 months ago, taking a majority stake in a bet on Clearwire's version of 4G wireless broadband, WiMax. Some rivals have favored a comparable technology knows as LTE. $1B of a new infusion would come from Sprint, with Comcast (CMCSA), Intel (INTC), Time Warner Cable (TWC) and Bright House Networks kicking in another $500M. Google, a key JV partner, isn't thought to be involved in this round.
• Comcast, GE agree on CNBU valuation. After weeks of wrangling, GE (GE) and Comcast (CMCSA) reportedly agreed to value NBC Universal at about $30B, and a deal to give Comcast a 51% stake in GE's media and entertainment arm could come as early as this week, though it's still unclear whether 20% NCBU stakeholder Vivendi has signed off on the proposal. Sources say the pair met last week with debt-raters to ascertain the impact of $9B in debt a new NBCU would assume as part of the combination, and hope this week to be told it would be considered investment grade.
• Murdoch paper cleared of spy charges. The U.K. Press Complaints Commission said Monday it has found no proof journalists at Rupert Murdoch's The News of the World regularly hacked the phones of public figures to secure sensational stories. The probe was prompted after reports in The Guardian said the practice at the tabloid was widespread. In response, the Guardian described the PCC's report as complacent, saying the PCC did not have the "ability, the budget or the procedures to conduct its own investigations."
• Axa Asia Pacific shuns $10B bid from parent. Axa Asia Pacific (AXAPY.PK), the Australian unit of France’s biggest insurer (AXA -1.1% premarket), rejected an unsolicited $10B bid from its parent and AMP Ltd. (AMLTF.PK). CEO Rick Allert said Axa Asia Pacific would consider a higher offer, but called today's offer too low. Axa said today it will raise £2B through a rights offer to finance acquisitions.
• Brown backs down on transactions tax. World leaders publicly snubbed U.K. PM Gordon Brown's bold pitch for a global tax on financial transactions which would be used to fund future bailouts. Brown surprised ministers by pitching the initiative during a speech to the G-20 assembly Saturday to the dismay of his peers, who unanimously agreed with U.S. Treasury chief Tim Geithner in saying economic leaders don't think taxpayers should have to pay for future financial sector foibles. Brown backed down Sunday, though he continues to believe tighter bank regulation may not suffice to protect against future risk.
• Reynolds eyes stake in smokeless tomorrow. Cigarette giant Reynolds American (RAI) is in advanced talks to buy closely held Niconovum AB, a Swedish maker of nicotine-replacement therapies such as Zonnic pouch and Zonnic gum. A deal would be the largest move by Reynolds into nicotine products, as sales of cigarettes continue to decline. Reynolds controls about 28% of the U.S. cigarette market, second to Altria (MO) which has about 50%. Sources say the deal could be valued at €30M.

Earnings: Mon. Before Open

• DISH Network (DISH): Q3 EPS of $0.18 misses by $0.26. Revenue of $2.89B (-1.5%) vs. $2.93B. Net customers +241K to 13.85M. (PR)
• Energy Conversion Devices (ENER): FQ1 EPS of -$0.34 misses by $0.03. Revenue of $42.9M (-55.2%) vs. $56.4M. Shares -0.1% premarket. (PR)
• GTx (GTXI): Q3 EPS of -$0.35 in-line. Revenue of $3.6M (+20%) vs. $4M. (PR)
• Hospitality Properites Trust (HPT): Q3 FFO of $0.77 misses by $0.01. Revenue of $264M (-15.4%) vs. $272M. (PR)
• Nationwide Health Properties (NHP): Q3 FFO of $0.56 in-line. Revenue of $97.8M (+3.4%) vs. $94.4M. Sees full-year EPS of $2.22-2.23 vs. $2.28. (PR)
• Quicksilver Resources (KWK): Q3 EPS of $0.25 beats by $0.03. Revenue of $207M (-12.5%) in-line. (PR)
• Rockwell Automation (ROK): FQ4 EPS of $0.37 beats by $0.10. Revenue of $1.07B (-27.6%) in-line. (PR)
• Tesoro (TSO): Q3 EPS of $0.24 beats by $0.23. Revenue of $4.74B in-line. Expects to spend less than its stated capex budget of $600M. Shares +3.7% premarket. (PR)
• Warner Chilcott (WCRX): Q3 EPS of $0041 misses by $0.01. Revenue of $253M (+9%) in-line. (PR)
• Western Refining (WNR): Q3 EPS of -$0.05 beats by $0.01. Revenue of $1.83B (-40.6%) vs. $1.75B. Shares +0.5% premarket. (PR)
• Windstream (WIN): Q3 EPS of $0.24 beats by $0.03. Revenue of $734M (-7.5%) vs. $747M. (PR)

Today's Markets

Overseas markets and commodities surged Monday, and U.S. futures have gained overnight. The dollar is getting pounded in early trading.

Bullish Calls:

Windstream (WIN): "I am going to send you to Windstream Corporation which did a pretty good acquisition today."

Altria Group (MO) reported strong third-quarter results, with earnings of 48 cents per share. Earnings were 2 cents above the Zacks Consensus Estimate and up 4.3% year-over-year. Profits were primarily driven by the company’s cost savings efforts and growth in the cigar unit.

Net revenues increased 20.3% year-over-year to $6.3 billion, primarily driven by cigar segment results that increased 56.1%. The cigarette segment revenues increased only 10.7% for the quarter, as it was impacted by higher pricing related to the Apr 1, 2009, federal excise tax (FET) increase. Altria’s smokeless products segment posted revenues of $352 million. Altria had acquired UST and its smokeless tobacco business, USSTC, on Jan 6, 2009. (As a result, financial results are from Jan 6 through Sep 30, 2009).

Q3 2009 Earnings Call

October 21, 2009 9:00 am ET

Most novice dividend investors typically are under the impression that successful dividend investing entails finding and purchasing the highest yielding stocks. This strategy is flawed, because it does not take into account the sustainability of the dividend. A company which yields 20%, might generate a much lower yield on cost over time.

I purchased American Capital (ACAS) in 2008 when this business development company was trading at $30 and was yielding 13%. Just a few months later the company suspended its dividend payment, and I sold it immediately. The thing to learn from this example is that investors have to check the sustainability of distributions in light of cash flows generated by the business, the amounts of debt relative to total assets and the amounts of interest expenses. If you find a high yielding stock, which generates enough cash flow growth and has limited amounts of debt, then it could be a buy on the next dip.

• King: Break up the banks! Bank of England Governor Mervyn King stepped up his call to break apart Britain's largest banks, saying more stringent capital requirements won't shield taxpayers from having to bail out more too-big-to-fail banks in the future. "The massive support extended to the banking sector around the world, while necessary to avert economic disaster, has created possibly the biggest moral hazard in history," King said in a speech (.pdf) late Tuesday. His comments were at odds with those of Chancellor of the Exchequer Alistair Darling, who said yesterday focusing on capital rules may be enough to ward off future crises. Meanwhile, on this side of the Atlantic, Paul Volcker keeps pounding the desk to split up banks, but no one's listening.
• State Street slapped with fraud suit. The California AG's office charged State Street (STT) with fraud Tuesday, accusing it of bilking the state's two largest pension funds - Calpers and Calstrs - of $57M, and seeking $200M in overcharges and penalties (complaint (.pdf)). The lawsuit stems from an inquiry launched after a whistleblower claimed State Street secretly and substantially marked up the price of its currency trades. State Street beat Q3 earnings estimates Tuesday, but shares dived 8.4% on news of the lawsuit and a sobering outlook.
• Yahoo defies bears. Shares of Yahoo (YHOO) are up 4.6% premarket after the internet giant beat Q3 earnings estimates handily with the help of some serious cost cutting ($0.13/share vs. $0.06), while revenue was steady from last quarter at $1.13B. "There's a change occurring in Yahoo," CFO Tim Morse said on Yahoo's earnings call (transcript), "that will value that kind of work - that good old-fashioned, get-your-hands-dirty kind of find ways to take costs down or make sure that they don't go up as much as they otherwise would have - type work." Analysts were impressed with the quarter, but said the real test of Yahoo's massive branding initiative would come in Q4. Bernstein's Jeffrey Lindsay summed it up: "The patient is off life support and back in the recovery ward. But it is certainly not out playing soccer again."
• Shedding light on the dark pools. In an effort to bring transparency to famously opaque "dark pool" off-exchange trading cliques on which Wall Street firms execute some of their largest trades, the SEC will reportedly today propose slashing the percent of daily volume in a company's shares that can be executed on the systems before quotes must be publicized to 0.25% from 5%. The move would force dark pools to either bring their prices in line with open markets, or risk losing their order flow. Trading executives warn sweeping rule changes could ultimately hurt the investors regulators are trying to empower.
• AT&T sues LCD makers over price fixing. AT&T (T) sued Samsung Electronics, LG Display (LPL), AU Optronics (AUO) Corp. and other LCD manufacturers, claiming they colluded to fix prices of panels sold in the U.S. "The conspiracy included communications and meetings in which defendants agreed to eliminate competition and fix the prices of LCD panels that were ultimately incorporated into LCD products that they knew would be sold in California and the U.S.," according to the complaint.
• Logi offer: does it make sense? An obscure hedge fund - logi Energy - said it offered to buy $1B of CIT Group's (CIT) debt, but wouldn't identify its source of capital. Logi said the deal could give CIT "wiggle room" as it works to sidestep bankruptcy. CIT wouldn't comment on whether it was seriously considering the offer.
• Volvo sale hits snag. Sources say China carmaker Geely's $2B attempt to buy Ford's (F) Volvo unit is in danger of stalling over disagreements about intellectual property rights. The impasse centers on Ford's concerns about sharing its proprietary technology and plans for new products.
• Morgan mulls giving away Crescent. Sources say Morgan Stanley (MS) may hand over its Crescent Real Estate Equities unit to Barclays (BCS), to whom the business owes $2B which comes due Nov. 2. Morgan bought Crescent for $6.5B in August 2007, and had planned to put its assets into real estate investment funds, but was left holding the bag when markets seized up.
• IRS watchdog says homebuyer plan fraught with fraud. The IRS's internal watchdog will warn the agency again about fraud in the multibillion dollar homebuyer tax credit program. The IRS faces significant challenges in preventing individuals from scamming the tax credit program.
• JPMorgan, Goldman cornering the M&A market. According to a study by Bloomberg News, JPMorgan (JPM) edged out Goldman Sachs (GS) in M&A advisory fees ($1.26B vs. $1.22B) for the first time since 2000. By deepening relationships with corporate clients, the two have created a deep moat around M&A counselling. "It's going to be very difficult for upstart or broad-based firms to come in and usurp what many believe are the insurmountable leads that Goldman and JPMorgan have over competitors," one analyst says.
• Business spending perks up. Industrial bellwether Caterpillar (CAT) joined the ranks of those who say the worst is behind us, as corporate buyers slowly begin reinvesting in their businesses. While Caterpillar's sales were 44% lower than a year ago, CFO David Burritt said he sees "encouraging signs that indicate a recovery may be under way," and predicted sales could rise 10-25% next year (read Caterpillar's Q3 earnings call transcript). Business spending accounts for about 9.5% of U.S. GDP - a fraction of the 68.2% accounted for by consumer spending - but still a potential catalyst for recovery.
• Get ready for pay as you play internet. Internet service providers including AT&T (T) and Time Warner Cable (TWC) are considering returning to usage-based pricing for internet, amid a surge in traffic as more people watch videos online, and after a push by the FCC to force ISPs to treat all web traffic equally. "Some type of usage-based model, for those customers who have abnormally high usage patterns, seems inevitable," an AT&T spokesman said, declining to provide details on the company's exact plans.

Earnings: Wed. Before Open

• Air Products and Chemicals (APD): FQ4 EPS of $1.14 beats by $0.02. Revenue of $2.13B (-21.6%) in-line. (PR)
• AirTran (AAI): Q3 EPS of $0.08 in-line. Revenue of $597M (-11.3%) vs. $600M. Shares -0.9% premarket. (PR)
• Allegheny Technologies (ATI): Q3 EPS of $0.01 misses by $0.02. Revenue of $698M (-49.9%) vs. $738M. Says the worst appears to be behind us, but many customers remain cautious due to the uncertain global economy and are keeping inventories low. Shares -8.8% premarket. (PR)
• Altria (MO): Q3 EPS of $0.48 beats by $0.01. Revenue of $4.32B (+0%) vs. $4.66B. Shares -1.4% premarket. (PR)
• Boeing (BA): Q3 EPS of -$2.23 misses by $0.11. Revenue of $16.69B (+9.1%) vs. $17.16B. Sees full-year EPS of $1.35-1.55 vs. $1.54 consensus. "The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business, We look forward to getting the 787 and 747-8 in the air soon and moving forward with flight test and certification for these two important programs." Shares -2.5% premarket. (PR)
• Deutsche Bank (DB): Q3 net income of €1.4B vs. consensus of €811M and last year's €435M. Pretax profit of €1.3B vs. consensus of €1.19B. Tier 1 capital ratio rose to 11.7% from 11% in Q2. Shares -2.3% premarket. (Bloomberg)
• Continental (CAL): Q3 EPS of $0.02 beats by $0.08. Revenue of $3.32B (-20.2%) in-line. (PR)
• Elan (ELN): Q3 EPS of -$0.06 beats by $0.07. Revenue of $399M (-19.5%) vs. $382M. (PR)
• Eli Lilly (LLY): Q3 EPS of $1.20 beats by $0.18. Revenue of $5.56B (+6.8%) vs. $5.41B. Gross margin as a percent of total revenue increased by 3.7% to 81.1%. Shares +0.4% premarket. (PR)
• FLIR Systems (FLIR): Q3 EPS of $0.38 beats by $0.03. Revenue of $286M (+3.2%) vs. $281M. Shares +2.9% premarket. (PR)
• Freeport-McMoRan Copper & Gold(FCX): Q3 EPS of $2.07 beats by $0.73. Revenue of $4.14B (-10.2%) vs. $4.24B. Reinstates dividend due to strong performance. Shares -0.1% premarket. (PR)
• KeyCorp (KEY): Q3 EPS of -$0.50 misses by $0.09. Takes a $733M provision for loan losses, which KEY says drove the miss. Average deposits were +6% (+$3.6B). Shares -4.7% premarket. (PR)
• Knight Capital Group (NITE): Q3 EPS of $0.32 misses by $0.07. Revenue of $300M (+24.5%) vs. $282M. Shares -6.4% premarket. (PR)
• Manpower (MAN): Q3 EPS of $0.26 beats by $0.09. Revenue of $4.19B (-26%) vs. $3.95B. Sees Q4 EPS of $0.17-0.27 vs. $0.28. "We continued to experience sluggish demand for our services as the labor markets throughout the world were hampered by lack of demand for companies' products and services... the uptick in revenue is muted at this time compared to previous recoveries." Shares -5.3% premarket. (PR)
• Morgan Stanley (MS): Q3 EPS of $0.38 beats by $0.11. Revenue of $8.7B vs. $6.99B. Assets under management $386B vs. $483B last year. Declares $0.05 quarterly dividend. Shares +0.9% premarket. (PR)
• Northern Trust (NTRS): Q3 EPS of $0.72 misses by $0.12. Revenue of $928M (-1.2%) vs. $985M. Shares -5% premarket. (PR)
• Northrop Grumman (NOC): Q3 EPS of $1.29 beats by $0.11. Revenue of $8.73B (+4.1%) vs. $8.58B. (PR)
• Omnicom Group (OMC): Q3 EPS of $0.53 in-line. Revenue of $2.83B (-14.4%) in-line. (PR)
• Penn National Gaming (PENN): Q3 EPS of $0.33 misses by $0.02. Revenue of $620M (+0.4%) vs. $642M. Shares -8.2% premarket. (PR)
• St. Jude Medical (STJ): Q3 EPS of $0.59 beats by $0.01. Revenue of $1.16B (+7%) in-line. Sees Q$ EPS of $0.61-0.63 vs. $0.66. "We are lowering our expectations for our fourth quarter results to accommodate the issues we are experiencing from a limited portion of our customer base in the U.S., but we are confident that our long term growth program is on track." Shares -0.9% premarket. (PR)
• U.S. Bancorp (USB): Q3 EPS of $0.30 beats by $0.03. Revenue of $4.25B (+2.2%) vs. $4.12B. Says credit deterioration moderated somewhat. Shares +0.8% premarket. (PR)
• Wells Fargo (WFC): Q3 EPS of $0.56 beats by $0.19. Revenue of $22.47B (+116.5%) vs. $21.63B. Q3 chargeoffs of $5.1B, up from $4.4B in Q2. Sees credit losses peaking in 2010, "with consumer losses potentially peaking in first half of the year and gradually declining, absent further economic deterioration." Shares -1% premarket. (PR)

Earnings: Tue. After Close

• Amylin Pharmaceuticals (AMLN): Q3 EPS of -$0.19 beats by $0.10. Revenue of $211M (-3%) vs. $219M. Shares -1.1% AH. (PR)
• Canadian National Railway Company (CNI): Q3 EPS of C$0.94. Revenue of C$1.85B (-18%) in-line. Shares -1.6% AH. (PR)
• C.H. Robinson Worldwide (CHRW): Q3 EPS of $0.57 beats by $0.01. Revenue of $1.95B (-16%) vs. $1.96B. Shares -0.8% AH. (PR)
• Cree (CREE): FQ1 EPS of $0.30 beats by $0.08. Revenue of $169M (+20%) vs. $165M. Sees Q2 EPS of $0.28-0.30 vs. $0.23 and revenue of $180M-190M vs. $173M. Shares +3.6% AH. (PR)
• Gilead Sciences (GILD): Q3 EPS of $0.78 beats by $0.11. Revenue of $1.8B (+31%) vs. $1.75B. Shares -2.2% AH. (PR)
• Infinera (INFN): Q3 EPS of -$0.03 beats by $0.09. Revenue of $83M (+3%) vs. $80M. Shares +2.5% AH. (PR)
• Intuitive Surgical (ISRG): Q3 EPS of $1.64 beats by $0.16. Revenue of $280M (+19%) vs. $258M. Shares -5.9% AH. (PR)
• Nabors Industries (NBR): Q3 EPS of $0.18 beats by $0.02. Revenue of $804M (-44%) vs. $820M. Shares flat AH. (PR)
• Polycom (PLCM): Q3 EPS of $0.31 misses by $0.01. Revenue of $243M (-16%) vs. $236M. Shares -5.2% AH. (PR)
• SanDisk (SNDK): Q3 EPS of $0.75 beats by $0.49. Revenue of $935M (+14%) vs. $788M. Shares +0.2% AH and halted. Updated 4:30 p.m.: Shares resume trading, +10.2% AH. (PR)
• Seagate Technology (STX): FQ1 EPS of $0.58 beats by $0.11. Revenue of $2.66B (-12%) vs. $2.62B. Shares -2.9% AH. (PR)
• SLM Corp. (SLM): Q3 EPS of $0.26 beats by $0.22. Net interest income after provision for loan losses of $204M (-29%). Shares +7.8% AH. (PR)
• STMicroelectronics (STM): Q3 EPS of -$0.23 misses by $0.14. Revenue of $2.28B (-16%) vs. $2.25B. Shares +3.7% AH. (PR)
• Stryker (SYK): Q3 EPS of $0.69 in-line. Revenue of $1.65B (+1%) vs. $1.62B. Shares +3.5% AH. (PR)
• Tupperware (TUP): Q3 EPS of $0.54 beats by $0.12. Revenue of $514M (flat) vs. $486M. Raises full-year EPS guidance to $2.84-2.89 from $2.59-2.64, vs. $2.73. Shares +4.5% AH. (PR)
• Walter Industries (WLT): Q3 EPS of $0.45 beats by $0.18. Revenue of $278M (-10%) vs. $223M. Shares +1.7% AH. (PR)

Today's Markets

Overseas markets sustained losses Wednesday. U.S. futures moved lower overnight.

Altria Group's business lines are under constant threat of regulation. Altria owns Phillip Morris USA, the largest tobacco maker in the US. In June, President Obama enacted a law giving the Food and Drug Administration authority over the tobacco industry. Altria supported the move, while rivals such as Reynolds American Inc (RAI) fought the regulation and have challenged the law, stating that it violates their right to free speech. One of the moves that the FDA has made since the law came into effect was the September 22nd ban on all sales of flavored cigarettes excluding menthol. Altria's Phillip Morris USA was unaffected by the ban, while another one of its subsidiaries, John Middleton, makes flavored cigars, which continue to be legal and may benefit from the ban.

• The most likely scenario in my opinion is that this will be the greatest depression (remember "The Great Depression" earned this title not because of the magnitude of economic contraction, but because of the duration). The media propaganda has obviously convinced the average person we are out or about to come out of the turbulence that was the last two years. Consumer spending has once again shot back up to an unsustainable level especially when you take into account how debt ridden many people are. If this truly is a recovery, I think it may have defied gravity as unemployment reached another new high yet that current mantra is being touted at a "jobless recovery". Can you say oxymoron? Getting back to my point, many high paying dividend stocks will necessarily be forced to cut their dividends as more uncertainty floods the market over the next year
• If we do somehow defy gravity and resume economic growth while unemployment continues to increase, The government WILL have to raise taxes in an attempt to dig their way out of the hole they have been digging for themselves over the last decade (referring to our record debt levels and record deficit spending). Marginal tax rates, both on personal and corporate will have to increase which has historically driven capital to those places that will provide the highest after tax return. As for corporations when deciding to engage in new projects, they always choose that which will ( or at least is projected) to produce the highest Internal Rate Of Return. This return will not be nearly as lucrative if say the same company was in a tax friendly country such as Singapore (which by the way now ranks higher in terms of “economic freedom”, which is not to be confused with “political freedom, the former meaning the ease of starting a business as well as the proportion of net operating profit being extremely high). The latest survey (yes it is only a survey) I read now has the U.S ranked 10^th in term of economic freedom as opposed to 1^st a couple of years back. In other words, the new formation of capital will become increasingly less likely to be allocated in the U.S. New capital investment will be drawn towards those places that reward an entrepreneur for his foresight (profit) as opposed to the U.S which will likely engage in a more severe progressive tax system or in simple terms, punishing productivity and innovation.

The point I’m trying to make it that should an investor be dividend oriented, one must look deeper into the true sustainability as well as the ability to grow dividends, which is easier said than done. Obviously there are several companies in the U.S that will be of the minority and reward investors for years to come, but it is worth noting that dividends and payout ratios currently seen are likely to evaporate in response to one, two or a combination of the aforementioned scenarios. I know there will be plenty to add, but I will give my favorite dividend paying stocks for the next decade (or at least try to mention a few).

From our Interactive Earnings Report Database, below we have filtered out the US stocks that have historically been the most volatile on their earnings report days. To calculate this, we use the average absolute percentage change on all earnings report days for each stock that has reported earnings going back to 2001. (If a stock is up 10% on one day and down 20% on the next day, the average absolute 1-day change is 15%.)

The stocks below all have at least 10 quarterly earnings reports in our database and are trading higher than $5/share. As shown, FSLR has historically been the most volatile stock on earnings with an average daily change of +/-17.71%! in our database. MFLX isn't far behind at +/-17.03%. A stock that gains or loses nearly 20% of its value on every quarterly report is a day trader's dream. Other notables on the list of the most volatile stocks on earnings include ISRG, PCLN, UAUA, NFLX, and SNDK. For those interested, we also provide each stock's expected upcoming earnings report date.

Speculating on Gambling: WMS Industries (WMS)

Nvidia (NVDA), Hewlett Packard (HPQ), AMD (AMD), Microsoft (MSFT)

By Hao Jin

The Fed is going to keep interest rates near zero for the foreseeable future. With 10-Year Treasury yields around 3.5%, solid blue chip companies offering decent dividends become popular. Not only do they offer current income and the possibility of capital gains, they also have better protection against inflation than regular bonds. No wonder Warren Buffett wrote, “Buy American. I Am.” in The New York Times last October.

The Fed is going to keep interest rates near zero for the foreseeable future. With 10 year treasury yields around 3.5%, solid blue chip companies offering decent dividends becomes popular. Not only do they offer current income and the possibility of capital gains, they also have better protection against inflation than regular bonds. No wonder Warren Buffett wrote “Buy American. I Am” article on The New York Times last October. (source: NY Times)

However, the economy is still in the bottoming process. There is a potential risk for the economic to backslide. Which blue chips are relatively safe?

Sell Block: U.S. Treasurys

Kraft Foods Inc. (KFT), together with its subsidiaries, manufactures and markets packaged food products and grocery products worldwide. The company has consistently raised dividends since it went public in 2001. It was a part of tobacco conglomerate Altria Group (MO), until Kraft was spun off in May 2007.

As a company whose management shared the values of Altria group (MO) to consistently reward shareholders with dividend increases and share buybacks, Kraft (KFT) has attracted the interests of many dividend investors. While it has raised distributions for only seven consecutive years, many investors didn’t see this as a problem, but believed that the company would soon join the ranks of the elite dividend achievers.

The actual private object of most skilled investment today is to ‘beat the gun.’ As Americans so well express it, to outwit the crowd and to pass the bad, or depreciating halfcrown, to the other. For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs – a pastime in which he is the victor who plays ‘snap’ neither too soon nor too late, who passes the old maid to his neighbor before the game is over, who secures a chair for himself when the music stops. Or to change the metaphor slightly, professional investment may be likened to those newspaper competitors in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors, as a whole; so that each competitor has to pick not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. We have reached the third degree where we devote our intelligences to anticipating what the average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.

Bet it surprises you that the aforementioned quote is from John Maynard Keynes’ legendary book “The General Theory of Employment, Interest, and Money,” written back in 1935. Read it a couple of times away from the maddening crowd, and reflect on it, because certain phrases will grab you with their wisdom. Bet you it also brings back memories of last year’s market machinations, and a wish that – if I had only “beat the gun,” or passed the “old maid” in time to avoid the final “snap.”