H&M Billionaire's Best Business Insights

Stefan Persson is one of the richest people in the world. He took the CEO post at Hennes & Mauritz (NASDAQOTH: HMRZF  ) in 1982 and ran his father's business for the next 16 years.

Today, H&M is the second-largest clothing retailer worldwide: $20 billion in trailing sales puts it just behind Spanish rival Zara and far ahead of its largest American competitor, Gap. Persson passed the baton in 1998, but he remains H&M's chairman and largest shareholder.

Today, he's worth $32 billion. Persson is the 19th-richest person on the planet, and his legacy will continue through his son Karl-Johan, who has served as CEO since 2009.

You don't build a $32 billion nest egg without a sharp business sense, and Persson can stand shoulder to shoulder with the mighty Warren Buffett when it comes to business-grade witticisms. In the following slideshow, you'll get a short background check on Stefan Persson and H&M, followed by some of Persson's most important management insights.

You'll laugh. You'll cry. And you'll walk away as a better investor and businessperson.

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25 Small-Cap Stocks to Buy

Popular Posts: 3 Big Bank Stocks to Buy Now9 Cheap Stocks to Buy Now for $10 or LessMicrosoft Layoffs – What it Means for MSFT Stock Recent Posts: 25 Small-Cap Stocks to Buy How to Start Investing in Stocks With Less Than $1,000 NFLX Is Back – Buy Netflix Stock Now! View All Posts 25 Small-Cap Stocks to Buy

Investment bank Goldman Sachs (GS) recently whipped out a list of 25 small-cap stocks it likes right now, leaning heavily toward consumer plays and tech stocks.

According to the Wall Street Journal:

“Goldman strategist David Kostin identified 25 small-cap stocks (companies with market capitalizations of less than $4 billion) that could offer at least a 25% upside to the Goldman price target over the next 12 months.”

That’s a pretty tall order, especially considering some of these picks are actually deeply in the red year-to-date…

But if you’re interested in the stocks Goldman is watching, here’s the list:

Agios Pharmaceuticals (AGIO) — the healthcare stock is up 63% year-to-date in 2014. Axiall (AXLL) — the materials stock is down 4% YTD. Boise Cascade (BCC) — the materials stock is down 6% YTD. Cornerstone Ondemand (CSOD) — the information technology stock is down 25% YTD. Darling Ingredients (DAR) — the consumer staples stock is down 7% YTD. Granite Construction (GVA) — the industrial stock is up 1% YTD. GT Advanced Technologies (GTAT) — the information technology stock is up 19% YTD. Infinera (INFN) — the information technology stock is up 29% YTD. Lumber Liquidators (LL) — the consumer discretionary stock is down 45% YTD. Marketo (MKTO) — the information technology stock is down 28% YTD. MGIC Investment (MTG) — the financial stock is down 6% YTD. Nimble Storage (NMBL) — the information technology stock is down 38% YTD. NPS Pharmaceuticals (NPSP) — the healthcare stock is down 3% YTD. NuVasive (NUVA) — the healthcare stock is up 5% YTD. Office Depot (ODP) — the consumer discretionary stock is down 2% YTD. Polycom (PLCM) — the information technology stock is up 13% YTD. Proofpoint (PFPT) — the information technology stock is up 6% YTD. Qlik Technologies (QLIK) — the information technology stock is down 16% YTD. Radian Group (RDN) — the financial stock is flat YTD. RetailMeNot (SALE) — the consumer discretionary stock is up 3% YTD. Ryland Group (RYL) — the consumer discretionary stock is up 4% YTD. Steven Madden (SHOO) — the consumer discretionary stock is down 1% YTD. Synageva BioPharma (GEVA) — the healthcare stock is down 1% YTD. Universal Display (OLED) — the information technology stock is up 1% YTD. Vitamin Shoppe (VSI) — the consumer discretionary stock is flat YTD.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor's Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. 

US Grabs Lead in Natural Gas

According to the recently-released BP Statistical Review of World Energy 2014, global natural gas production rose last year by 1.1% to a new all-time high of 328 billion cubic feet per day (Bcfd). World consumption of natural gas is about 24% of all primary energy consumed, behind oil's 33% share and coal's 30%.

Over the past five years, natural gas production in the US has grown by more than 20%. No other country has come close to matching US production gains, and the US leap-frogged Russia in 2009 to become the world's largest natural gas producer.

US production expanded once again in 2013 to a new record of 66.5 Bcfd — 20.5% of the global natural gas supply. The US production gains weren't as great in 2013 as they had been in recent years, and Russia gained some ground on the US in 2013, reaching 58.5 Bcfd. Far behind in third place was Iran at 16.1 Bcfd — good for 4.9% of global gas supplies. Rounding out the top five were Qatar at 15.3 Bcfd and Canada at 15 Bcfd.

The US, Russia, and Iran were also first, second and third, respectively, in natural gas consumption. They consumed, respectively, 71.3 Bcfd, 40 Bcfd, and 15.7 Bcfd. The US and Iran consumed approximately as much gas as they produced (or a bit more), while Russia produced nearly 50% more than it consumed internally. The rest of Russia's gas is piped primarily to Europe, but China is also slated to become an important consumer. The Russian gas monopoly Gazprom recently signed a $400 billion deal that will have Russia supplying China with natural gas for the next 30 years. In 2013 China was the world's fourth-largest consumer of natural gas at 15.6 Bcfd. Rounding out the top five among consumers was Japan at 11.3 Bcfd.

While t! he US was tops in both production and consumption, we are in fifth place for proved global natural gas reserves. (From BP's definitions: "Proved reserves of natural gas are generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions.")

Iran holds the top spot for proved reserves with 1,193 trillion cubic feet (Tcf) — 18.2% of the world's total proved natural gas reserves. Russia's 1,104 Tcf is good for 16.8% of global proved reserves, followed by Qatar (872 Tcf), Turkmenistan (617 Tcf) and the US (330 Tcf). At 2013 production rates, the US has 13.6 years of proved reserves, while Russia's reserves could allow 52 years of production. Because of Iran's much lower production rate and higher reserves, its proved reserves could theoretically be pumped at the 2013 rate for more than 200 years.

Despite the surge in US natural gas production, US proved reserves have increased substantially over the years. Proved gas reserves in the US reached an all-time high of 334 Tcf in 2011, fell in 2012, but surged in 2013 back to 330 Tcf. The increase in reserves is primarily a function of the pairing of hydraulic fracturing with horizontal drilling, which turned a big volume of natural gas resources into natural gas reserves for the first time. After two decades of declining to flat natural gas reserves, US reserves have now risen 86% since 2000.


Global proved natural gas reserves have grown more consistently than US reserves over the years, albeit not as sharply. Over the past decade global gas reserves are up 33%, and just eked out a new record in 2013 of 6,558 Tcf. This record is a fraction of a percent higher than the previous record in! 2011, bu! t global reserves have been effectively flat for the last two years.


The surge in US gas production has had a dampening impact on domestic gas prices, but internationally prices remain high:

With the enormous differentials that have developed over the past five years between US natural gas prices and liquefied natural gas (LNG) prices in Europe and northeast Asia, it is understandable why there is a rush to build LNG export terminals in the US.

As I pointed out in last week's Energy Letter, US natural gas production is up 11.4 Bcfd in just the past five years. Presently there are 13 pending proposals awaiting approval from the Federal Energy Regulatory Commission (FERC), with a total proposed export capacity of 17.9 Bcfd. Two projects have been approved by FERC. Cheniere Energy (NYSE: LNG) and Sempra Energy (NYSE: SRE) have had projects approved with a combined proposed capacity of 4.46 Bcfd.

Unless US natural gas production continues expanding at the pace of the past five years, it is almost a certainty that these export facilities (among other drivers) will lead to higher US natural gas prices. Higher natural gas prices will create opportunities for natural gas providers as well as companies and partnerships focused on logistics and transport of natural gas — opportunities we regularly focus on in depth in The Energy Strategist.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

 

3 Big-Volume Stocks to Trade for Breakouts

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>5 Hated Earnings Stocks You Should Love

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>5 Rocket Stocks to Buy for Summer Gains

With that in mind, let's take a look at several stocks rising on unusual volume recently.

AeroVironment

AeroVironment (AVAV) designs, develops, produces, supports and operates unmanned aircraft systems, tactical missile systems, and efficient energy systems in the U.S. and internationally. This stock closed up 5.6% to $35.33 in Monday's trading session.

Monday's Volume: 841,000

Three-Month Average Volume: 327,116

Volume % Change: 149%

From a technical perspective, AVAV ripped sharply higher here right above its 50-day moving average of $32.76 with strong upside volume flows. This sharp spike higher on Tuesday is quickly pushing shares of AVAV within range of triggering a big breakout trade. That trade will hit if AVAV manages to take out some near-term overhead resistance levels at $36.45 to $36.50 and then once it clears some past resistance levels at $36.97 to $37.90 with high volume.

Traders should now look for long-biased trades in AVAV as long as it's trending above Monday's intraday low of $33.43 or above its 50-day at $32.76 and then once it sustains a move or close above those breakout levels with volume that hits near or above 327,116 shares. If that breakout gets underway soon, then AVAV will set up to re-test or possibly take out its next major overhead resistance level at it 52-week high of $41.67.

Pacific Ethanol

Pacific Ethanol (PEIX) produces and markets low-carbon renewable fuels in the U.S. This stock closed up 8.2% to $16.98 in Monday's trading session.

Monday's Volume: 2.51 million

Three-Month Average Volume: 1.21 million

Volume % Change: 144%

From a technical perspective, PEIX ripped sharply to the upside here and broke out above some key overhead resistance levels at $16.08 to $16.29 with high volume. This big move to the upside on Monday is now starting to push shares of PEIX within range of triggering another big breakout trade. That trade will hit if PEIX manages to take out Monday's intraday high of $17.35 to its 52-week high at $18.65 with high volume.

Traders should now look for long-biased trades in PEIX as long as it' trending above Monday's intraday low of $15.85 and then once it sustains a move or close above those breakout levels with volume that hits near or above 1.21 million shares. If that breakout materializes soon, then PEIX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $20 to $25.

Imperial Oil

Imperial (IMO) is engaged in the exploration for and the production and sale of crude oil and natural gas in Canada. This stock closed up 0.97% at $53.21 in Monday's trading session.

Monday's Volume: 629,000

Three-Month Average Volume: 182,885

Volume % Change: 206%

From a technical perspective, IMO rose modestly higher here right around some near-term support at $52.84 to $52 with above-average volume. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $39.98 to its recent high of $54.09. During that uptrend, shares of IMO have been consistently making higher lows and higher highs, which is bullish technical price action. This move higher on Monday is starting to push shares of IMO within range of triggering a near-term breakout trade. That trade will hit if IMO manages to take out some near-term overhead resistance levels at $53.50 to its 52-week high at $54.09 with high volume.

Traders should now look for long-biased trades in IMO as long as it's trending above some near-term support levels at $51.61 or at its 50-day at $50.70 and then once it sustains a move or close above those breakout levels with volume that hits near or above 182,885 shares. If that breakout kicks off soon, then IMO will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $60 to $65.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>3 Huge Stocks on Traders' Radars

>>5 Toxic Stocks You Need to Sell in July

>>3 Stocks Under $10 Making Big Moves Higher

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Why Smartwatches Aren't the Next Big Thing

Smartwatches, and wearables in general, are expected by some to be the next big thing. Samsung has already released some smartwatches, and both Apple (NASDAQ: AAPL  ) and Microsoft (NASDAQ: MSFT  ) are rumored to be developing smartwatches of their own. Along with Google's (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) recently announced Android Wear platform, it's clear that the big tech companies are betting big on the wearables revolution. Despite this, there are plenty of reasons to believe smartwatches won't be nearly as big as many people think.

What problem do smartwatches solve?
Smartphones have been wildly successful because they solved a real problem. Smartphones took certain tasks that were formerly performed on a PC and moved them to a form factor that can fit inside of a person's pocket. Checking Facebook on a smart phone, for example, is far more convenient than lugging around a laptop.

But smartwatches, with small screen sizes and limited functionality, don't make anything that one can do on a smartphone more convenient. Smartphones are already so portable that the need for general-purpose smartwatches just doesn't seem to exist. This is likely why Samsung's smartwatch efforts have thus far failed.

Samsung's Gear 2 Smart Watch. Source: Samsung.

There's only one use case that I can think of where smartwatches are actually useful, and that's fitness. While a smartphone can be strapped to one's arm, it's not an ideal solution, and it's difficult to use the phone in that state. Using a smartwatch as a fitness-orientated device makes a lot of sense. Fitness is the problem smartwatches are capable of solving.

Apple and Microsoft have the right idea
Both Apple and Microsoft are rumored to be working on smartwatches, and both are expected to focus heavily on fitness. Apple's iWatch will likely only work with the company's iPhones, and it's expected to feature more than 10 different sensors on board for tracking things like heart rate. Screen sizes may vary from as small as 1.3" to as large as 2.5", and the screens are expected to be protected by scratchproof sapphire glass.

Microsoft's device seems quite similar. It will likely work with all of the major smartphone operating systems instead of just one, but it too will focus heavily on fitness. Rumors point to Microsoft making the APIs for the device open in an attempt to gain developers for the platform, and it will also reportedly feature as many as 11 sensors.

Although Apple's iWatch will likely sell well, given Apple's cult-like customer base, a fitness-focused device is unlikely to move the needle for the company. Apple sold 150 million iPhones in 2013, but if the iWatch will primarily be a fitness device, as the rumors suggest, only a fraction of iPhone users will have a use for it. The CDC estimates that only about 20% of adults in the United States get the recommended amount of exercise, and that could greatly limit the market for a fitness-orientated smartwatch. Even if Apple managed to sell 30 million iWatches annually at, say, $300 each, that's only $9 billion in annual revenue. For a company with $170 billion in total revenue in 2013, that's not very meaningful.

Of course, all that we know about the iWatch so far are only rumors, so all of this is speculation. One other possible use case for the iWatch could be medical applications, and given both the bevy of sensors on the device and that Apple has been assembling a medical technology team, Apple's aim for the iWatch could go well beyond fitness alone. This could greatly expand the market for such a device, although regulatory hurdles may stand in the way. 

What the iWatch will do is strengthen Apple's ecosystem, making the iPhone look more attractive, and if that's the goal of the device, then Apple will likely succeed.

It's unclear why Microsoft is even bothering to make a smartwatch, but it does make its own tablets and, with the acquisition of Nokia's phone operations, its own phones, so I suppose it's just an extension of the company's hardware efforts. If Microsoft can put together a high-quality, useful device, then the fact that it will be cross-platform could make it quite desirable. But like Apple, it won't have much of an effect on the company's top or bottom lines.

Google's strategy seems flawed
Google is going with a different strategy, creating a smartwatch platform and allowing OEMs to come up with their own devices. The idea behind Android Wear is that it displays useful information when you need it, such as weather, scheduled items, commute times, and other pieces of data.

Moto 360 from Motorola running Android Wear. Source: Motorola.

But so do smartphones. It seems like the point of Android Wear devices is to allow people to avoid having to take out their smartphones. That's not exactly a huge burden being lifted. Android Wear has fitness functions as well, but the devices are likely to be far broader compared to Apple's or Microsoft's products.

It seems like Google is just throwing Android on a smartwatch and hoping that OEMs can figure out how to make it work. This is the exact opposite of what Apple is doing, developing a device aimed at a specific function, and I doubt that Android Wear devices will find much success.

The bottom line
Smartwatches that attempt to do the same things that a smart phone can already do are bound to fail. Both Apple and Microsoft are reportedly building devices where fitness is the main focus, and that's the only use case that really makes sense for smartwatches. Google's strategy seems flawed in contrast, and I doubt Android Wear will see much success. Regardless, the market for smartwatches is unlikely to be anywhere near the size of the smartphone market, and it will do little to help the bottom lines of Apple, Microsoft, or Google.

This potential Apple supplier could be the one to watch
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Trade Groups Back Cybersecurity Info Sharing Bill

Financial services trade groups on Tuesday urged the Senate Select Committee on Intelligence to pass the Cybersecurity Information Sharing Act of 2014, which they say will further strengthen the ability of the private sector and the federal government to work together to develop a more effective information sharing framework to respond to cyber threats.

The legislation, introduced June 17 by committee chairwoman Dianne Feinstein, D-Calif., and Senate Intelligence Committee Vice Chairman Saxby Chambliss, R-Ga., was being marked up by the committee on Tuesday in a closed-door session.

The Financial Services Roundtable and the Securities Industry and Financial Markets Association told the committee in a joint letter that “the threat of cyber attacks is a clear and present danger to our industry and to other critical infrastructure providers that we and the nation as a whole rely upon.”

While FSR and SIFMA said in the letter that the financial services sector “makes substantial investments in protecting our infrastructure, has improved coordination among institutions of all sizes and is continually enhancing our partnerships with the Federal government,” these measures are “not enough and it is critical for Congress to take action to enhance, facilitate and protect threat information sharing across sectors and with the federal government.” 

Taken as a whole, FSR and SIFMA say, the draft bill “is a very good step forward as it provides liability and antitrust protections while balancing the need for privacy protection,” and will also “facilitate cross-sector information sharing and respects and builds upon existing information sharing programs.”

Feinstein said in a press release that the bill removes legal barriers for companies to share, receive and use cyber threat information and cyber countermeasures (defensive measures) on a purely voluntary basis; Provides liability protection for the sharing of cyber information for cybersecurity purposes; and provides important protections to ensure that sharing of cyber information does not allow for privacy intrusions.

---

Check out Cybersecurity: What the Regulators May Do on ThinkAdvisor.

Baidu: This Search Giant Is a Worthy Investment

Leading Chinese search provider Baidu (BIDU) released strong first-quarter results. The company came up with fantastic financials, exceeding its own outlook. Baidu's core search business was performing well, driving the company's growth. Moreover, Baidu is confident of a better performance in the future, as the company is counting on the fast growing mobile segment. On the back of many key factors, Baidu can be a good long-term holding.

Strong financials

Baidu's financials were strong. Its quarterly revenue reported an impressive 59% growth as compared to last year's same quarter. Baidu also saw a good 8.8% growth in online marketing customers, which led the company to post a good 24% increase in net profit. On the earnings front, Baidu posted $1.23 per share, which outpaced consensus estimates of $1.04 per share.

Baidu is a famous name in China's internet industry. It has aggressive strategies to grow faster and move ahead of peers -- Alibaba Group and Tencent. Both these competitors are making impressive moves to capture untapped opportunities in the growing e-commerce business. To hold its ground, Baidu is investing in its core business as it transitions to mobile devices such as smartphones from PC search advertising.

Baidu is expanding its operations on the international front as well. Looking at its performance in the past, the promises look concrete. Baidu is laser-focused on mobile, cloud-based services, and customer products. These segments are expected to generate strong income, and give enormous opportunity to Baidu to tap markets in future. Baidu is stretching its foot print to different sectors such as media, retail, and travel, along with financial and local services that should generate strong margins for the company.

Growth ahead

Further, Baidu has its eyes on the growing mobile segment. The changing customer preferences from feature phones to smartphones is a great opportunity for many companies, and Baidu is also lining up to benefit from it. Seeing this, Baidu is taking steps to expand its operations in segments such as media, social, online tools to deliver world class services. According to some sources, internet users logging in from mobile devices have increased over time, and Baidu is looking to maximize its profit and improve its market share as a result.

Recent studies have revealed that internet mobile search is increasing day by day. The statistics show that the number of active users have increased from 130 million to 160 million in two quarters. Seeing this, Baidu wants to capture these growing opportunities. It is making moves to strengthen its channel distribution through a number of initiatives, such as optimizing ad formats on the search page, making click-to-call, click-to-download buttons, as well as location extensions on the product side. Such moves by the company will help it generate healthy returns in the future.

Moving forward, Baidu has added the Plus V verification program on the safety front, which is an attractive feature which will attract more users. Also, with this feature, users will be able to advertise on the search page, which will be accretive to its revenue as the company expects solid growth in its customer base with this system in place.

Conclusion

Looking at the ratios, Baidu is quite undervalued with a forward P/E of just 3.61. Baidu is continually reporting solid results which indicate that the company is moving forward. Also, its core fundamentals are strong, indicating that Baidu looks set to get better in the future.

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Gilead Sciences: The Senate Just Wrote Me a Letter

The Box Tops hit”the Letter” was about rushing to get home to a girlfriend who can’t live without the singer anymore. Gilead Sciences (GILD) received a letter a letter, too, but I’m guessing it could live without this one.

Special to The Chronicle

Reuters has the details on the letter sent to Gilead by two Senators:

Two members of the U.S. Senate Finance Committee, including Chairman Ron Wyden, on Friday asked Gilead Sciences Inc to defend the more than $80,000 cost of its  breakthrough treatment for hepatitis C, citing the expense to federal healthcare programs.

“Given the impact Sovaldi’s cost will have on Medicare, Medicaid and other federal spending, we need a better understanding of how your company arrived at the price for this drug,” the lawmakers said in a release. “It is unclear how Gilead set the price for Sovaldi.”

RBC Capital Markets’ Michael J. Yee and team and team aren’t particularly concerned:

In our view, the bottom line is 1) it’s not clear how much jurisdiction if any, the Committee will have on enforcing timely and complete information exchange, 2) it’s a significant uphill battle for anything to actually change because it’s Congressional law that Medicare cannot negotiate drug pricing and this would require new legislation and an overhaul in part of the CMS pricing system (extremely unlikely for anything to get done or to start during an election year….?), 3) this is not surprising anyways as one should expect the “headline” pricing of Sovaldi to generate lobbying and pressure to get Gilead Sciences to reduce Sovaldi price just like this all happened years ago during the HIV days for Viread, 4) it’s not clear if hearings could even happen …and for anything to actually result out of it (public complaints by the Committee but can’t do anything in reality), and 5) rational free markets have lots of justification for why Sovaldi pricing is what it is based on drug development R&D risk, significant risk in the acquisition of VRUS, and significant breakthrough in treatment (a cure).

Investors don’t appear to agree. Shares of Gilead Sciences have dropped 0.4% to $88.56 at 3:01 p.m. on a day when other biotech stocks are rising. Celgene (CELG) has gained 1.5% to $89.13, Regeneron (REGN) has advanced 1.1% to $317.96 and Biogen Idec (BIIB) has risen 1.1% to $322.62. The iShares Nasdaq Biotechnology ETF (IBB) is up 0.6% at $257.10.

Wells Fargo Earnings Don’t Warrant Selloff in WFC Stock

Popular Posts: 5 Stocks to Buy for July5 Stocks to Sell for JulyThe Top 10 S&P 500 Dividend Stocks for March Recent Posts: Wells Fargo Earnings Don’t Warrant Selloff in WFC Stock Portugal: An Unusual Suspect for a Market Correction Left for Dead, Emerging Markets Are Having a Great 2014 (EEM) View All Posts Wells Fargo Earnings Don’t Warrant Selloff in WFC Stock

Wells Fargo (WFC) earnings were just fine on the top and bottom lines, but the market quibbled with some of what came in between, sending WFC stock lower in midday Friday trading.

Although Wells Fargo earnings per share rose to match Wall Street’s estimate — and revenue beat expectations by declining less than forecast — a key measure of Wells Fargo profitability continued to slip, and that was enough to ding WFC stock.

That doesn’t really affect the trajectory of WFC, however, which should continue to grind higher — at least as long as the market does.

Shares were up a market-beating 14% for the year-to-date heading into the Wells Fargo earnings release, but the immediate pullback on the earnings report doesn’t change the thesis.

WFC stock is a must-own if you’re bullish on the economy and the market. After all, Wells Fargo represents the nation’s largest mortgage lender and biggest bank by market cap.

It’s hard to see either the economy or the market going anywhere without WFC participating.

Wells Fargo Earnings – Nitpicking Over NIM

For the most recent quarter, Wells Fargo earnings rose 3.8% to $5.73 billion, or $1.01 a share, from $5.52 billion, or 98 cents, a year earlier. As noted above, earnings matched Street estimates. Revenue, meanwhile, slipped 1.5% to $21.07 billion, beating the Street view for a drop to $20.84 billion.

There were no big surprises in the broad strokes of the Wells Fargo earnings release. Revenue has been sluggish because higher interest rates pinched off the mortgage refinancing boom some time ago. Home lending originations totaled $47 billion in the second quarter, down from $112 billion booked a year ago.

Additionally, Wells Fargo earnings aren’t getting the same goosing from the release of loan-loss reserves as they once did because credit quality has improved to the point where it’s pretty much topped out. No surprise there, either.

That left the Street to worry about the nitty-gritty of basic banking, where rising costs and lower margins remain a Wells Fargo bugaboo.

For years now, historically low interest rates have made it tough for Wells Fargo earnings to show an improvement in net interest margin, or NIM. (That’s the bread-and-butter difference between what a bank pays for deposits and charges for loans.)

It’s tough to grow net interest margin when benchmark rates are plumbing the depths.

However, rates are no longer stuck at ultra-depressed levels, yet Wells Fargo earnings still showed contraction in this key measure of profitability. Indeed, Wells Fargo net interest margin fell to 3.15% vs. 3.4% year-over-year, and from 3.2% in the prior quarter.

If there was a blemish on the Wells Fargo earnings report, this was it.

Bottom Line

In the grand scheme of WFC stock, recalcitrant net interest margins amount to a pimple — not psoriasis. That makes the pullback in WFC stock more of a buying opportunity than a signal that’s something wrong.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

4 Stocks Under $10 Making Big Moves


DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.

>>5 Stocks Set to Soar on Bullish Earnings

Stocks that are making large moves like these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.

Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success.

>>5 Tech Stocks to Trade for Gains This Week

With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside.

Synthesis Energy Systems

Synthesis Energy Systems (SYMX), a development stage energy and gasification technology company, provides various proprietary gasification technology systems and solutions to the energy and chemical industries worldwide. This stock closed up 5.5% to $1.70 in Tuesday's trading session.

Tuesday's Range: $1.62-$1.72

52-Week Range: $0.60-$2.49

Tuesday's Volume: 438,000

Three-Month Average Volume: 376,653

From a technical perspective, SYMX ripped higher here right above some near-term support at $1.61 and back above its 50-day moving average of $1.65 with above-average volume. This stock recently pulled back from its high of $1.95 to its recent low of $1.61. Shares of SYMX are now starting to rebound off that $1.61 low with decent upside volume flows. Market players should now look for a continuation move to the upside in the short-term if SYMX manages to take out Tuesday's intraday high of $1.72 to some more near-term overhead resistance at $1.80 with high volume.

Traders should now look for long-biased trades in SYMX as long as it's trending above some near-term support levels at $1.61 or around $1.50 and then once it sustains a move or close above $1.72 to $1.80 with volume that hits near or above 376,653 shares. If that move kicks off soon, then SYMX will set up to re-test or possibly take out its next major overhead resistance levels at $1.90 to $1.95, or even $2.09. Any high-volume move above those levels will then give SYMX a chance to re-test or take out its 52-week high at $2.49.

ION Geophysical

ION Geophysical (IO) provides geophysical technology, services and solutions to the oil and gas industry worldwide. This stock closed up 2.6% to $4.30 in Tuesday's trading session.

Tuesday's Range: $4.11-$4.30

52-Week Range: $2.81-$6.58

Tuesday's Volume: 1.40 million

Three-Month Average Volume: 1.19 million

From a technical perspective, IO jumped notably higher here right off its 50-day moving average of $4.16 and just above its 200-day moving average or $4.02 with above-average volume. This stock has been uptrending a bit for the last two months, with shares moving higher from its low of $3.85 to its recent high of $4.40. During that move, shares of IO have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of IO within range of triggering a major breakout trade. That trade will hit if IO manages to take out some key near-term overhead resistance levels at $4.36 to $4.40 and then once it clears more resistance levels at $4.60 to $4.73 with high volume.

Traders should now look for long-biased trades in IO as long as it's trending above Tuesday's intraday low of $4.11 or above its 200-day at $4.02 and then once it sustains a move or close above those breakout levels with volume that hits near or above 1.19 million shares. If that breakout gets started soon, then IO will set up to re-test or possibly take out its next major overhead resistance levels at $5 to $5.50. Any high-volume move above $5.50 will then give IO a chance to make a run at $6.

SandRidge Energy

SandRidge Energy (SD), together with its subsidiaries, explores for and produces oil and natural gas properties primarily in the Mid-Continent region of the U.S. This stock closed up 2% to $6.97 in Tuesday's trading session.

Tuesday's Range: $6.72-$7.05

52-Week Range: $4.79-$7.43

Tuesday's Volume: 17.21 million

Three-Month Average Volume: 7.82 million

From a technical perspective, SD trended modestly higher here back above its 50-day moving average of $6.84 with monster upside volume. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $5.80 to its recent high of $7.43. During that uptrend, shares of SD have been consistently making higher lows and higher highs, which is bullish technical price action. This spike higher on Tuesday is starting to push shares of SD within range of triggering a big breakout trade. That trade will hit if SD manages to take out some resistance at $7.20 to its 52-week high at $7.43 and then when it clears some past resistance at $7.47 to $7.80 with high volume.

Traders should now look for long-biased trades in SD as long as it's trending above Tuesday's intraday low of $6.72 or above more support near $6.50 and then once it sustains a move or close above those breakout levels with volume that hits near or above 7.82 million shares. If that breakout begins soon, then SD will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are its next major overhead resistance levels at $8.16 to $8.50, or even $8.98 to $9.04.

Revolution Lighting Technologies

Revolution Lightning Technologies (RVLT), together with its subsidiaries, designs, manufactures, markets and sells LED replacement lamps and fixtures; and LED-based signage, channel-letter, and contour lighting products. This stock closed up 2.7% to $2.62 in Tuesday's trading session.

Tuesday's Range: $2.46-$2.65

52-Week Range: $2.01-$5.50

Tuesday's Volume: 905,000

Three-Month Average Volume: 341,784

From a technical perspective, RVLT jumped higher here right above its 50-day moving average of $2.41 with above-average volume. This stock recently formed a double bottom chart pattern at $2.15 to $2.22. Following that bottom, shares of RVLT have started to gap and spike higher and move back above its 50-day moving average. Market players should now look for a continuation move to the upside in the short-term if RVLT manages to take out Tuesday's intraday high of $2.65 with strong upside volume.

Traders should now look for long-biased trades in RVLT as long as it's trending above its 50-day at $2.41 or above those double bottom support zones and then once it sustains a move or close above $2.65 with volume that hits near or above 341,784 shares. If that move gets started soon, then RVLT will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $3.03 to $3.05, or even $3.23 to $3.40.

To see more stocks that are making notable moves higher, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>4 Stocks Rising on Big Volume

>>3 Big Stocks on Traders' Radars

>>5 Blue-Chip Stocks to Trade for Summer Gains

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

5 Tech Stocks in Danger of Shorting Out

Popular Posts: 3 Airline Stocks Running Into TurbulenceJob Gains Threaten Liquidity Bubble5 Silver and Gold Stocks Waiting to Pop Recent Posts: 5 Tech Stocks in Danger of Shorting Out 3 Airline Stocks Running Into Turbulence Job Gains Threaten Liquidity Bubble View All Posts 5 Tech Stocks in Danger of Shorting Out

Stocks were on the slide Tuesday as nervousness grew over the start of Q2 earnings season when Alcoa (AA) reports after the close, as well as the outbreak of another geopolitical hotspot as Israel gears up for an anti-terror campaign in the Gaza Strip.

Source: ©iStock.com/lef2481

With Iraq still a mess and Iranian nuclear negotiations on the fritz, the Middle East is really heating up. And let’s not forget that Ukraine is far from resolved as well.

Technically, the Dow Jones Industrial Average has been pushed back below the 17,000 level that had the bulls foaming at the mouth over the weekend while the Russell 2000 is down another 1.6% as I write for its worst two-day drop since April.

Given all the pent-up selling pressure, the drop could deepen much further.

Certainly, the weakness is already hitting momentum favorites in the technology sector. Here are five popular tech stocks that you need to sell or avoid.

Next Page

Tech Stocks Under Pressure – Pandora (P)

Click to EnlargePandora (P), the Internet radio company, has been hammered during the past two days by nearly 14% as it scythes below its 50-day moving average for the first time since March.

Pandora shares enjoyed a nice 36% rally off of their May low as they partially reversed the March-May tech sector wipeout. But the 200-day moving average proved to be tough resistance as investors doubt the company’s prospects amid tougher competition from Apple (AAPL) and others.

Next Page

Tech Stocks Under Pressure – Twitter (TWTR)

Click to Enlarge Twitter (TWTR) shares are down nearly 12% to cap a four-day loss as faith in the microblogging service is shaken. We’ve yet to see Twitter make a profit, with positive earnings per share not expected until the fourth quarter of this year.

Competitive threats are on the rise as well, with Chinese microblogging service Weibo (WB) recently coming public on the Nasdaq exchange.

Next Page

Tech Stocks Under Pressure – Yelp (YELP)

Click to Enlarge Yelp (YELP) dropped hard below both its 20-day and 200-day moving averages on Tuesday after enjoying a huge 45% rally off of its May low. Shares still are down more than 32% from their March high, however, as the bloom has come off the stock.

Like Twitter, Yelp isn’t profitable and isn’t expected to post positive earnings per share for a full fiscal year until 2015.

Next Page

Tech Stocks Under Pressure – LinkedIn (LNKD)

Click to Enlarge LinkedIn (LNKD) has had a rough time since last September, falling into a relentless downtrend that’s pushed the stock down roughly 40% from its old highs. LNKD shares caught a reprieve over the last three months but succumbed to selling pressure again on Tuesday as shares drop below their 50-day moving average once more.

Analysts at Barclays Capital, in a recent coverage initiation note, highlighted the main problem LNKD faces: creating habitual, regular use among its users.

Next Page

Tech Stocks Under Pressure – Facebook (FB)

Click to Enlarge Like many of the other names in its industry, Facebook (FB) suffered a washout between March and May as momentum tech favorites were washed out in a wave of selling pressure. In the months that followed, the bulls wrestled prices higher.

But on Tuesday, that three-month uptrend was decisively broken as FB stock threatened its 50-day moving average for the first time since March.

The shine is coming off of FB as teens, the arbiters of cool in the mobile economy, migrate to other platforms to avoid the “mom problem”: Studies cited by Barclays analysts show Facebook usage by the 35- to 54-year-old age bracket has grown by 41% over the last three years while the 13-17 demo has dropped 25% and the 18-24 demo has dropped modestly.

In response, I’ve recommended the July $62.50 put options to my Edge Pro subscribers.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters, as well as Mirhaydari Capital Management, a registered investment advisory firm.

What’s the Best Puerto Rico Stock? DRL, FBP, OFG & BPOP

For investors looking for exposure to the US commonwealth of Puerto Rico, banking stocks Doral Financial Corp (NYSE: DRL), First Bancorp (NYSE: FBP), OFG Bancorp (NYSE: OFG) and Popular Inc (NASDAQ: BPOP) offer the best bet as these Puerto Rico stocks trade on major US exchanges rather than the OTC. However, it should be mentioned that there has been a slowdown in Puerto Rico's economy which has also shrunk in five of the past seven fiscal years. Then last February, Puerto Rico's debt was cut to speculative grade by the three largest credit-rating companies while Governor Alejandro Garcia Padilla has proposed a series of budget cuts to help tackle the island's mounting debt load -including the freezing public workers' salaries and the closing about 100 schools.

On the other hand, Sterne Agee recently stated their belief that legislation to restructure public entities in Puerto Rico is positive for banks based there and the firm does not expect First Bancorp, OFG Bancorp and Popular Inc to have any losses or a significant negative impact as a result of the legislation. Sterne Agee also identified Popular Inc as its favorite name in the sector, followed by OFG and First Bancorp – giving all three a buy rating.

With the above thoughts in mind, here is a look at four Puerto Rico banking stocks to give you an idea about what the island might have to offer investors on the mainland:

Doral Financial Corp. A bank holding company engaged in banking, mortgage banking and insurance agency activities through its wholly-owned subsidiaries Doral Bank, Doral Financial Corp has operations on the mainland US (New York metropolitan area and northwest region of Florida) and Puerto Rico. Doral Financial Corp began surging as much as 70% on Wednesday when an appeals court in Puerto Rico reversed a lower court's ruling that it lacked jurisdiction to hear a case stemming from the company's tax dispute with the island's government. Back in May, Doral Financial Corp sued the government for voiding an agreement that required the Treasury Department to pay the company about $230 million in tax refund. The appeals court has since said the lower court erred when it ruled that it lacked jurisdiction to hear the case and ordered it to hold a hearing in which the Treasury Department must prove the basis for voiding the agreement. The company had received a letter from the Federal Reserve Bank of New York in May stating that it must classify the tax agreement as a loss and write off the asset. It should be noted that the dispute stems from the company's overstatement of earnings from 1998 to 2005. On Thursday, Doral Financial Corp rose rose 4.46% to $7.39 (DRL has a 52 week trading range of $1.87 to $25.00 a share) for a market cap of $49.10 million plus the stock is down 52.3% since the start of the year, down 55.5% over the past year and down 83.7% over the past five years. 

First Bancorp. The parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the Virgin Islands and Florida, and of FirstBank Insurance Agency, First BanCorp operates a total of 144 branches, stand-alone offices and in-branch service centers throughout Puerto Rico, the US and British Virgin Islands and Florida where FirstBank Florida has a network of 12 branch offices in Miami/Dade, Broward, Orange and Osceola counties. Back in late April, First Bancorp reported earnings where the CEO commented:

"Our main focus for 2014 continues to be asset quality as we continue to face economic headwinds in Puerto Rico. We are pleased with our core operating performance during the first quarter achieving improvements in our core franchise metrics; net income improved to $17.1 million, or 15.5%, from $14.8 million in the fourth quarter, pre-tax pre-provision income improved to $56.9 million, or 19.5%, from $47.6 million in the fourth quarter mainly driven by our expense management initiatives and reduction in credit cost."

On Thursday, First Bancorp rose 1.46% to $5.56 (FBP has a 52 week trading range of $4.36 to $8.70 a share) for a market cap of $1.16 billion plus the stock is down 8.5% since the start of the year, down 27.5% over the past year and down 91.3% over the past five years.

OFG Bancorp. A diversified financial holding company, OFG Bancorp has three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, which provide a full range of commercial, consumer and mortgage banking services, as well as financial planning, trust, insurance, investment brokerage and investment banking services, primarily in Puerto Rico through 55 financial centers. In late April, OFG Bancorp reported earnings where the CEO/Vice Chairman commented:

"OFG has delivered another strong quarter – our fifth consecutive one – since the close of the BBVA PR acquisition. We continued to show impressive growth in book value and capital, with little or no noise in the numbers… Puerto Rico has made some good progress in addressing its fiscal situation and in meeting its immediate liquidity needs. While the economic environment is still challenging, we have proven our ability over the years to navigate such conditions. Looking beyond 2014, we expect a notable increase in reported earnings as non-cash, amortization of the FDIC indemnification asset will be significantly lower."

On Thursday, OFG Bancorp rose 0.87% to $18.56 (OFG has a 52 week trading range of $14.05 to $19.33 a share) for a market cap of $835.27 million plus the stock is up 8.7% since the start of the year, down 0.16% over the past year and up 83.8% over the past five years.

Popular Inc. Founded in 1893, Popular Inc is the leading banking institution by both assets and deposits in Puerto Rico and ranks among the top 50 US banks by assets. In the US, Popular Inc has established a community-banking franchise that does business as Popular Community Bank, providing a broad range of financial services and products with branches in New York, New Jersey, Illinois, Florida and California. Last Wednesday, Popular Inc announced that it had completed the repayment of TARP funds to the US Treasury (the bank was the largest still outstanding for TARP's capital purchase fund) through the repurchase of $935 million of trust capital securities issued to the US Treasury under the TARP Capital Purchase Program. Popular Inc funded the repurchase through a combination of available cash and $400 million from the proceeds of the issuance of its 7.000% Senior Notes due 2019. Back in April, Popular Inc reported earnings where the Chairman/CEO commented:

"This quarter we are reporting solid financial results as well as announcing an important initiative to restructure our U.S. business. The payment of a dividend from PCB is also an important step in more effectively managing our capital structure. Although the business environment in our home market is challenging, we expect to continue to make progress in our capital management initiatives as the P.R. economy stabilizes."

Popular Inc also announced that Popular Community Bank (PCB) will undergo a strategic reorganization in which it will divest its regional operations in California, Illinois and Central Florida and centralize certain back office operations in Puerto Rico and New York. On Thursday, Popular Inc rose 1.24% to $34.37 (BPOP has a 52 week trading range of $23.97 to $34.80 a share) for a market cap of $3.56 billion plus the stock is up 19.6% over the past year, up 8.1% over the past year and up 43.8% over the past five years.

Finally, here is a look at the performance of all four Puerto Rico stocks:

As you can see from the above chart, OFG Bancorp and Popular Inc have given investors a positive performance while Doral Financial Corp has been volatile and First Bancorp has at least been trending slightly upward the past few years.

Six Flags Rewards Investors Post-Bankruptcy

NEW YORK (TheStreet) -- Back in 2009, Six Flags (SIX) wiped out almost all of its value for shareholders before ultimately declaring bankruptcy. Now, the world's largest theme park company is back with a vengeance, introducing the world to record-breaking roller coasters, and bringing incredible returns for shareholders along the way.

The company's Great Adventure Park in New Jersey currently houses Kingda Ka, the tallest and fastest roller coaster in North America. The u-shaped track reaches 456 feet in the sky. People on the ride experience the thrill of going from 0 to 128 miles per hour in a mere 3.5 seconds. The ride stretches over 3,118 feet and takes less than a minute to complete the run.

The Kingda Ka and Great Adventure are about to get even bigger with the introduction of Zumanjaro and the Drop of Doom. The record-breaking ride will have the tallest drop in the world from 415 feet in the air. Speeds on the drop reach 90 miles per hour in a 10-second drop from top to bottom. The ride is being built into the same structure as Kingda Ka, giving the theme park two record breaking attractions in close proximity for guests. Six Flags recently unveiled Goliath at its Chicago theme park. The ride broke three wooden coaster records. The ride is the fastest wooden coaster, with a speed of 72 miles per hour. Goliath also features the tallest drop of a wooden roller coaster and the steepest drop at 180 feet and 85 degrees respectively. Along with Kingda Ka, Drop of Doom and Goliath, Six Flags has other record-breaking attractions that are increasing yearly attendance. Full Throttle is the fastest and tallest looping coaster in the world. El Toro features the steepest drop of any wooden coaster in the country. Bizzarro has a 220 foot drop, which is one of the largest. Texas Skyscreamer is the world's tallest swing carousel ride. Medusa, a new ride to open in Mexico, will have a world record three inversions. Also helping Six Flags in the future will be its strong relationship with Time Warner (TWX). The company's parks feature rides themed after Batman, Superman, and other DC Comic characters. With a plethora of DC Comic movie adaptations coming, Six Flags will have plenty of opportunities to cash in on increased attendance. Six Flags remains the number one theme park in the world by number of properties. The company ranks in the top five for attendance and has seen a steady rise in the number of annual visitors. Six Flags has 18 theme parks that attract over 26 million guests. Take a look at these attendance figures over the last five years: 2009: 23.3 million 2010: 24.3 million 2011: 24.3 million 2012: 25.7 million 2013: 26.1 million The good news for Six Flags investors is the record-breaking rides continue to increase attendance, revenue and season passes. A focus on adding record breaking roller coasters has paid off for investors. The company emerged from bankruptcy in 2010 and began revitalizing its parks and balance sheets. Since that time, shares are up over 350%. Investors in Six Flags also collect a healthy 5% dividend yield. With a cleaner-looking balance sheet, investors are in good position with this theme park company. Thrill seekers continue to go to parks with the biggest and fastest rides. Six Flags strategy is working and investors should take note. At the time of publication, the author held no positions in any of the stocks mentioned. Follow Chris on Twitter @chriskatje This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

What Delta’s Disappointment Means for American Airlines, United Continental

UBS analysts Darryl Genovesi and Raymond Wong explain what Delta Air Lines’ (DAL) disappointing update yesterday means for American Airlines (AAL), United Continental (UAL) and other carriers:

ASSOCIATED PRESS

[Delta's unit] revenue weakness attributed to weaker Latam yields as business travel declined during World Cup. We can see this trend in June agency bookings, followed by sharp recovery in July/Aug. American Airlines is most levered to Latam among our coverage.

Mapping agency bookings across American Airlines’ geographic mix would imply ~5.7% Q2 PRASM growth for it, followed by 4-5% growth in July and August. While our prior Q2 EPS estimate had incorporated some upside beyond this forecast, we are scaling back our expectation with our Q2 EPS estimate moving from $1.96 to $1.85.

Mapping agency bookings across United Continental’s geographic mix would imply ~5% Q2 PRASM growth for it, followed by ~4% growth in July and August, although our Q2 EPS estimate at $2.00 incorporates ~3% PRASM growth, high end of 1-3% guidance.

Shares of Delta Air Lines have gained 1.1% to $38.67 at 12:03 p.m., while United Continental has risen 1.9% to $40 and American Airlines has declined 0.5% to $41.74.

PIMCO Total Return Outflows Top $64B: Morningstar

Looks like PIMCO needs a goalie like Tim Howard of Team USA to save it from bad news.

Despite the rehiring of Paul McCulley, the bond shop continues to experience investment outflows, according to Morningstar. U.S. investors pulled some $4.5 billion out of the PIMCO Total Return Fund in June, the research firm estimates. That’s about 2% of its roughly $229 billion of assets in May, leaving it with some $225 billion.

There was a bit of good news: the PIMCO Total Return ETF (BOND) pulled in $33 million last month, giving it about $3.4 billion in assets.

“Things were getting less and less severe for a while, but the past two months were worse than expected,” said Michael Rawson, a fund analyst with Morningstar in Chicago, in an interview. “There’s no real negative news from PIMCO, and investors are buying funds in the [intermediate-bond] category. This has got to be a bit disconcerting for PIMCO.”

Indeed. This brings the tally of outflows to 14 months. (That's just one less than the number of goals blocked by Howard in the match against Belgium on Tuesday.) 

“Marginally, the outflows [are getting] worse, so this is a bit surprising – with the fund category getting better,” Rawson said. “Investors are less concerned with interest rates than last year, and I am surprised [with the recent outflows], given the recent hiring of McCulley. It’s surprising that the outflows haven’t stabilized a bit.”

Made in the Shade?

News of the outflows might not be a big shock to those following Morningstar’s major fund conference, which took place in June. PIMCO co-founder Bill Gross addressed the crowd, but in an unusual way, wearing sunglasses and proclaiming himself “one cool dude.” His remarks left many members of the audience somewhat confused.

This performance came about six months after the departure of then-PIMCO CEO Mohamed El-Erian and the frenzy it created as tensions between the two played out in the media.

These issues played a part in outflows at the time “with Mohamed leaving the firm and Goss making statements that gave the impression of poor communication and led some people to question leadership,” Rawson noted.

“But investors embraced them after the financial crisis,” the analysis said.

Given that U.S. outflows from the Total Return Fund have reached an estimated $64.1 billion, the atmosphere at the firm is likely to be grim.

“This must be causing tension in the firm as assets have shrunk a significant amount,” said Rawson. Bonuses paid to employees and management are tied to asset flows, “and those working in the industry are not used to losing assets.”

“There’s been a lot of shuffling of the ranks at PIMCO, and as assets shrink, the bonuses levels should be negatively impacted,” the analyst stressed.

("Patient investors are rewarded over the long term by sticking with core bond allocations in a diversified portfolio. The PIMCO Total Return fund has outperformed its benchmark and a majority of its peers over the last 1, 3, 5, 10 and 15 years," the company said in a statement given to Dow Jones.)

The situation at PIMCO stands in stark contrast to that of rival bond shop DoubleLine, led by Jeffrey Gundlach.

Morningstar’s estimates that the net inflows for the DoubleLine Total Return Fund in June were $515 million. Total assets in the fund at the end of June were $33 billion. 

“This is representative of the [medium-term] category overall,” Rawson said. Its popularity with investors has improved, since “the interest-rate environment is less dire than a year ago when they were concerned with a sharp rise in rates.”