What Ben Graham’s Mr. Market Metaphor Really Means

Top 10 Small Cap Companies To Invest In 2014

Don't worry about why a stock is cheap. Don't think of your investment in a stock as a bet for or against the prevailing view that some product, industry, technology, CEO or societal trend will prove good or bad – durable or temporary.

That isn't your job. Knowing why other people are betting against a stock is knowledge you don't need.

The only knowledge you need is the knowledge that you are buying a piece of a business for less than its value to a private owner.

The stock market is not a racetrack pooling bets on the future. It is a store selling pieces of businesses. Some of the merchandise is priced very high. Some very low. Most is priced about the level a reasonably well-informed shopper would pay.

But that doesn't mean you should assume the listed price has any relationship to the product's actual value.

You are a bargain hunter. Your job is to find the best merchandise at the lowest price.

Mr. Market

Everybody has heard the story of Mr. Market. At least second hand. Here is the actual tale as told by Ben Graham:

Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly. If you are a prudent investor or a sensible businessman, will you let Mr. Market's daily communication determine your view of the value of a $1,000 interest in that enterprise? Only, in case you agree with him! , or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low…price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.
It doesn't matter what other people are doing – and it certainly doesn't matter why they are doing it. All you and I need to do is buy a stock when it sells for less than its value to a private owner.

That's the whole point of Ben Graham's Mr. Market metaphor. Mr. Market has mood swings. Our job is to take advantage of those mood swings. It is not our job to use Mr. Market's moods as possible evidence of some actual condition of the business.

Seeing Wal-Mart (WMT) has a P/E of 13 and Costco (COST) has a P/E of 26 and then setting off to prove that Wal-Mart's prospects are every bit as good as Costco's is a terrible idea. If you want to buy Wal-Mart stock you need only prove that Wal-Mart is selling for less than the business is worth. You don't need to know why Wal-Mart sells for less than Costco or Dollar General (DG). In fact, you don't even need to know how high or low Wal-Mart's P/E is compared to those businesses. You only need to know one price and understand the value of one business.

And yet, many of the value investing blogs and articles I read start their discussion of why some stock is such a great investment by explaining what the market's consensus view is and why that conventional wisdom is wrong.

This is a terrible idea because:

1. Market prices are complex. Buy and sell decisions are complex. Comparing your view of the future with the market's view of the future assumes we can offer a dist! inct reas! on for why people buy and sell stocks. Can we really be more specific than people sell stocks because they don't want to hold them and they buy stocks because they do want to hold them?

I'm skeptical about the idea of understanding the reasons for people's buy and sell decisions. People are attracted to certain stocks and repulsed by others. These feelings aren't totally unexplainable. I'm sure we can partially explain why certain celebrities are found especially attractive or repulsive by the general public. We could probably do the same for why certain stocks are found especially attractive or repulsive by the investing public. Beyond laying down some general principles of what investors do and don't find attractive in a stock – I think we'd mostly just be entertaining ourselves making up stories about stocks instead of just valuing stocks.

2. We intend to take advantage of the market price. If we let the market price influence our opinion of the company we are taking an input and letting it pass through us as an output. This is dangerous. And risks creating feedback where we do not isolate our thinking from the market's thinking but instead allow ourselves to regurgitate some of what the market is telling us without analyzing it. If you head down this path, you are venturing into more and more reactive behavior. It's a bad idea to be "in tune with the market." Isolation is best.

3. I don't think knowing the reasons why people are selling a stock has much practical use.

Here are my own experiences in this regard.

I don't worry about why investors stay away from a stock, because I've found it isn't helpful in my investing process. Trying to find the issue on which I and other investors disagree has never helped me. Knowing why others aren't buying a stock hasn't helped me. Some of my best purchases have been in situations where it was rather unclear to me why the stock persistently traded as low as it did.

J&J Snack Foods
Fo! r example, J&J Snack Foods (JJSF) in 2000.

At the time, these were the company's last five years of (diluted) earnings per share:

1995: $0.61

1996: $0.65

1997: $0.91

1998: $1.26

1999: $1.50

You can read the CEO's 1999 letter to shareholders. The company was already 28 years old. Its long-term growth record was fine. The founder had been running it for 28 years. The business was simple to understand. And the discussion of it in the annual report was adequate. The CEO had a simple, clear vision for the company. He communicated it well. And the company had delivered on that vision for close to three decades. It didn't sound like the CEO was leaving any time soon. So the future would probably look a lot like the past. And It was not a difficult company to value based on the past.

In 2000, the stock price of J&J Snack Foods ranged from $12.50 to $22.75. In every quarter, it sold below $17 a share at least once.

So, you could buy JJSF in 2000 at a P/E of anywhere from 8.3 to 15.2 just by picking a random day to buy the stock. If you were choosy, you were given the opportunity to buy the stock at under 12 times earnings at least once in every quarter.

You may remember, back in 2000, the S&P 500's price-to-earnings ratio was quite a bit higher than 12.

What happened to J&J Snack Foods?

Earnings dipped right after 1999, but J&J Snack Foods went on to grow by more than 11% a year for the next decade.

If you bought the stock in 2000 and held it until today, you experienced annual stock price appreciation of somewhere between 13% and 19% a year (depending on whether you bought closer to a P/E of 8 or a P/E of 15). You also received cash dividends of $5.10 (split adjusted for 2000 stock purchase) which is anywhere from a 20% to 40% return of your original investment within 12 years. Not bad considering the company didn't pay a dividend in 2000. Had never paid a cash dividend in the past. And had no intention of payin! g a cash ! dividend in the future.

I'm still not clear why the stock often traded for a high single-digit to low double-digit P/E ratio back in 2000. It didn't make sense to me when I bought the stock at age 14. Today, at age 26, I still don't know why that happened. But it did happen. And all you had to do was notice the stock and buy it. You didn't need to know why it was cheap. You just had to recognize JJSF was a perfectly fine business selling for less than its value to a private owner. That's the lesson of Ben Graham's Mr. Market metaphor.

Village Supermarket

Next example: same year (2000), same state (New Jersey), same product (food), different company – Village Supermarket (VLGEA).

At the time, these were the company's last five years of (diluted) earnings per share:

1995: $0.20

1996: $0.69

1997: $0.71

1998: $1.34

1999: $1.55

Same store sales:

1995: (0.7%)

1996: 1.7%

1997: 1.0%

1998: 2.4%

1999: 6.0%

Sales per square foot:

1995: $803

1996: $809

1997: $803

1998: $811

1999: $866

Tangible book value (July 1999): $18.45 a share.

In fiscal year 2000, Village Supermarket's shares traded between $12.13 a share and $15.75 a share.

That means if you bought the stock on a random day in 2000, you got it at a P/E ratio of anywhere from 7.8 to 10.2.

The price-to-book ratio was anywhere from 0.66 to 0.85.

The letter to shareholders from Village Supermarket was even better. It didn't explain how the company was simply chugging along as it had for more than a quarter century – like J&J Snack Food's letter did – instead it explained how the company had turned itself around in the last four years and was committed to continuing down that very simple path.

You can read the shareholder letter here (it's part of the 10-K).

As you can see, Village was selling more per square foot, increasing the amount of sq! uare feet! of selling space per store, and adding higher margin specialty items in those extra square feet (see discussion of the "Power Alley" for example).

The whole thing was very obvious (remember, this was a grocer with a 6% jump in same store sales). And yet none of it was reflected in the stock's P/E ratio (which was basically 8-10 throughout the following year) or the price-to-book ratio (which was around 0.7 to 0.9).

I'm not sure why the stock traded at those prices. The company had debt. But it also had land offsetting much of that debt. It had built up a lot of retained earnings over the years. It wasn't some speculative business. To the extent the financial position was not spotless it was basically what you would find with any grocery store.

About five years before, Village posted an operating loss. At that time, it violated some bank covenants. This is not unusual for a grocery store. Generally, they aren't built to post even an occasional operating loss. If you own a grocer or a railroad or something like that and you see operating earnings go into the red – you know operations need to get turned around fast or your stock is going to go to zero. That's the nature of leverage. So, that could've been a concern here. Although (operating and financial) leverage works both ways. So a sustained improvement in operations at a grocer can lead to really big returns (the same is true at a railroad).

Now, maybe some people had a preference for a grocer with more of a national presence. Though it's unclear to me why smaller stores spread over a larger region and operated under different brand names is better than big stores clustered in a small area using the same brand name.

Yes, in 2000, there was some talk of online groceries. The web was changing everything. And it was going to change the way we bought our food too. Maybe that had something to do with it.

Personally, I kind of doubt it. I actually think the web did have something to do with ! the stock! price of Village Supermarket – but not in the way you might think.

I think both J&J Snack Foods and Village Supermarket had two strikes against them in 2000:

1. They weren't tech companies

2. They weren't mega caps

If you look at stocks in 2000, people were interested in the world's newest public companies and the world's biggest public companies. That's what investors found attractive back then: new and big.

Old and small was repulsive.

And this trend had been happening for a few years. So, if in 1996 or so you were some company that wasn't a global giant or on the Internet, you were neglected. And if you were that kind of company and you were growing the value of your business quarter after quarter in the late 1990s, you got no credit for that growth. So by around 2000 or so we were in a situation where some public companies had increased their intrinsic value quite a bit without any parallel increase in their market cap. In an odd way, you had some stocks get cheaper during a bull market.

Beyond that, I can't offer a good explanation for why these stocks traded at the prices they did back in 2000. It didn't make sense to me then. And it doesn't make sense to me now.

The fact that I never understood why either stock was cheap is irrelevant.

You don't need to know why something is cheap to know it is cheap.

In each case, all you had to do was look at the business and look at the market cap. They were both perfectly fine businesses selling for less than their value to a private owner.

That's the only requirement for a value investment.

Worrying about why a stock is cheap is doing exactly the opposite of what Ben Graham taught. And yet it's something I see included in a lot of articles and blog posts written by value investors. They always feel they have to explain why investors hate the stock.

That often makes for a more entertaining article. It certainly gives the piece more of the fl! avor of a! narrative. And people love hearing stories. People love thinking in stories.

But it's not necessary for the actual investments you make. It's okay to have no clue why a stock is so cheap.

It's enough just to understand how the value of the business is higher than the stock price. You don't need to know why the stock price is what it is.

That's not your business.

Your business is buying cheap stocks. Not worrying about why a stock is cheap.

Ask Geoff a Question about Ben Graham's Mr. Market Metaphor
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Hain Celestial - A Healthy Option - Analyst Blog

A leader in natural food and personal care products categories with an extensive portfolio of well-known brands and strong fundamentals, The Hain Celestial Group Inc. (HAIN) offers a healthy investment opportunity for investors. The stock is poised to surge as the economy gradually revives and the appetite for organic food increases.

An Attractive Investment Prospect

Hain Celestial remains a healthy option for the investors. Barring a few hiccups, the shares have been portraying an upward trend since February end, and is gradually inching closer to its 52-week high of $73.72. Considering the last traded price of $67.69 on Jul 8, the stock has amassed a year-to-date return of roughly 20%. The long-term EPS growth rate stands healthy at 14.9%.

Moreover, the company's last traded price was above the 50 and 200-day moving averages, which stand at $66.50 and $60.73, respectively. In fact, the stock has been consistently trading above its 200-day moving average since Mar 19, 2013, but has remained above the 50-day moving average since Jul 1, 2013.

If we look at the company's earnings surprise history for the last 10 quarters, Hain Celestial has topped estimates by an average of 4.6%. In the last concluded quarter, the company posted earnings of 72 cents a share that came in line with the Zacks Consensus Estimate and surged 28.6% year over year. Management cited that strong top-line growth, integration of acquired businesses, focus on high margin carrying brands, and elimination of underperforming private label brands facilitated the bottom-line growth.

Hot China Companies To Watch For 2014

Acquisitions Driving Growth

Acquisitions have played a vital part in Hain Celestial's strategy of building market share. These acquisitions have not only widened the company's geographical presence, but have also provided opportun! ities to cross-sell products in the U.S., Canadian, and European markets.

The company recently acquired leading packaged grocery brands Hartley's, Gale's Robertson's, Frank Cooper's and Sun-Pat from Premier Foods plc. The company also acquired Ella's Kitchen Group Limited that offers organic baby food products under approximately 80 brands and provides them in easy to carry pouches. Management believes the acquisition to be accretive to the company's earnings by 5 cents to 8 cents a share in fiscal year 2014.

Closing Commentary

Going forward, we believe that the company will be able to mitigate the cost pressures through increased productivity and efficient pricing. Moreover, Hain Celestial has undertaken a number of initiatives to improve its performance and positioned itself on the growth trajectory. The company's Stock Keeping Unit ("SKU") rationalization program has helped eliminate SKUs, which had lower sales volume or weak margins.

However, the company's customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their disposable income, triggering a shift in focus from higher priced organic products to cheaper private label brands.

Currently, Hain Celestial carries a Zacks Rank #3 (Hold). Other stocks worth considering in the food-miscellaneous sector include B&G Foods Inc. (BGS) and Flowers Foods, Inc. (FLO) both of which hold a Zacks Rank #1 (Strong Buy), and Campbell Soup Company (CPB) carrying a Zacks Rank #2 (Buy).

Economic Instability Affects ADTRAN - Analyst Blog

Networking and communication equipment manufacturer, ADTRAN Inc.'s (ADTN) shares plummeted after the company declared that the volatility in the macroeconomic condition of Europe is hurting its profitability.

ADTRAN's shares fell $1.74 or almost 7% as the stock closed at $23.47 on Wednesday on Nasdaq. The shares were one of the 10 worst performing stocks on Nasdaq on Wednesday in relative terms.

On Jul 9, 2013, ADTRAN reported better-than-expected second-quarter 2013 financial results, beating the Zacks Consensus Estimate in both the fronts. Strong contributions from the Internetworking and Broadband Access product divisions contributed to the improved results.

Although quarterly total revenue of $162.2 million declined 11.8% annually, ADTRAN outpaced the Zacks Consensus Estimate of $153.0 million. Similarly, the adjusted earnings per share of 18 cents handsomely beat the Zacks Consensus Estimate of 15 cents. However, a 47.6% decline in operating profit was the most notable of the different financial measures.

Huntsville, Ala.-based ADTRAN expects its overall profitability to decline in the third quarter of 2013. Nevertheless, the company presumes that significant carrier network upgrades and a tight cost control effort will allow it to improve its profitability in the fourth quarter of 2013.

Improved carrier spending along with geographic expansion of business could boost ADTRAN's top line in the coming quarters, which in turn can improve its profitability. Thus, we believe that although the stock has risen more than 21% since the beginning of the year, there is scope for further improvement.

ADTRAN currently has a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other stocks in this industry that warrant a look include Calix Inc. (CALX), Crown Castle International Corp. (CCI) and Equinix Inc. (EQIX). All the stocks currently carry a Zacks Rank #2 (Buy).

Markets Playing Tetherball With F5 Networks

When I last wrote on F5 (Nasdaq:FFIV) in early June, I still liked the prospects for the company and its shares, but I warned that it was likely to be a volatile holding. In the intervening two months or so, the shares have lived up to that prediction – initialing falling another 15%, before rebounding 30% and ending up with a net 11% gain since that June 3 article.

I see little reason to believe that these shares won't remain highly volatile. Although the company should see meaningful benefits from new product launches and a spending recovery in the coming quarters, there is still the spectre of greater competition and a slowing core market looming over the shares. While I continue to believe that F5 is the premier application delivery controller (ADC) company, and that the ADC market is slowing (not declining), the market's uncertainty regarding the company's future is likely to play out in outsized reactions in the stock price.

SEE: Market Cycles: The Key To Maximum Returns

A Good Beat For Fiscal Q3
There was quite a bit of pessimism going into this quarter, but F5 delivered a surprisingly strong set of results. Although those analysts who'd been bullish going into the report certainly celebrated the outperformance, more than a few bearish analysts tried to tamp down the excitement by claiming it was just an aberration.

Revenue rose 5% from the year-ago quarter and 6% from the prior quarter. Product revenue declined 5% and rose 6%, respectively, while service revenue rose 19% and 5%. Sales were boosted by a strong recovery in the telecom market, and though management cited good uptake for non-ADC products like the Advanced Firewall Manager and Application Security Manager, there wasn't much specificity there.

Margin performance was a good news/bad news proposition – better than expected (and not trivially so), but still not so good on a comparative basis. Gross margin fell about 70bp from the year-ago period and 40bp from the prior quarter. GAAP sales and marketing expenses rose about 9% from last year, helping push GAAP operating income down about 5%. On a non-GAAP basis, income was down 2% and up 10%, good for a six-cent operating beat.

SEE: A Look At Corporate Profit Margins

Will New Intros Leverage An Improving Spending Environment?
IT hardware companies seem to be getting a little more optimistic about the spending environment, particularly in the telecom sector. What's more, multiple sell-side surveys seem to support the idea that ADC purchases still rank relatively high as a priority for enterprise customers.

F5 could further leverage that with the introduction of two new products (the 5000 and 7000) late in this past quarter. New production introductions have been a powerful catalyst for sales growth in F5's past, and bulls are hoping for a repeat performance.

Market And Competition Fears Are Not Going Away
Although F5 continues to score well in a variety of surveys, there is still a lot of fear in the market regarding F5's future prospects. Rival Citrix (Nasdaq: CTXS) has also been showing strong momentum in this market, and it still looks as though the Citrix-Cisco (Nasdaq: CSCO) partnership is moving most of Cisco's former ADC customers to Citrix. It also doesn't help matters that Citrix still retains a significant market share edge in virtual ADCs, a market that continues to grow at the traditional ADC market's expense.

Competition from companies like Citrix, Radware (Nasdaq: RDWR), and A10 is bad enough, but those aren't the only concerns on the Street regarding F5. Some investors question F5's ability to compete with companies like Cisco, Check Point (Nasdaq:CHKP), and Juniper (Nasdaq: JNPR) in security, and not unlike what has happened to Check Point, others fear that F5 may be too high-end for its own good (leading customers to go with cheaper alternatives).

The Bottom Line
I do wonder if F5 isn't going to be more of a trader's stock than an investor's stock for the remainder of 2013. More growth (and more detail) in markets like security, storage, and traffic management would certainly help, as would signs that F5 is taking away some of those former Cisco customers from Citrix.

Even with modest future growth expectations (roughly 4% to 5% long-term free cash flow growth), a fair value of around $100 seems appropriate for these shares. That said, so long as the market remains worried that F5's core market growth is slowing and that margins are likely to shrink, it will be a challenging stock to hold. Investors who can tune out the noise will likely be happy with the long-term returns, but seeing the shares touch $70 again doesn't seem out of the question.

Disclosure – As of this writing, the author has no positions in any of the stocks mentioned.

Forget Coca-Cola: Buy This Stock Instead

My job as chief investment strategist for Game-Changing Stocks requires me to look for "the next big thing."

Sometimes that means I'm looking through obscure government reports to learn about the latest technology the Pentagon is using that could soon make it to a retailer near you.

Other times, it means I might be on the phone with an executive of a small company with designs on changing the way we fuel our cars -- or treat patients in hospitals.

But sometimes, I see a game-changing product right in front of me. And I just have to tell my readers about how they can profit from it.

You don't have to own shares of Coca-Cola (NYSE: KO) to know that through its worldwide production and distribution network, the company owns some of the most valuable brands in the world. All told, Coca-Cola pours 3% of the beverages served to humanity each day.

And you don't have to work on Wall Street to know that shareholders have done pretty well in the past decade...

Coke products aren't the most-consumed liquid overall, of course. Good old H2O accounts for the most amount of servings, then tea. But as far as soft drinks are concerned, Coke and Diet Coke are the No. 1 and No. 2 brands in the world.

A game-changer right in the midst of this "stodgy" industry...
This planet consumes 55 billion beverage servings a day. Globally, the research consultancy Datamonitor pegs the soft-drink market at an eye-popping $216 billion annually. Beverage Digest, a trade publication, puts the value of the U.S. soft drink market at fully $77.1 billion a year.

 

The beverage industry is extremely large, highly fragmented and intricately complex. Some brands are doing well. Others are -- forgive me -- flat, and a few are on the express train to Donesville.

But the industry view from 30,000 feet isn't so hot. Beverage Digest, in its 2011 rankings, noted that carbonated soft-drink sales fell 1.2% in 2012. Soft drinks haven't seen an increase in U.S. sales since 2004, which seems to indicate people are cutting back for reasons other than the lackluster economy. Consumption, for now, is at 1996 levels.

So should investors steer clear of this industry? Not if you want to miss out on a game-changing company with virtually unlimited potential.

SodaStream (Nasdaq: SODA) is an Israeli company that makes a carbonation machine that makes custom-flavored sodas. The company has a razor/razor blade business model, given that it sells both the machines -- which cost anywhere from $99 to $129 -- as well as consumables like CO2 cartridges, flavoring and special carbonation bottles. The company's worldwide retail footprint comprises 60,000 stores in more than 40 countries, including mass-market chains in the United States.

The appeal of the product is multi-faceted...

We live in a do-it-yourself (D-I-Y) society. Consumers are learning how to do their own home repairs, create their own fashions, and grow their own food. And they're always on the lookout for more ways to stop buying someone else's product or service, and do it on their own.

Of course even the most brilliant concept can languish if management doesn't know how to crack a market. Sodastream's executives courted the most popular retailers to give its products visibility. Mission accomplished. Prominent Sodastream displays can be found in major retailers across the country.

Tapping into Bed, Bath & Beyond (Nasdaq: BBBY) and other U.S. retailers helped this once obscure company boost its sales to more than $400 million by 2012 from around $145 million in 2009. Considering that less than 2% of all U.S. households have a Sodastream beverage maker, this company's domestic growth prospects are open-ended. And management is now tapping into a range of promising international markets as well, setting the stage for more than $600 million in sales by 2014, and perhaps $1 billion a year later.

This isn't just a play on sugar-laden soft drinks that you can make at home. Many people simply make carbonated fruit juice or make plain old seltzer. The days of lugging home a heavy case of water bottles may soon be gone.

Of course, whenever you are looking at a young and fast-growing company, you have to wonder if management is too focused on sales growth and ignoring the bottom line. After all, profit-less growth is a Pyrrhic victory: you may win the sales battle, but will lose the profit war.

Notably, Sodastream's bottom-line performance may be even more impressive than its top-line gains. Per share profits rose an average 50% in 2011 and 2012, and should continue to grow at an average of 25% in 2013 and 2014 (to around $3.20) a share, according to consensus forecasts.

The strategy to grow is solid: Expand its retail footprint geographically across a variety of price points and functionally own the do-it-yourself soda market, then expand into office systems and food service.

That, to my mind's eye, is the money shot.

I've tried SodaStream products, and they're good, at least as good as the other stuff that is out there, but add booze into the mix and you might just have The Real Thing. Restaurants live and die on high-margin alcohol sales, and customized boozy sodas might be a nice way to augment the till behind the bar.

I like this product. I like that the company is profitable. I like its prospects for growth, and I like that it is riding a pair of trends -- wellness and the environment -- that I think have real legs as consumer movements. I also like that the company, valued at about $1.34 billion, has a lot of room to grow.

SodaStream is still growing, and it's not inconceivable that it'll experience some growing pains along the way. The stock can be a bit volatile sometimes, so it's important that you be able to stomach the day-to-day swings, keeping in mind that this company is capable of big things.

You may want to wait to buy this stock on any pullbacks, but I think shares are a good "buy" at their current level for aggressive growth investors.

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Boomers Underestimate LTC Cost, Life Expectancy

“Nursing home costs have increased more than 4% annually since 1974,” John Carter, president and chief operating officer of retirement plans for Nationwide Financial, said in a statement. “What a year of nursing home care costs today will not even come close to the actual cost when boomers really need it.”

Nationwide found 27% of long-term care is performed in a nursing home and 24% in an adult day care facility.

When asked to estimate how long they might live after they retire, the average response was nearly 21 years among pre-retiree respondents. Among those who were already retired, the average was just over 27 years.

“Often people who intended to work longer are forced into retirement due to health reasons or employment changes,” Carter said. “Others may not anticipate their own longevity, especially with today’s medical advances. It’s critical that pre-retirees change their current mentality of planning to live 20 years in retirement. Too often, once retired they realize they’re facing 10 or more years of expenses ahead of them that they didn’t plan for.”

Half of respondents aren’t taking into account the likelihood of their spouse surviving them, either, especially women. Two-thirds of men said they had planned for their spouse to outlive them compared with 32% of women.

Further compounding the problem is that even though most respondents said they had a plan for their finances during retirement, nearly 60% said they didn’t account for LTC expenses. Almost two-thirds of respondents said being able to cover LTC expenses was their top priority in retirement planning, more than those who said not outliving their assets was their biggest concern. Just one-quarter of respondents said they had long-term care insurance.

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Top 5 Canadian Stocks To Watch For 2014

Canadian stocks rose, erasing earlier losses of as much as 0.3 percent to clinch a fifth week of gains, as a surge in Valeant Pharmaceuticals International Inc. (VRX) offset a slump in oil and gold producers.

Valeant jumped 13 percent to an 11-year high after a person familiar with negotiations said Canada�� largest drugmaker might pay $9 billion to buy Bausch & Lomb. Manitoba Telecom Services Inc. surged 5.7 percent after agreeing to sell its Allstream unit to a firm co-founded by Egyptian billionaire Naguib Sawiris. Encana Corp. fell 0.7 percent as oil capped its biggest weekly decline in more than a month. Banro Corp. and OceanaGold Corp. slid more than 3.9 percent as gold retreated.

The Standard & Poor��/TSX Composite Index (SPTSX) rose 9.13 points, or 0.1 percent, to 12,667.22 at 4 p.m. in Toronto. The benchmark equity gauge�� 0.4 percent gain in the past five days gave it the longest streak of weekly advances since February 2012.

Top 5 Canadian Stocks To Watch For 2014: ConocoPhillips(COP)

ConocoPhillips operates as an integrated energy company worldwide. The company?s Exploration and Production (E&P) segment explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids. Its Midstream segment gathers, processes, and markets natural gas; and fractionates and markets natural gas liquids in the United States and Trinidad. The company?s Refining and Marketing (R&M) segment purchases, refines, markets, and transports crude oil and petroleum products, such as gasolines, distillates, and aviation fuels. Its Chemicals segment manufactures and markets petrochemicals and plastics. This segment offers olefins and polyolefins, including ethylene, propylene, and other olefin products; aromatics products, such as benzene, styrene, paraxylene, and cyclohexane, as well as polystyrene and styrene-butadiene copolymers; and various specialty chemical products comprising organosulfur chemicals, solvents, catalyst s, drilling chemicals, mining chemicals, and engineering plastics and compounds. The company?s Emerging Businesses segment develops new technologies and businesses. It focuses on power generation; and technologies related to conventional and nonconventional hydrocarbon recovery, refining, alternative energy, biofuels, and the environment. This segment also offers E-Gas, a gasification technology producing high-value synthetic gas. ConocoPhillips was founded in 1917 and is based in Houston, Texas.

Advisors' Opinion:

• [By Fabian]

  ConocoPhilips(COP) is a close second. This is a Warren Buffett darling that will benefit from its spinoff of refining assets some time in 2012.

  Conoco also continues to pay a consistent and reliable 3.75%. Note that COP has underperformed the rest of the sector recently. Correlations are normally so close that such an underperformance by one stock can point the way to value.

Top 5 Canadian Stocks To Watch For 2014: Canadian National Railway Company(CNI)

Canadian National Railway Company, together with its subsidiaries, engages in the rail and related transportation business in North America. It provides transportation for various goods, including petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, and intermodal and automotive products. The company operates a network of approximately 20,600 route miles of track that spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico. It serves the ports of Vancouver, Prince Rupert (British Columbia), Montreal, Halifax, New Orleans, and Mobile (Alabama), as well as metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth (Minnesota)/Superior (Wisconsin), Green Bay (Wisconsin), Minneapolis/St. Paul, Memphis, and Jackson (Mississippi), with connections to various points in North America. The company was founded in 1922 and is headquartered in Montreal, Canada.

Advisors' Opinion:

• [By Vodicka]

  Montreal-based Canadian National Railway (CNI) operates
  about 21,000 route-miles of rail that span all the way from the frozen north down to the Mississippi Delta — nearly enough track to wrap around the entire world. Since Canada is one of the largest countries in the world by geography (second only to Russia with an area of about 4 million square miles), the transportation and freight industries are vital and very lucrative parts of the nation’s economy.

  The reason I’m so bullish on CNI right now is that the company is a large player in transporting commodities, including Canada’s exports of timber and metals and imports of energy from the United States. In Canadian National’s latest earnings report in January, the company stated that Q4 shipments grew for coal, grain and fertilizers and petroleum and chemicals — and this is in spite of bad weather and a five-day strike that really messed with CNI’s schedule. Just imagine how CNI will do in the warmer months as the economy continues to improve.

5 Best High Tech Stocks To Watch Right Now: North American Energy Partners Inc. (NOA)

North American Energy Partners Inc. provides heavy construction and mining, piling, and pipeline installation services to customers in the Canadian oil sands, industrial construction, commercial and public construction, and pipeline construction markets. The company operates in three segments: Heavy Construction and Mining, Piling, and Pipeline. The Heavy Construction and Mining segment focuses on providing surface mining support services for oil sands and other natural resources. Its activities include land clearing, stripping, muskeg removal, and overburden removal to expose the mining area; the supply of labor and equipment to supplement customers� mining fleets supporting ore mining; and provision of general support services, such as road building, repair and maintenance for mine and treatment plant operations, and hauling of sand and gravel. This segment also engages in the construction related to the expansion of existing projects-site development and infrastructure ; and the provision of environmental and tailings management services. In addition, it provides industrial site construction for mega-projects; and underground utility installation services for plant, refinery, and commercial building construction. The Piling segment installs driven, drilled, and screw piles, as well as caissons and earth retention, and stabilization systems. It also designs, manufactures, and sells screw piles and pipeline anchoring systems worldwide, as well as provides tank maintenance services to the petro-chemical industry in Canada and the United States. The Pipeline segment provides small and large diameter pipeline construction and installation services, as well as equipment rental to energy and industrial clients. The company�s fleet includes approximately 900 pieces of diversified heavy construction equipment supported by approximately 750 pieces of ancillary equipment. North American Energy Partners Inc. was founded in 1953 and is headquartered i n Calgary, Canada.

Top 5 Canadian Stocks To Watch For 2014: Prestige Brand Holdings Inc.(PBH)

Prestige Brands Holdings, Inc., together with its subsidiaries, engages in marketing, selling, and distributing over-the-counter healthcare and household cleaning products primarily in North America. The company?s Over-The-Counter Healthcare segment offers a portfolio of OTC products under nine core OTC brands, including Chloraseptic sore throat remedies, Clear Eyes eye drops, Compound W wart removers, Dramamine motion sickness products, Efferdent and Effergrip denture products, Little Remedies pediatric healthcare products, Luden's cough drops, PediaCare pediatric healthcare products, and The Doctor?s brand of oral care products. This segment also provides other significant brands that include Dermoplast first-aid products, Murine eye and ear care products, NasalCrom allergy relief product, New-Skin liquid bandage, and Wartner wart removers. Its Household Cleaning segment markets household cleaning products, such as abrasive and non-abrasive tub and tile cleaner, scrubb ing pads and sponges, dilutables, anti-bacterial hard surface spray for counter tops, and glass cleaners under the Comet, Chore Boy, and Spic and Span brands. Prestige Brands Holdings distributes its products through various retail channels, including drug, food, dollar, and club stores, as well as supermarkets and mass merchandisers. The company was founded in 1996 and is headquartered in Irvington, New York.

Top 5 Canadian Stocks To Watch For 2014: Chipotle Mexican Grill Inc.(CMG)

Chipotle Mexican Grill, Inc. develops and operates fast-casual, fresh Mexican food restaurants in the United States, Canada, and England. Its restaurants primarily offer burritos, tacos, burrito bowls, and salads. As of December 31, 2011, it operated 1,230 restaurants, which includes 1 ShopHouse Southeast Asian Kitchen. Chipotle Mexican Grill, Inc. was founded in 1993 and is based in Denver, Colorado.

Advisors' Opinion:

• [By Fitz Gerald]

  Chipotle Mexican Grill (CMG) has the potential to be the McDonald’s (MCD) o f the next half-century … in part because this high-quality burrito shop was spun off from McDonald’s in 2006 … so management has been taught well. Revenues are growing steadily and profit margins are consistently in the high single digits, which is great in the restaurant industry. (It’s my son’s favorite restaurant, but I’m not the analyst who submitted it.)

• [By Victor Mora]

  Chipotle Mexican Grill provides consumers with quick, delicious, and healthy food options on a daily basis. The company recently delivered an earnings report that beat analyst expectations. The stock has been on a strong surge to higher prices and sees no signs of slowing just yet. Over the last four quarters, earnings and revenue figures have been increasing which has produced very pleased investors. Relative to its peers and sector, Chipotle Mexican Grill has been a year-to-date performance leader. Look for Chipotle Mexican Grill to continue to OUTPERFORM.

Is a Frequent Upgrade Cellular Plan for You?

It all started with T-Mobile US' (NYSE: TMUS) JUMP plan which allowed consumers to upgrade their smartphones sooner than the industry standard of every two years.

It didn't take long before AT&T (NYSE: VOD) owned-Verizon Wireless, which showed up with a program called Edge.

Related: Verizon and AT&T Unveiling Plans to Compete with T-Mobile 'Jump' Plan

So, now there are three carriers offering three plans that allow you to upgrade as soon as every six months to a year after you get a new phone.

The question is: Should you?

The Denver Post took a look at all three programs and concluded that it depends. Noting that manufacturers like Apple (NASDAQ: AAPL) and Samsung (OTC: SSNLF) come out with new models at least once a year, clearly the new plans are aimed at consumers who want the latest phone at the first possible moment.

As the Denver Post also pointed out, however, even with the new plans, having the latest and greatest comes at a price – often considerably more than you would pay by keeping a phone for the more customary two years.

AT&T Next

With AT&T's Next program, you have to pay at least 60 percent of your existing phone's full retail price before you can switch. Payments are spread over 20 months with trade-ins available after 12 payments.

Using a Samsung Galaxy S4 for illustration, after 12 payments of $32 on the Next plan, you will have shelled out $384. By going the traditional subsidized route, AT&T requires $200 upfront with no payments. Early termination (at 12 months) will cost you $205. Total out of pocket by then will have been $405, but you own the phone, which you can sell to more than make up the $21 difference and quite likely cover part or all of the costs of your next subsidized phone.

Verizon Edge

The Verizon plan allows you to upgrade after six months – as opposed to a year under the other plans – but as the Denver Post points out, why would anyone want to pay $32! 5 (50 percent of Verizon's $650 cost of a new Samsung S4) for a phone you only have for six months?

NBC News noted that Verizon spread the payments over 24 months instead of AT&T's 20, requiring only that you pay 50 percent of the cost before upgrading. After 12 monthly payments of a little more than $27, you will have paid the $325 and can then trade in your (now) old Samsung S4 for a new model and start all over again.

T-Mobile JUMP

T-Mobile is unlike both Verizon and AT&T because it did away with contracts and subsidized phones so that option isn't available. T-Mobile contracts tend to be less expensive than either AT&T or Verizon, although AT&T touts the fact that its LTE service is the fastest available and Verizon points out that it is considered the most reliable network everywhere.

Related: Verizon Slips to Second on LTE Speed, Maintains a Lead on Reliability

T-Mobile requires an upfront payment and a monthly fee for the smartphone as well as a $10 "program charge" (which also includes insurance that normally runs $8 a month).

At the end of a year under T-Mobile you would have $510 for your Samsung S4. While this all seems to make T-Mobile the "odd man out" price-wise, the Denver Post points to T-Mobile's exceptionally low wireless service plan prices – much lower than those of AT&T or Verizon.

Adding it All Up

If you are generally happy with your cellphone and don't feel the need (or desire) to upgrade frequently, the new frequent upgrade plans are probably not for you. All of them will end up costing you more if you don't upgrade at least once a year and you could end up literally paying twice for your phone if you keep it long enough.

According to USA Today, if you did upgrade once a year and go with AT&T, you would pay almost twice what you would pay for a phone on a subsidized plan.

With Verizon, you would only have to pay half the retail cost (versus AT&T's 60 p! ercent), ! but still more than what you would pay during the same period for a subsidized phone.

T-Mobile, USA Today, notes has the extra charges, but they are mitigated by cheaper wireless plans, making T-Mobile your best bet, cost-wise.

This, of course, doesn't take into account AT&T's faster service or Verizon's reputation for reliability.

Top Tech Companies To Own For 2014

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Unisys Boosts ClearPath Libra System - Analyst Blog

Leading information technology company Unisys Corporation (UIS) has successfully launched a new version of the flagship MCP (Master Control Program) operating environment and a high-availability option for the ClearPath Libra 4200 system. The launches are likely to augment the mission-critical computing capabilities of its ClearPath Libra servers.

The MCP is the proprietary operating system of Unisys that offers robust scalability, data integrity and security for ultra-high-volume transaction processing capabilities. This integrated operating environment for ClearPath Servers provides the software needed to operate an enterprise-class server, allocates system resources, manages files and data, and provides a library of useful subroutines.

The new ClearPath MCP operating environment enables users to safely access ClearPath applications through mobile devices and it secures data transfer by enhanced protection against security breaches. On the other hand, the high-availability option for ClearPath Libra 4200 system strengthens failover protection in high-volume transaction environments.

Based in Blue Bell, Pa, Unisys specializes in helping clients to secure their operations, increase efficiency and utilize their data centers. The company also enhances support to their end users and constituents, and modernizes their enterprise applications. The primary markets that Unisys serves include financial services, communication and transportation, and commercial and public sector, including the U.S. federal government.

Unisys has two operating segments – Services and Technology. System integration, outsourcing, infrastructure services, consulting, and core maintenance together constitute the Services segment, while enterprise class servers and specialized technologies are included in the Technology segment. Though hardware sales and maintenance have made the largest contribution to revenue in the past, Unisys has been transforming itself lately into a services company so t! hat the Services segment can generate above 85% of the company's revenues.

Unisys currently has a Zacks Rank #3 (Hold). Other companies in the industry worth reckoning include Advanced Micro Devices, Inc. (AMD), Diodes Incorporated (DIOD) and Integrated Device Technology, Inc. (IDTI), each carrying a Zacks Rank #1 (Strong Buy).

Free Cash Flow: Adjusting for Acquisitions, Capital Allocation and Corporate Character

Someone who reads my articles sent me this email:

…I would appreciate your thoughts on three questions of mine:

When calculating the free cash flow of serial acquirers, should the acquisition costs be factored in? What are your thoughts on using pre-tax earnings, FCF, etc., yields to evaluate the attractiveness of securities. Intuitively, post-tax is all that matters, but pre-tax numbers allow for a more straightforward comparison between equities and fixed-income securities. Now for a more company-specific question. Sotheby's (BID) is inherently a very good business, but management owns only a small sliver of equity and in the past has failed to act prudently in the use of the balance sheet (impairment charges show up on cash flow statement following downturn in art market). The language in the SEC filings since that point is encouraging… which brings me to my question. How can an investor evaluate if management has learned from past missteps? Or is it so time consuming that a more efficient use of time would be to move on to other ideas?Thanks again,

Patrick

Great questions. I get similar questions a lot. Especially about how to treat cash flows used for acquisitions. Is it really free cash flow? Or is it basically just another form of capital expenditure?

And questions about management changing their stripes are very, very common. That's a tough question. But since these two questions are connected, I'll start with the acquisition issue first.

When calculating the free cash flow of serial acquirers, should the acquisition costs be factored in?

Yes. If the company really is a serial acquirer, acquisition costs should be considered equivalent to cap-ex. The issue of acquisitions is always one that can be considered part of cap-ex or not part of cap-ex. If spending on acquisitions is treated as if it is part of cap-ex, then your expectations for that company's growth would be higher (because they would be growing through acquisitions). If it is no! t counted as part of cap-ex, then your expectations for that company's growth should be lower (because you are not treating acquisition spending as a normal part of the company's year-to-year progress).

Sometimes it may be easier to estimate growth before acquisitions.

For example, a company involved in a mundane business like running hair salons – like Regis (RGS), dentist offices – like Birner Dental (BDMS), grocery stores – like Village Supermarket (VLGEA), or garbage dumps – like Waste Management (WM), may be easy to estimate as essentially a no-growth business.

Sotheby's would be harder. Because there is not a steady, year-in-year-out kind of demand for their products. And a growth company like Facebook would also be impossibly hard to evaluate this way. There is no normal industry wide rate of growth at those kinds of businesses. You simply have to evaluate them on a company-specific basis. You have to dig into their growth stories the way someone like Phil Fisher would.

But what about companies in industries with very steady demand? Industries like hair salons, dentist offices, groceries and garbage.

You can think of such businesses in two ways. One way would be to assume roughly zero percent real growth (although the company's nominal revenues might grow in line with inflation) and then to treat acquisitions as one-time both in terms of costs and the growth they provide.

The other way would be to assume the company will spend a certain amount of its free cash flow on acquisitions each year. In that case, free cash flow might fall to nearly zero (because acquisition costs are so high). But then you would analyze the business as if it grows by 3%, 5%, 8%, 10%, or whatever the acquisition-fueled sales growth tends to be.

So there are two ways to analyze a business that grows by acquisition. It is up to you to either pick which way works best for your understanding of the business — or to use both approaches in parallel. What you mus! t never d! o is assume acquisition growth is real but acquisition costs aren't. Or — more conservatively — that acquisition costs are real but the growth they provide is not. If acquisitions are a normal part of the business, so is the sales growth they provide. If acquisitions aren't a normal part of the business, then neither is the sales growth they provide.

What are your thoughts on using pre-tax earnings, FCF, etc. yields to evaluate the attractiveness of securities? Intuitively, post-tax is all that matters, but pre-tax numbers allow for a more straightforward comparison between equities and fixed-income securities?

If you are analyzing the company as a potential control buyer — asking yourself what this company would be worth to private equity, a competitor, Berkshire Hathaway (BRK.A)(BRK.B), etc. — use pre-tax numbers. And use enterprise value instead of the stock price. Analyze the business like you are buying the whole thing — equity and debt — and you are getting all of their EBIT.

But if you are analyzing the company merely as a passive minority investor, use free cash flow or after-tax income. This second calculation is important in situations where you imagine being invested for a long time under the same management team or corporate culture. These are not situations where you imagine a change of control. They are not something you are looking to buy today and sell next year.

These are long-term holdings.

When you are looking at that kind of business — Berkshire Hathaway is certainly one, but CEC Entertainment (CEC), Birner Dental, Oracle (ORCL) etc. may also count — you are imagining yourself as a shareholder and silent partner in a business that will continue to be controlled by the current management team — or similar successors — and in which they will decide what your dividends are each year, they will decide how much stock is issued or bought back, etc.

Buy and hold investments should be analyzed on a free cash flow basis. Not a! n EV/EBIT! basis. "Value" investments in the Ben Graham sense of the word — think cigar butts — should be analyzed on an enterprise value.

Simply put, make your Ben Graham investments on an EV/EBIT basis. And make your Warren Buffett investments on a price-to-free-cash-flow basis.

We can think of this as a public owner versus private owner choice. Are you buying the company because you think it is cheap relative to its intrinsic value and you expect to receive your investment gain in the forms of capital gains caused by a rising share price that will close the gap between price and value — some sort of merger, takeover, etc. — or do you imagine being invested in the company the way Warren Buffett is invested in Wells Fargo (WFC), Coca-Cola (KO), the Washington Post (WPO), etc.?

Enterprise value and operating income ("EBIT") should be used when analyzing an investment as a private owner. This is how Joel Greenblatt seems to work. At least that is how he talks in "You Can Be a Stock Market Genius" and how he designed the magic formula (enterprise value and pre-tax earnings). If you are looking to buy a company on a public owner basis — like Berkshire Hathaway's long-term investment mentioned above — then you need to look at the investment on an after-tax basis. Probably on a free cash flow basis. And you certainly need to make sure you are comfortable with current leverage, management and capital allocation policies. Because you are betting on those things continuing.

I know this sounds confusing. It sounds like I'm saying there are two different ways of analyzing a company. Do you really have to decide if you are buying a Ben Graham stock or a Warren Buffett stock? That just doesn't sound right.

But think about the way Warren Buffett described the stocks Ben Graham bought in the 1950s and before. He called them used cigar butts. Stocks that were pretty much free. But that had only one puff left in them. The puff was all profit. But once you took that puff, ! you had t! o get out of the stock fast.

And Buffett has repeatedly said that he made a big mistake by buying control of Berkshire Hathaway. Everything he did after buying the dying textile mills was genius. Buying insurance companies, See's Candies, etc. Brilliant. Buying Berkshire? Dumb.

How can that be?

It wasn't because buying a net-net like Berkshire Hathaway was actually a mistake. It wasn't. Buffett was right to buy Berkshire Hathaway stock at first. He was wrong to hang onto it. He was wrong to hold that kind of company — a bad one — year after year.

If you expect to buy a stock the way Ben Graham did — using a static intrinsic value estimate as your expected sell price — you can use enterprise value and EBIT as your valuation tools.

But if you start thinking about stocks the way Warren Buffett does today, you are moving into another area. Another way of thinking. This area of investment is not static. It's not about getting one profitable puff and then selling out. It's not about looking for a stock to rise 30% or 50% or 100% in one or two or three years. It's about owning something for, well, forever.

That's a different game entirely. It's a different approach. It comes from Ben Graham's principles. From his core beliefs. But it's a different approach. It's very close to Phil Fisher. And it's an approach that depends more on management, capital allocation and the free cash flow they have to allocate rather than measures like enterprise value and EBIT.

Where capital allocation is important, you need to move beyond EV/EBIT. You need to start thinking dynamically. Start thinking about the future. The uses free cash flow will be put to. You need to start thinking about dividends and stock buybacks and acquisitions and all that.

Warren Buffett clearly does. If you listened to Buffett talk about why he bought IBM (IBM) — this was when he was talking to the folks over at CNBC — you could tell he was very excited about! the idea! that IBM had reduced its share count over time. He had no problem at all with modest sales growth if it was accompanied by constant share buybacks. That gives you a rising earnings per share number the same way much stronger sales growth — through acquisitions — would. Buybacks are just another form of capital allocation.

For stocks like IBM, don't use enterprise value and EBIT. Use free cash flow. And really dig into the company's history of capital allocation. Do you think they will have a higher or lower share count 10 years from now? Those are the questions that matter when analyzing something like IBM. Something where the uses free cash flow is put to are key.

Finally...

Now for a more company-specific question. Sotheby's is inherently a very good business, but management owns only a small sliver of equity and in the past has failed to act prudently in the use of the balance sheet (impairment charges show up on cash flow statement following downturn in art market). The language in the SEC filings since that point is encouraging… which brings me to my question. How can an investor evaluate if management has learned from past missteps? Or it is so time consuming that a more efficient use of time would be to move on to other ideas?

My advice here is simple. Words don't matter. Behavior does. Character is behavior. And behavior is character. When looking to assess a person, look at their past record. The pattern that emerges is a portrait of that person. Don't listen so much to what others say about them, or even what they say about themselves.

Look at what they did.

Talking about buybacks tells you nothing. Actually doing 10 straight years of buybacks tells you something. There are companies like CEC Entertainment (CEC) and Sherwin Williams (SHW) that practice buybacks like that pretty consistently. Then there are Internet companies and tech giants that dilute their shareholders year after year. Finally, there are companies that raise their divid! end every! year.

Some companies overpay chasing instant growth through acquisitions. Companies will always tell you their latest purchase is a good idea, and then when they spin the unit off or sell it, they'll tell you they've learned focus matters. Five years later they'll be talking about diversification again. Today they may talk about unlocking shareholder value. But if the economy is really pumping and the stock market is really frothy in 5 or 10 years, you can bet they'll be talking about the importance of growth again.

Focus on past behavior. Look at what people really did. Not just people. But institutions too. Understand the temptations all companies face. But don't trust words. Trust deeds.

As far as I'm concerned, management's character is equivalent to their pattern of past behavior. Nothing more. Nothing less.

Talk to Geoff About Acquisitions, Capital Allocation, and Corporate Character geoff@gurufocus.com

Australian Dollar Recovery Expected to Continue vs. Majors

Fundamental Forecast for Australian Dollar: Bullish

AUD/USD Technical Analysis: Looking for Long Trade SetupSpeculative Sentiment Hints Aussie Reversal May be Brewing

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index.

The Australian Dollar outperformed last week, adding a hefty 3.4 percent against its US namesake to produce the strongest 5-day rally in 20 months. The move is all the more impressive considering it was produced against the backdrop of an interest rate cut from the RBA and a disappointing set of Employment figures that showed the economy shed 10,200 jobs in July, yielding the worst result in four months.

While traders’ response to further easing was to be expected, resilience following the jobs data is of interest considering the details of the report were not much more encouraging than the headline figure. Full-time and part-time hiring both declined and a slight drop in the unemployment rate seems to have owed to a drop in the participation rate rather than a robust labor market. Furthermore, June’s figures were revised broadly lower.

Such counter-intuitive performance seems to reflect a deceleration in capital flows feeding the Aussie-short trade. Put simply, those market participants that intended to be short at current levels are already there, meaning the down trend is running dry on fuel needed to perpetuate itself. Indeed, while the latest COT data set shows net speculative shorts hit another record high, the week-on-week growth rate of anti-AUD exposure has dramatically declined.

Furthermore, the breakdown in the Aussie over recent months has closely tra! cked the deterioration in the relative monetary policy outlook, which in turn appears to have emerged as the markets aggressively slashed their outlook for Chinese economic growth. With this in mind, it’s noteworthy that Chinese economic news-flow appears to be stabilizing relative to expectations. If this helps halt the slide in Chinese growth bets, it may likewise scatter calls for further RBA easing in the near term and set the stage for Aussie gains.

Hot Tech Stocks To Invest In 2014

Indeed, this dynamic was on full display in price action last week after China released encouraging trade, inflation and industrial production figures.Imports rose by 10.9 percent, marking the largest year-on-year increase in three months and hinting demand from Australia’s top trading partner may be far more resilient than expected. Meanwhile, soft CPI and PPI readings signaled greater room for Beijing to introduce stimulus and Industrial Production posted a 9.7 year-on-year increase, marking the strongest gain in five months.

The week ahead seems to offer a relatively clear path for an Aussie recovery to continue. The Australian economic docket features second-tier event risk and the Chinese calendar is effectively blank. US news-flow is worthy of consideration in the event that speculation about the Fed’s intention to “taper” QE asset purchases produces a strong response from sentiment trends that spills over into AUD price action. CPI, Retail Sales and the University of Michigan Consumer Confidence gauge are all due to cross the wires. The correlation between the Australian unit and benchmark stock indexes (including the S&P 500 and the MSCI World gauge) has unraveled on short-term studies however, hinting the currency may be little-scathed even if risk appetite sours.

original source

Best Biotech Stocks To Watch Right Now

With the�SPDR S&P Biotech Index�up 31% over the trailing-12-month period, it's evident that investment dollars are willingly flowing into the biotech sector. Keeping that in mind, let's have a look at some of the rulings, studies, and companies that made waves in the sector last week.

Earlier this week looked as if it could be the most uneventful week of the year for the biotech sector, but a flurry of mid-to-late week clinical data and advisory panel rulings changed that in a flash.

You can thank the Committee for Medicinal Products for Human Use, or CHMP, for the majority of this week's news. CHMP, which is Europe's equivalent of the Food and Drug Administration's advisory panel, took a closer look at three drugs this past week, divvying out two positive and one negative recommendation.

Best Biotech Stocks To Watch Right Now: Cell Therapeutics Inc (CTIC)

Cell Therapeutics, Inc. (CTI), incorporated in 1991, develops, acquires and commercializes treatments for cancer. The Company�� research, development, acquisition and in-licensing activities concentrate on identifying and developing new ways to treat cancer. As of December 31, 2011, CTI focused its efforts on Pixuvri (pixantrone dimaleate) (Pixuvri), OPAXIO (paclitaxel poliglumex) (OPAXIO), tosedostat, brostallicin and bisplatinates. As of December 31, 2011, it developed Pixuvri, an anthracycline derivative for the treatment of hematologic malignancies and solid tumors. Another late-stage drug candidate of the Company, OPAXIO, is being studied as a potential maintenance therapy for women with advanced stage ovarian cancer, who achieve a complete remission following first-line therapy with paclitaxel and carboplatin. As of December 31, 2011, it also developed tosedostat in collaboration with Chroma Therapeutics, Ltd. (Chroma). On May 31, 2012, CTI completed its acquisition gaining worldwide rights to S*BIO Pte Ltd.'s (S*BIO) pacritinib.

Pixuvri

As of December 31, 2011, the Company developed Pixuvri, an aza-anthracenedione derivative, for the treatment of non-Hodgkin�� lymphoma (NHL), and various other hematologic malignancies, and solid tumors. Pixuvri was studied in the Company�� EXTEND, or PIX301, clinical trial, which was a phase III single-agent trial of Pixuvri for patients with relapsed, refractory aggressive NHL who received two or more prior therapies and who were sensitive to treatment with anthracyclines. On September 28, 2011, CTI announced that a second independent radiology assessment of response and progression endpoint data from its PIX301 clinical trial of Pixuvri was achieved with statistical significance. The results of the EXTEND trial met its primary endpoint and showed that patients randomized to treatment with Pixuvri achieved a significantly higher rate of confirmed and unconfirmed complete response compared to patients treated with standard chem! otherapy had a significantly increased overall response rate and experienced a statistically significant improvement in median progression free survival. Pixuvri had predictable and manageable toxicities when administered at the proposed dose and schedule in the EXTEND clinical trial in heavily pre-treated patients. In March 2011, the Company initiated the PIX-R trial to study Pixuvri in combination with rituximab in patients with relapsed/refractory diffuse large B-cell lymphoma (DLBCL). Pixuvri has also been studied in patients with HER2-negative metastatic breast cancer who have tumor progression after at least two, but not more than three, prior chemotherapy regimens. In the second quarter of 2010, the NCCTG opened this phase II study for enrollment. The study is closed to accrual and results are expected to be reported by the NCCTG later in 2012.

OPAXIO

OPAXIO is the Company�� biologically-enhanced chemotherapeutic agent that links paclitaxel to a biodegradable polyglutamate polymer, resulting in a new chemical entity. As of December 31, 2011, the Company focused its development of OPAXIO on ovarian, brain, esophageal, head and neck cancer. OPAXIO was designed to improve the delivery of paclitaxel to tumor tissue while protecting normal tissue from toxic side effects. In November 2010, results were presented by the Brown University Oncology Group from a phase II trial of OPAXIO combined with temozolomide (TMZ), and radiotherapy in patients with newly-diagnosed, high-grade gliomas, a type of brain cancer. The trial demonstrated a high rate of complete and partial responses and a high rate of six month progression free survival (PFS). Based on these results, the Brown University Oncology Group has initiated a randomized, multicenter, phase II study of OPAXIO and standard radiotherapy versus TMZ and radiotherapy for newly diagnosed patients with glioblastoma with an active gene termed MGMT that reduces responsiveness to TMZ. A phase I/II study of OPAXIO combined with radi! otherapy ! and cisplatin was initiated by SUNY Upstate Medical University, in patients with locally advanced head and neck cancer.

Tosedostat

In March 2011, the Company entered into a co-development and license agreement with Chroma Therapeutics, Ltd. (Chroma), providing the Company with marketing and co-development rights to Chroma�� drug candidate, tosedostat, in North, Central and South America. Tosedostat is an oral, aminopeptidase inhibitor that has demonstrated anti-tumor responses in blood related cancers and solid tumors in phase I-II clinical trials. Interim results from the phase II OPAL study of tosedostat in elderly patients with relapsed or refractory acute myeloid leukemia (AML) showed that once-daily, oral doses of tosedostat had predictable and manageable toxicities and results demonstrated response rates, including a high-response rate among patients who received prior hypomethylating agents, which are used to treat myelodysplastic syndrome (MDS), a precursor of AML.

Brostallicin

As of December 31, 2011, the Company developed brostallicin through its wholly owned subsidiary, Systems Medicine LLC, which holds rights to use, develop, import and export brostallicin. Brostallicin is a synthetic deoxyribonucleic acid (DNA) minor groove binding agent that has demonstrated anti-tumor activity and a favorable safety profile in clinical trials, in which more than 230 patients have been treated as of December 31, 2011. The Company uses a genomic-based platform to guide the development of brostallicin. A phase II study of brostallicin in relapsed, refractory soft tissue sarcoma met its predefined activity and safety hurdles and resulted in a first-line phase II clinical trial study that was conducted by the European Organization for Research and Treatment of Cancer (EORTC).

The Company competes with Bristol-Myers Squibb Company, Sanofi-Aventis, Pfizer, Roche Group, Genentech, Inc., Astellas Pharma, Eli Lilly and Company, Celgene, Telik, I! nc., TEVA! Pharmaceuticals Industries Ltd. and PharmaMar.

Best Biotech Stocks To Watch Right Now: Algeta ASA (ALGETA.OL)

Algeta ASA is a Norway-based biotechnology company engaged in the development of targeted cancer therapies based on its alpha-pharmaceutical platform. The Company�� principal product is Alpharadin for the treatment of bone metastases resulting from castration-resistant prostate cancer. The Company�� pipeline also includes Alpharadin for the treatment of bone metastases resulting from breast cancer, a combination of Alpharadin with Taxotere for the treatment of bone metastases resulting from prostate cancer and Thorium-227 showing various cancer indications. The Company develops Alpharadin in a development and marketing cooperation with Bayer Schering Pharma. Algeta ASA is active through the two wholly owned subsidiaries, Algeta Innovations AS and Algeta UK Limited. On April 12, 2012, the Company announced that it estabilished a subsidiary active in the United States, Algeta US.

Top 10 Oil Companies To Buy For 2014: InterMune Inc.(ITMN)

InterMune, Inc., a biopharmaceutical company, engages in the research, development, and commercialization of therapies in pulmonology and fibrotic diseases. In pulmonology, the company focuses on therapies for the treatment of idiopathic pulmonary fibrosis (IPF), a progressive and fatal lung disease. It markets pirfenidone, an orally active drug that inhibits the synthesis of TGF-beta under the Esbriet name in the European Union, as well as in a Phase III clinical trial in the United States. Pirfenidone is also approved for the treatment of IPF in Japan, where it is marketed by Shionogi & Co. Ltd. under the Pirespa trade name. The company?s research programs focus on the discovery of small-molecule therapeutics and biomarkers to treat and monitor serious pulmonary and fibrotic diseases. InterMune, Inc. was founded in 1998 and is headquartered in Brisbane, California.

Best Biotech Stocks To Watch Right Now: Telik Inc (TELK)

Telik, Inc. (Telik), incorporated in 1988, is a clinical-stage drug development company focused on discovering and developing small molecule drugs to treat cancer. The Company discovers its product candidates using the Company�� drug discovery technology, Target-Related Affinity Profiling (TRAP). TELINTRA, its principal drug product candidate in clinical development, is a small molecule glutathione analog inhibitor of the enzyme glutathione S-transferase P1-1 (GST P1-1). TELCYTA, its other product candidate, is a small molecule cancer drug product candidate designed to be activated in cancer cells.

Clinical Product Development

TELINTRA is the Company�� lead small molecule product candidate in clinical development for the treatment of blood disorders, including cancer. It has a mechanism of action and acts by inhibiting GST P1-1, an enzyme that is involved in the control of cellular growth and differentiation. Inhibition of GST P1-1 results in the activation of the signaling molecule Jun kinase, a regulator of the function of blood precursor cells. Preclinical tests show that TELINTRA is capable of causing the death or apoptosis of leukemic or malignant blood cells, while stimulating the growth and development of normal blood precursor cells. TELINTRA has been studied in Myelodysplastic Syndrome (MDS) using two formulations. A liposomal formulation was developed for intravenous administration of TELINTRA and was used in Phase I and Phase II studies in MDS patients. The results from the Phase II intravenous liposomal TELINTRA clinical trials demonstrated that TELINTRA treatment was associated with improvement in all three types of blood cell levels in patients with all types of MDS, including those in intermediate and high-risk groups. An oral dosage formulation (tablet) was subsequently developed and results from a Phase I study with TELINTRA tablets showed clinical activity and the formulation to be well tolerated. In June 2011, the Company initiated a Phase II clinical ! trial to evaluate TELINTRA tablets. In October 2011, the Company initiated an additional Phase IIb clinical trial to evaluate TELINTRA tablets. '

The activity and safety profile of tablet formulation allowed the Company to complete a Phase II trial of TELINTRA tablets in MDS. The primary objective of the Phase II TELINTRA tablet study was to determine the efficacy of TELINTRA. A multivariate logistic regression analysis was conducted to identify MDS disease prognostic factors associated with erythroid improvement response rates, including prior MDS treatment, age, gender, the international prognostic scoring system (IPSS), risk, Eastern Cooperative Group performance status, years from MDS diagnosis, MDS World Health Organization subtypes, anemia only versus anemia plus other cytopenias, dose schedule and starting dose. Results from this study show that TELINTRA is the first GSTP1-1 enzyme inhibitor shown to cause clinically reductions in red blood cell transfusions, including transfusion independence in low to intermediate-1 risk MDS patients, as well as improvement in platelet count and white blood cell levels in certain patients. TELINTRA, administered orally twice daily, appeared to be convenient and flexible for chronic treatment administration.

TELCYTA is a small molecule drug product candidate that the Company is developed for the treatment of cancer. TELCYTA binds to GST. TELCYTA has been evaluated in multiple Phase II and Phase III clinical trials, including trials using TELCYTA as monotherapy and in combination regimens in ovarian, non-small cell lung, breast and colorectal cancer. Results from these clinical trials indicate that TELCYTA monotherapy was generally well-tolerated, with mostly mild to moderate side effects, particularly when compared to the side effects and toxicities of standard chemotherapeutic drugs. When TELCYTA was evaluated in combination with standard chemotherapeutic drugs, the tolerability of the combinations was similar to that expected of each! drug alo! ne.

Clinical activity including objective tumor responses and/or disease stabilization was reported in the TELCYTA Phase II trials; however, TELCYTA did not meet its primary endpoints in the Phase III studies. Positive results from a Phase I-IIa multicenter, dose-ranging study of TELCYTA in combination with carboplatin and paclitaxel as first-line therapy for patients with non-small cell lung cancer, or NSCLC, were published in a peer reviewed publication. Clinical data demonstrated positive results of TELCYTA in combination with carboplatin and paclitaxel in the treatment of first-line lung cancer followed by TELCYTA maintenance therapy. As of December 31, 2011, the Company had an on-going investigator-led study at a single site of TELCYTA in patients with refractory or relapsed mantle cell lymphoma, diffuse B cell lymphoma, and multiple myeloma.

Preclinical Drug Product Development

The Company has a small molecule compound, TLK60404, in preclinical development that inhibits both Aurora kinase and VEGFR kinase. Aurora kinase is a signaling enzyme whose function is required for cancer cell division, while VEGF plays a key role in tumor blood vessel formation, ensuring an adequate supply of nutrients to support tumor growth. These lead compounds prevented tumor growth in preclinical models of human colon cancer and human leukemia by inhibiting both Aurora kinase and VEGFR kinase. A development drug product candidate, TLK60404, has been selected.

The Company, using its TRAP technology has discovered TLK60357, a novel, potent small molecule inhibitor of cell division. TLK60357 inhibits the formation of microtubules that are necessary for cancer cell growth leading to persistent G2/M cancer cell cycle block and subsequent cell death. This compound demonstrates potent broad-spectrum anticancer activity against a number of human cancer cells. This compound also displays oral efficacy in multiple, standard preclinical models of cancer. TLK60596, a potent VG! FR kinase! inhibitor, blocks the formation of new blood vessels in tumors. Oral administration of TLK60596 to animal models of human colon cancer reduced tumor growth.

SA Pro Insider's Report, Wednesday August 7

This is a copy of the SA Pro Insider's Report sent exclusively to Pro subscribers on Wednesday, August 7. It was made fully available on Seeking Alpha twenty-four hours later.

Dear SA Pro subscriber,

This is your Insider’s Report for Wednesday, August 7, with today's high-conviction long and short ideas available only to SA Pro subscribers.

Exclusive Alpha-Rich Ideas

U.S. Cellular And TDS: Buy The Milk, Get The Cow On The Cheap, by Helix Investment Research. Subtracting its USM ownership stake, TDS's operating business is greatly undervalued. Substantial upside. Exclusive until 9:30 AM today. Intelsat: Evolution Of Capital Structure Presents Opportunity For Preferred Equity, by Mike Arnold. Intelsat's high degree of operating leverage in a stable, growing business makes for a good investment. 75-85% upside. Exclusive until 9:45 AM today. 6 Reasons ImmunoCellular Therapeutics Is One Of The Best Risk Vs. Rewards In The Market, by Joe Springer. IMUC has a cancer drug near approval and a platform adaptable to many forms of cancer. Significant upside beyond sell-side estimates. Exclusive until 10:00 AM today. Vecima Networks: Cheap Yield And Improving Fundamentals, by Nick Ghattas. With strong operational performance, expanding margins, and monetizable non-core assets, VNWTF.PK is an attractive investment. 35% upside. Exclusive until 12:30 PM today. New Gold: A Value Investment Opportunity Offering Considerable Upside, by Caiman Valores. The recent gold sell-off has left low-cost producer NGD undervalued. 45% upside. Exclusive until 2:15 PM today. WSP Holdings Will Reward Short Sellers Soon, by Yuanxi Zhang. Various red flags suggest WH's go-private deal could fall through. 50% downside if shares revert to pre-deal levels. Exclusive until 2:45 PM today.

Stock Movers and Great Calls
Alpha-Rich long and short ideas regularly move stocks and identify stocks that are about to move. Some notable recent calls subscribers had early access to:

On July 24, ! Mike Williams explained why FreightCar America's (RAIL) shares could double by 2015 as it returned to historic profitability. Shares are +16.3% to date after a strong earnings report this week. Read article » Vince Martin said on June 17 that Cray's (CRAY) sell-off after Q1 earnings was way overdone, offering investors a great deal. After a strong earnings report last week, shares now stand +45% from where they were before the article. Read article »

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To Come Today
Don't forget to check your SA Pro dashboard later today for the latest Alpha-Rich ideas. Any thoughts to share on the latest Alpha-Rich ideas? Leave a comment here.

SA Pro Editors
…............

The SA Pro team is Eli Hoffmann (Editor in Chief), Rachael Granby (Editorial Product Manager), Daniel Shvartsman, Samir Patel, Michael McDonald, and Jeffrey Fischer (Senior Pro Editors). You can reach us at pro-editors@seekingalpha.com.

Source: SA Pro Insider's Report, Wednesday August 7

Millennial Money

The younger generation is not quite as bad off as the media suggests; in fact, they are positioned to become tomorrow's stockholders, suggests Jack Bowers in his Fidelity Monitor & Insight.

Who will buy stocks when the boomer generation sells? Until recently, there wasn't a clear answer to this demographic question. But with Boomers reducing their stock exposure, and the Millennial population (ages 18-37) swelling to 86 million, we now have an answer.

The Millennials' growing ability to invest in stocks—along with their healthy appetite for risk—has set the stage for a full offset.

The media perception is that Millennials are unemployed, living with their parents and saddled with college debt. In reality, less than 15% of 25-34 year-olds are still in the nest, and many of them are working and saving for a down payment on a house. They are a highly educated group, and many have no college debt.

Among those who do, the average loan is about $25k. At today's low interest rates, annual debt service is on par with what Boomers took on for their first new car loan.

While unemployment remains high among 20-24 year-olds (13.3%), the rate for those aged 25-34 is below the national average (7.4%).

According to a recent Barron's article, Millennials already account for 21% of US consumer spending, a figure that could rise sharply as employment drives household formation, which in turn drives spending on autos and housing.

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The generation may also be able to invest a greater share of income in stocks, because today's borrowing rates are a fraction of what Boomers saw when they were striking out on their own.

Be it travel, extreme sports, job opportunities or investing, the Millennials are an opportunistic bunch.

Vanguard, which allows minors to open Roth IRAs at an early age (thus having a unique view into Millennial investing habits,) reports that their stock exposure exceeds 70%. The oldest Millennials are just entering the key 35-49 age group, which invests heavily in stocks.

As a result, sometime in the next few years, we can expect stock market outflows among individuals to reverse, which suggests stock returns should modestly outpace earnings growth over the next 15 years.

Subscribe to Fidelity Monitor here…

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This Easy Tip Can Save You Big on Homeowners Insurance

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Getty Images Answer: If your deductible is $500 now, increasing it to $1,000 can lower your premiums by up to 20 percent. Most insurers offer much higher deductibles, too, which is a popular strategy for people who have enough money in emergency funds to cover potential costs. Raising your deductible is a good way to reduce your premiums, and it makes you less likely to file small claims that could result in a rate hike. At Chubb, about half of the wealthiest customers choose a deductible of $10,000 to $50,000. "For homes here in Malibu that are valued at $10 million to $25 million, having a $25,000 deductible isn't out of the ordinary at all," says Derek Ross, president of Kulchin Ross Insurance Services, an independent agency in Tarzana, Calif. The higher the deductible, the bigger the premium savings. Let's say, for example, you have a policy with Fireman's Fund with a $1,000 deductible and a $3,000 annual premium.

You'd save about 24 percent by boosting your deductible to $2,500, 37 percent by raising it to $5,000, 47 percent by raising it to $10,000 and 53 percent by raising it to $25,000. Compare the premium savings with the extra dollar amount at risk to make sure that boosting your deductible is worthwhile. You should file a claim only if it is at least several hundred dollars more than the deductible. "If your insurer raises your rate by 10 percent for three to five years after you have a claim, that could easily exceed the amount the insurer paid beyond the deductible," says Ross. Whatever deductible you choose, keep enough money in an emergency fund to self-insure up to the deductible -- or even a few hundred dollars more. The risk of self-insuring may not be as high as you think. The average person files a homeowners insurance claim only once every eight to 10 years, says Jeanne Salvatore of the Insurance Information Institute. You could take the money you save in premiums and add it to your emergency fund each year so that you're prepared when you do have a claim, recommends Ross. You could also use the extra money to boost your dwelling, property and liability coverage levels by tens of thousands of dollars.

An Investor's Take on SodaStream Earnings: Welcome to America

With SodaStream (NASDAQ: SODA  ) facing a dramatically smaller market share in the U.S. than it does in Europe, many investors are following closely the company's ability to have its sales grow and its products be adopted by American consumers. The potential market is huge for SodaStream in the U.S., but many have been worried that these products will be seen here as just a fad. In this video, Motley Fool consumer goods analyst Blake Bos discusses SodaStream's recent earnings report, which announced explosive growth in the U.S. this quarter, and tells investors what has been driving that growth and what it means for shareholders.

5 Best Small Cap Stocks To Invest In 2014

SodaStream's carbonation technology sounds simple, but this razor-and-blade company offers an intriguing opportunity for growth that could very well disrupt the soda industry. The Motley Fool's premium report on SodaStream explains the opportunities as well as the risks in the company. The report comes with a year's worth of updates, so just click here to get started.

Tackling Cancer: Thyroid Cancer's Biggest Current and Upcoming Players

As I noted eight weeks ago, cancer statistics are both staggering and disappointing. Although cancer deaths per 100,000 people have been on the downswing since 1991 thanks to access to more effective medications and better awareness about the negative health effects of smoking, there is still a lot of research and progress yet to achieve. My focus in this 12-week series is to bring to light both the need for continued research in these fields, as well as highlight ways you can profit from the biggest current and upcoming players in each area.

Over the past seven weeks, we've looked at the seven cancer types most expected to be diagnosed this year:

Prostate cancer Breast cancer Lung cancer Colorectal cancer Melanoma Bladder cancer Non-Hodgkin's lymphoma

Today, we'll turn our attention to the projected eighth-most diagnosed cancer: thyroid cancer.

The skinny on thyroid cancer
There certainly is a give and a take to thyroid cancer. On one hand, thyroid cancer is the fastest growing cancer for both sexes. It afflicts women in nearly three out of every four cases, and incidence rates have been going up at a rate of 5.6% per year for men and 7% per year for women between 2005 and 2009. Worse yet, it's one of the few cancers whose risk doesn't seem to increase with age. A shocking 80% of newly diagnosed cases are people under age 65 according, to the American Cancer Society (links opens a PDF file).

Sources: Surveillance, Epidemiology, and End Results Program, and National Center for Health Statistics. 

On the other hand, with 60,220 cases of thyroid cancer forecast to be diagnosed this year, only 1,850 deaths are projected to be as a result of thyroid cancer. This means if it's caught early enough, it's a very preventable, even curable, cancer. In 1975-1977, five-year survival rates for thyroid cancer tallied an already impressive 92%. By 2002-2008, that figure has climbed to 98%, with local and regional thyroid cancers demonstrating 100% and 97% five-year survival rates.

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Amazingly, there aren't any diagnostic tests for thyroid cancer, so patients really need to keep their eyes open for lumps in their throat, or stiffness in their neck. Being female, having a history of goiter, or having been exposed to radiation are the most likely risk factors that could contribute to a thyroid cancer diagnosis.

Where investment dollars are headed
Thyroid cancer is treated in nearly every case with a full or partial thyroid removal since the majority of thyroid cancers aren't aggressive. However, in those rare cases where surgery isn't an option or the disease has metastasized to other parts of the body, there are two drugs approved by the Food and Drug Administration to choose from.

Caprelsa: AstraZeneca's (NYSE: AZN  ) Caprelsa was approved to treat unresectable, locally advanced, or metastatic medullary thyroid cancer in April 2011. In trials, AstraZeneca's pill increased progression-free survival over the placebo and delivered an overall response rate of 44%, compared with just 1% for the placebo -- although it should be noted that all responses were partial. However, Caprelsa also comes with a laundry list of side effects that range from something as simple as rash, nausea, and hypertension, to having resulted in death from respiratory arrest and cardiac failure with arrhythmia.  Cometriq: Exelixis' (NASDAQ: EXEL  ) Cometriq was approved last November to treat progressive metastatic medullary thyroid cancer. The capsules work by inhibiting multiple tyrosine kinases, which are crucial to blood vessel growth in solid and metastasizing tumors. In late-stage trials, patients receiving Cometriq demonstrated an astounding 11.2 months of progression-free survival compared with just four months for the placebo. Further, the objective response rate was 27% in the Cometriq arm and a goose egg for the placebo arm. Similar to AstraZeneca's Caprelsa, severe adverse reactions tended to increase for Cometriq users relative to the placebo.

Just as we've witnessed with every previous cancer in this series, not every drug trial proves successful. Pfizer's (NYSE: PFE  ) Sutent, for instance, is a very successful treatment for kidney cancer, gastrointestinal stromal tumors, and pancreatic endocrine tumors, but it didn't fare as well when it came to thyroid cancer. In a midstage trial targeting locally advanced or metastatic anaplastic differentiated thyroid cancer, Sutent was linked to two serious cardiac side effects that an independent monitoring committee felt required a close follow-up. This may not preclude Sutent from an eventual approval in helping advanced cases of thyroid cancer, but its side effects were enough to curb most of the enthusiasm investors had for the adding another indication.

What's coming down the pipeline
With surgery and/or radioactive iodine therapy being such an effective tool in treating the majority of thyroid cancer cases, outside of early stage trials and preclinical studies there isn't much going on in the thyroid cancer pipeline. There is one late-stage treatment in development that could provide a better outlook for those suffering with a more aggressive form of the disease: Nexavar.

Bayer and Onyx Pharmaceuticals' (NASDAQ: ONXX  ) anti-cancer agent Nexavar could be well on its way to receiving FDA approval for patients with locally advanced or metastatic radioactive iodine-refractory differentiated thyroid cancer. Announced in early January, results from the late-stage trial demonstrated improved progression-free survival relative to the placebo. Nexavar, which is given in a tablet form twice daily, works by blocking receptors responsible for blood vessel growth, thereby starving the tumor, or tumors, of nutrients and oxygen needed to grow.

Your best investment
The good news with thyroid cancer is that a diagnosis isn't a death sentence and that it's curable if caught early enough. On the other hand, thyroid cancer also isn't an area of intense research, since surgery and radioactive iodine treatments seem to cure a vast majority of the population, even if thyroid cases are on the rise.

Normally I would break this section into a riskier and safer investment option, but in this case I think both Exelixis and Onyx Pharmaceuticals represent one and the same. Nexavar is already approved to treat unresectable hepatocellular carcinoma and renal cell carcinoma and looks poised to gain the indication to treat an advanced form of thyroid cancer as well.

Likewise, Exelixis is the pure play on metastatic medullary thyroid cancer. The fact that Cometriq nearly tripled PFS in trials compared to the placebo makes it the clear choice over AstraZeneca's Caprelsa, and its efficacy in bone metastases in trials has thus far been very impressive. Exelixis will need additional indications for Cometriq to become profitable, but it appears to have the highest risk-versus-reward ratio here, depending on Cometriq's success moving forward.

Stay tuned next week, when we tackle the current and upcoming therapies for the treatment of kidney cancer in this "Tackling Cancer" series.

While you can certainly make huge gains in biotech and pharmaceuticals, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.