Analysts' Actions: APA CAG CHS DAL FITB

NEW YORK (TheStreet) -- CHANGE IN RATINGS

Apache (APA) was upgraded at Oppenheimer to outperform from perform. $100 price target. Stock has priced in risks and the company is buying back shares and debt, Oppenheimer said.

BB&T (BBT) was upgraded at Goldman Sachs to buy. Stock appears inexpensive relative to its peers, Goldman said.

ConAgra (CAG) was downgraded at J.P. Morgan to neutral from overweight. $33 price target. Consensus estimates have downside risk, J.P. Morgan said. Cavium (CAVM) was downgraded at Lazard Capital Markets to neutral from buy. Valuation call, as the stock has a price-to-earnings ratio of 29, based on expected 2014 earnings. Church & Dwight (CHD) was upgraded at Deutsche Bank to buy from hold. $66 price target. Company can sustain 3%-4% organic sales and double-digit earnings growth, annually, Deutsche Bank said. Chico's FAS (CHS) was upgraded at Keybanc to buy from hold. $21 price target. Company has long-term growth potential with earnings power approaching $2 a share, Keybanc said. Comerica (CMA) was upgraded at Goldman Sachs to neutral. Company should benefit from lower interest in short-end demand, Goldman said. [Read: US Airways Could Prosper Without Merger, Analyst Says] Charles River (CRL) was initiated with a neutral rating at UBS. Reflects valuation, although there are early-stage signs of improvement, said UBS. Price target is $49. Covance (CVD) was initiated with a buy rating at UBS. Reflects its late-stage clinical development and margin-expansion opportunity, UBS said. Price target is $96. Delta Air Lines (DAL) was upgraded at J.P. Morgan to overweight from neutral. $26 price target. Newly introduced tax rate not to be confused with a diminished earnings outlook, J.P. Morgan said. Fifth Third (FITB) was downgraded at Goldman Sachs to neutral from buy. Company is leveraged to slower mortgage activity, Goldman said. Fortuna Silver Mines (FSM) was upgraded to hold at TheStreet Ratings. Hologic (HOLX) was downgraded to hold at TheStreet Ratings. [Read: Less-Than-Shiny Gold Miners] Kellogg (K) was downgraded at J.P. Morgan to underweight from neutral. $60 price target. Top line concerns and difficult comparisons, J.P. Morgan said. Kennametal (KMT) was downgraded at Bank of America/Merrill Lynch. Valuation call, based on a $50 price target, BofA/Merrill said. US Airways Group (LCC) was upgraded at J.P. Morgan to overweight from neutral. $26 price target. Stand-alone prospects are materially better than implied by the market, J.P. Morgan said.

Mead Johnson Nutrition (MJN) was upgraded at J.P. Morgan to overweight from neutral. $88 price target. Top-line growth should be valued more highly than the pending cost headwinds and the possibility of further Chinese government intervention, J.P. Morgan said.

Public Service Enterprise (PEG) was upgraded at Jefferies to buy from hold. The company is gaining more political support for its "energy strong" capital spending program, said Jefferies. Price target is $37.

Quintiles (Q) was initiated with a buy rating at UBS. Reflects scale, late-stage development exposure and supplemental growth from CSO, said UBS. Price target is $51.

Steve Madden (SHOO) was downgraded at Wedbush to neutral from outperform. Valuation call, based on a $55 price target, Wedbush said. Volcano (VOLC) was upgraded at BMO Capital to outperform from market perform. $28 price target. Stock is attractively valued, and the company can achieve near-term earnings expectations, BMO Capital said. [Read: Wealth Concentration for the Top 1% Is at Worst Level Since 1929] Werner (WERN) was downgraded at Keybanc to hold from buy. Company warned and is facing several issues, Keybanc said. STOCK COMMENTS / EPS CHANGES Aetna (AET) numbers were raised at UBS. Estimates were raised as medical-claims trends should continue and CVH synergies could be better than expected, said UBS. Price target goes to $76. Celldex (CLDX) price target was raised at Jefferies to $29 ahead of CDX-1127 PI trial data release. Packaging Corp of America (PKG) numbers were reduced at Jefferies. Earnings estimates were adjusted lower to reflect less accretion from BZ acquisition, said Jefferies. Price target was reduced to $68. PerkinElmer (PKI) numbers were raised at UBS. Estimates were raised as the company enters expanding markets and balances investment vs. growth, said UBS. Price target goes to $43. >To submit a news tip, email: tips@thestreet.com. Follow TheStreet on Twitter and become a fan on Facebook.

This article was written by a staff member of TheStreet.

Tax Planning Tool Shows Impact on Retirement Plans

MassMutual on Tuesday launched a tool for advisors working with small business owners to help show their clients the way tax changes that take effect this year will impact their retirement plans.

The program, Solutions for Taxing Times, includes a run-down of 2013 taxes and their effect on various income levels and suggested talking points to help simplify conversations with clients. A calculator is also available to estimate potential tax savings and account balance at retirement.

The program also helps advisors identify which of their small-business clients are most likely to need help.

“Tax-advantaged retirement plans can be structured to show small businesses how to contribute a larger percentage of eligible compensation, thus reducing their tax impact while helping them to save more for retirement,” Thomas Foster, national retirement spokesperson for MassMutual’s Retirement Services Division, said in a statement.

“Our driving principle is to allow Americans to retire on their own terms,” Foster (right) told ThinkAdvisor on Thursday. “We approach that by engaging employers and educating employees.”

Foster said MassMutual surveyed advisors across channels to find out what issues are affecting their ability to grow. The survey found taxes, health care and participants’ retirement readiness are the major challenges advisors face.

Foster said advisors wanted guidance on tax planning issues in a “simplified, focused manner. We spend a lot of time on theory, but not a lot on practicality,” he said.

To address advisors’ concerns, Foster said, “we identified certain new taxes and isolated them by adjusted gross income.”

MassMutual then created a “cumulative peak” to show how those taxes would affect various income levels.

Some of those taxes include a 2% increase on Social Security taxes; a 0.9% surtax on Medicare and earned income for people with an adjusted gross income higher than $200,000; changes to allowable personal exemptions and itemized deductions at the $250,000-$300,000 level; and higher capital gains rate for the $400,000-$450,000 level.

MassMutual’s program includes graphs to show the increase, Foster said, then provides an example of how an individual would be affected in 2013 compared to what they paid in 2012.

“It gives them a way to engage with their CPA,” Foster said.

In addition to the online tools, which can be accessed at MassMutual’s website, other tools like postcards are also available. “We found one delivery system isn’t a good way to reach people,” Foster said. “Any tools we offer can be accessed multiple ways.”

AT&T Adds Back-Up for Windows Phone8 - Analyst Blog

The second-largest U.S. carrier, AT&T Inc. (T), has extended its mobile content storage facility for smartphones running on Microsoft Corporation's (MSFT) Windows Phone8 OS (operating System).

Termed as AT&T Locker, the storage facility is based on the cloud and offers 5GB of back-up space for mobile content. The new application comes with an easy upload feature, which allows AT&T customers to upload images, videos, documents and music files automatically from the Windows Phone to AT&T Locker.

The photos and documents are transferred via AT&T wireless network or Wi-Fi and are stored on the cloud-based facility, in a secured location. Customers can also share their images on social media like Facebook and Twitter directly from AT&T Locker.

The application is already available for AT&T customers using Apple Inc.'s (AAPL) iPhone or Google Inc.'s (GOOG) Android-based smartphones. AT&T Locker is available for free to Windows Phone8 customers, with an option to buy additional space for high data users.

Presently, AT&T's website does not show the Locker option for Windows' customers. AT&T customers can download the storage application from the Windows phone app store. Navigating the application is also quite easy. Apart from having dedicated pages for images, music and files, users can access the 'More' page to set up their own social media sites.

Arch rival, Verizon wireless, has already introduced cloud-based data storage and restoring facility for its Android and iOS customers, with the former having an additional ability to save call logs and messages. However, Verizon offers only 500 MB free storage and charges for additional space.

Such apps will satiate the demand for high data storage capacity of the U.S. customers, who use their smartphones to share and store photos and videos extensively. Additionally, AT&T Locker will be beneficial for customers who are not satisfied with the 7GB of free stor! age provided by SkyDrive.

Currently, AT&T carries a Zacks Rank #3 (Hold).

The Role Of Luck And Skill In Investing

Michael Mauboussin is head of Global Financial Strategies at Credit Suisse and the author of several books, including The Success Equation: Untangling Skill and Luck in Business, Sports and Investing (Harvard Business Review Press, 2012). He and I spoke about the role skill and luck play in investing.

Charles Rotblut: A big theme in your recent book is the distinction between skill and luck. Could you explain what the difference between the two is?

Michael Mauboussin: One of the ways I like to think about this is as a continuum of activities from pure luck and no skill on one end to pure skill and no luck on the other end. Obviously, most things reside somewhere between the extremes, and where an activity sits can be very important. But before we get going, it is important to define the terms.

I'm going to define skill right out of the dictionary: The ability to apply one's knowledge readily in execution or performance. You know how to do something, and when you're asked to do it, you can do it effectively.

Luck is much more difficult to define. It actually spills into moral philosophy pretty quickly. I'm going to say that luck exists when three conditions are in place. Number one, it operates on an individual or an organizational basis, such as you or your team or company. Second, it could be good or bad. By that, I don't mean to suggest that it is symmetrical, as in it could be equally good or bad. But rather there is a plus sign or a minus sign. The third thing is that it is reasonable to expect that a different outcome could have occurred. If those three things apply, then you're in a situation where luck exists.

Not surprisingly, when you look out into the world, whether it's business, investing or your favorite sports team, both skill and luck are contributing. The real question is, in what proportion?

CR: Do you think investors confuse the two when looking at their own performance, in that they think they are skillful when they have actually gotten lucky?

MM: There is actually a very interesting test to determine if there is any skill in an activity, and that is to ask if you can lose on purpose. If you can lose on purpose, then there is some sort of skill. Investing is very interesting because it is difficult to build a portfolio that does a lot better than the benchmark. But it is also actually very hard, given the parameters, to build a portfolio that does a lot worse than the benchmark. What that tells you is that investing is pretty far over to the luck side of the continuum. That is the first important thing.

The second thing is that luck is a very difficult thing for us to deal with psychologically. The main reason has to do with a part of your brain in the left hemisphere. If you give it any effect, it will immediately and effortlessly come up with a cause. That part of your brain knows nothing about luck. It only knows about causality. So it attaches skill to positive outcomes and it attaches lack of skill or maybe bad luck to poor or negative outcomes. So there is this kind of disconnect between what happens in the real world and how our mind interprets those events.

And to your question, we tend to associate good outcomes with good skill alone and that's often simply not the case. And bad outcomes are not necessarily associated with bad skill either. It's a very tricky relationship to understand clearly.

CR: If someone is following a set process of picking stocks or bonds and it doesn't do well, is this a case where the investor should look at how the strategy has performed in the past and if it has worked well, just attribute the poor performance to luck turning against them?

MM: For sure. Part of what I talk about in the latter part of the book is how to improve one's skill. What I argue is that when you're on the skill side of the continuum, your output and your skill are very closely related to one another.

If I want to know if you're a good violin player or a good tennis player, I can listen to you or watch you play and I can tell quite quickly. When you move over to the luck side, it becomes process-oriented and probabilistic. For example, there is a standard strategy for blackjack. You may play your cards properly and lose the hand, which is just bad luck, or you may play your cards foolishly and win the hand. So the connection between the quality of your skill and the outcome is broken. There, you really have to focus on process.

How do I know if my process is any good? Number one, has it worked in the past and is it economically sound? Number two, I think of good processes as having three essential elements. Element one is analytical: having an ability to find situations in which you believe something the world doesn't believe and in which you have a good foundation for such a belief.

The second is behavioral: we are all subject to behavioral mistakes and cognitive biases. Are you aware of those things and are you taking steps to manage or mitigate them? The third, which is less true for individuals and truer for organizations, is what I call institutional. This element relates to the constraints in your personal or professional life that don't allow you to do the best thing possible in terms of your process. If you have a good analytical process, are aware of behavioral issues and organizational issues are not a problem, then you typically can develop a pretty effective process. If you've done that and you get a bad outcome in the short term, you pick yourself up, dust yourself off and you go back at it the next day because over time the process will lead to success.

CR: What about for investors who haven't really thought about whether their strategies have worked in the past? How do they go about seeing if their strategies make sense?

An ETF for muni bond exposure

Given the great and increasing difficulty of finding good income alternatives these days, we find no surprise in the fact that lately, investors have been flocking to the iShares S&P National AMT-Free Municipal Bond Fund (MUB).

No small wonder. This ETF's current yield is 2.7 percent as it's designed to deliver the price and yield of the U.S. municipal bond sector according to the S&P National AMT-Free Municipal Bond index.

Plus, because it invests in munis, which means that interest on these bonds is exempt from U.S. federal taxes, the effective yield is indeed much higher.

Moreover, as is evident from the index name, the fund is avoiding municipal bonds that carry coupons taxable by the Alternative Minimum Tax — for example, "private activity bonds" that corporations issue to fund public projects like airport terminals, hospitals or industrial parks. Therefore, the effective yield in the end is higher still.

To sum it up, the ETF invests in investment-grade state and local government bonds exempt from U.S. federal income taxes. While investors can still be subject to state income taxes, their exposure to the Federal and AMT tax is minimal by design.

One caveat: its holdings tend to have slightly longer durations than your typical, shorter-maturity municipal bond funds, making this ETF more sensitive to interest rate fluctuations.

But be careful here: as demand continues to move higher, the yield on munis has entered a pronounced downtrend. This derives from both the investors' need for income and their growing appetite for risk.

Normally, this would indicate that investment risk of these issues has declined (in the fixed income world investors generally get compensated by extra yield for taking extra risk).

However, the enormous demand for yield, especially tax-advantaged one, has consequently skewed the risk/return profile of these munis: they now compensate investors as if the risks of holding these bonds have declined, when in fact they have risen.

One risk is that the still-weak economy casts doubts on the future ability of some states to meet some of their obligations.

While not as low a risk as its current yield indicates, the ETF remains attractive for its effective yield. Plus, the MUB portfolio invests in higher-quality bonds: 86 percent of its total assets are rated A or better.

The fund's portfolio is spread across many states and sectors. At present, its top states are California, New York, Texas, New Jersey and Massachusetts, with the first two dominating as about 41 percent of the fund is invested there.

The fund's current average bond maturity is about 6 years; it now holds nearly 36 percent of its portfolio in issues maturing in five to ten years, 14 percent in paper coming due in 10 to 15 years, and nearly 8 percent in bonds maturing in 15 to 20 years.

Little more than 7 percent of the portfolio matures in less than one year, and nearly 28 percent matures in one to five years. Somewhat overpriced, MUB still looks interesting as its after-tax yield, especially for higher-income earners, remains relatively high.

Shhh! Quieter GM H.D. pickups get 38-hp boost

How about 38 extra horsepower for free? That's what General Motors is getting from the gasoline V-8 engine in its new-generation, 2015 heavy-duty pickups.

GM says it has boosted the published rating of the 6-liter gasoline V-8 in its Chevrolet Silverado 3500 and GMC Sierra 3500 -- the so-called one-tons -- heavy-duty pickups to 360 horsepower. That's up from the 322 hp it announced when it unveiled the trucks in Texas Sept. 26.

The same engine in the Silverado and Sierra 2500 models -- aka three-quarter ton -- is rated 360 hp.

Researching why the two engines had different ratings in substantially similar trucks, in response to a an inquiry from USA TODAY, GM found that the trucks could pass government noise regulations while the engines were running faster, allowing it to use the higher rating for the 3500 models, according to GM powertrain spokesman Tom Read.

The heaviest-duty pickups -- the 3500 series -- fall into a category that has required them to meet the same "pass by" noise regulations that apply to even heavier-duty trucks, the cab-chassis rigs that are the basis for ambulances, tow trucks and other commercial models.

To keep the noise down, an automaker sometimes must keep the engine running slower during the pass-by testing. It only can advertise the horsepower the engine makes at that reduced speed, even though the engine might make much more power when revved faster.

The noise rules haven't applied to the 2500 series vehicles because they are in a different category. Now, Read says, the 3500s are quiet enough running under hard throttle to pass the noise restriction.

"No longer do we need to 'de-rate' the full-size pickups, as we have done for over 20 years, because new technology and design make them quiet enough at full power to pass the noise test," Read explained.

As a result, "we are revising our information for the 2015 model year" 3500-series pickups, he said.

The heavy-duty versions of GM's new-generation full-size pickups go o! n sale first quarter of next year as 2015 models. The standard-duty models -- designated 1500 and sometimes called half-ton models -- have been on sale since the summer as 2014 models.

The 2500 and 3500 account for about 25% of all Chevrolet Silverado and GMC Sierra sales. Within that, the 2500 models are 75% to 80% of the mix. The 3500 models are the balance.

Usually powered by diesel engines, heavy-duty pickups have a broad array of buyers. They range from those who need simple work trucks with more capability than standard-duty pickups, to people who tow horse or race-car trailers all over the U.S. They want something powerful enough to shrug off nine or 10 tons hitched behind, even on hills, and they buy leather-lined, tech-infused interiors to keep them comfortable while doing it .

Boosting ratings due to a regulations issues is rare, perhaps unique. On the other hand, automakers over the past few decades have had to cut power ratings as new rounds of testing were conducted to verify compliance with tightening government fuel-economy and emissions regulations.

And several times lately automakers have had to cut their advertised fuel-economy ratings after the government discovered they were too high.

Is Western Digital Among the Best Stocks to Buy Now?

Solid-state disk drives may be the future, but they haven't taken over just yet. This week, Western Digital (NASDAQ: WDC  ) introduced a 1.5 terabyte portable magnetic drive for laptops and a variety of other formats, a move that could make it one of the best stocks to buy now.

While Apple and even Seagate Technology have increased their bets on SSD, Western Digital is poised to profit from PC makers hesistant to introduce too many premium-priced laptops into the market.

Think specifically of Dell (NASDAQ: DELL  ) and Hewlett-Packard (NYSE: HPQ  ) , both of which offer SSD machines but whose customers are more price sensitive, says Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova in the following video. Having access to Western Digital's higher-capacity drives should allow them to cater to budget-savvy customers that are still hungry for high performance, Tim says.

Do you agree? Please watch the video to get Tim's full take, and then let us know whether you believe Western Digital is one of the best stocks to buy now.

This stock computes
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out more in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

MAKO Surgical Notches Another Legal Victory

MAKO Surgical's (NASDAQ: MAKO  ) legal wins just keep stacking up.

Just last month, the company not only settled a trade secrets lawsuit on its own terms with competitor Blue Belt Technologies, but also resolved a patent infringement complaint it brought against U.K.-based Stanmore Implants for uncanny similarities between its own RIO System and Stanmore's Sculptor RGA.

Curiously enough, the resolution of the latter complaint ended with MAKO acquiring Stanmore's robotics technology for less than $1 million. Meanwhile, Stanmore agreed to withdraw itself from the surgical robotics market completely.

Then again, these cases were offensive moves by MAKO designed to make sure their competition would play fair. Even so, I'm sure most shareholders would agree that it would be a lot less stressful if the company hadn't needed to get involved in these legal matters in the first place.

As I noted earlier this month, however, management was also facing a courtroom challenge from other shareholders who alleged they were misled by last year's over-inflated RIO System sales projections. Of course, anyone who kept track of MAKO in 2012 remembers what happened after they missed their own lofty expectations:

MAKO Total Return Price data by YCharts

"Forward-looking statements"
Last week, however, according to a report from the South Florida Business Journal, the courts reminded shareholders the importance of owning their investing decisions.

More specifically, a Southern Florida District Court judge dismissed one of the aforementioned class action lawsuits after pointing out MAKO's "2012 sales projections were accompanied by meaningful language that cautioned investors that these 'forward-looking statements' may not be on target."

Going further, the judge elaborated by writing:

The warnings in the defendants' press releases and the referenced SEC filings warned investors of precisely what happened here: that projected system sales and procedures might be lower than projected due to the economic downturn, variable sales and a reluctance on the part of orthopedic surgeons to adopt the new technology.

What's more, the judge also ruled that comments made by management during investor conference calls were also protected as "forward-looking statements," and there exists no evidence at the time they were aware they wouldn't be able to meet their goals.

Foolish final thoughts
Of course, management's seeming ignorance was one of the very reasons fellow Fool Brian Stoffel told us last December that MAKO wouldn't remain in his 2013 portfolio, but I personally remain encouraged that the company seems to have finally adjusted investors' expectations with reality -- especially on the heels of two consecutive decent quarters.

However, regardless of how effective any given company is at selling you on its prospects, remember these businesses are run by imperfect people who may not always be able to deliver on their promises. In the end, then, don't take those monotonous Safe Harbor Statements as a time to zone out until the real conversation begins. Instead use them as a reminder that your investing decisions -- both good and bad -- are your own responsibility.

Zero to hero?
Sitting near all-time lows, has MAKO Surgical's robotic surgery growth story rusted over? To help investors answer this question, Fool.com analyst and MAKO expert David Meier has authored a premium research report covering all of the must-know details on the company, including key areas to watch and risks looming in the future for the medical robotics company. Claim your copy by clicking here now.

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More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Solid economic news puts tapering back on the agenda

Friday's surprisingly robust jobs report has triggered fresh debate about dialing back the Federal Reserve's $85 billion-per-month quantitative easing program.

The report showed that the U.S. economy added 204,000 jobs in October, 70% above the consensus estimates of 120,000 new jobs. It also included upward revisions for the jobs reports from both August and September.

The positive data followed a Thursday report showing that the economy was growing at 2.8% clip, or about 40% above what analysts were forecasting.

Meanwhile, the unemployment rate on Friday was adjusted slightly higher to 7.3% from 7.2%, an increase that market analysts see as an anomaly related to the recent government shutdown.

“I think the Fed can take some confidence from these reports and really put tapering back on the table,” said Dan Heckman, fixed-income strategist at U.S. Bank Wealth Management.

“I wouldn't be surprised to see a taper announcement from the Fed this year and with tapering starting in January,” he added. “There are good reasons to go ahead with tapering now, and it is certainly going to be a topic that gets moved to the front burner and will be more on the minds of investors.”

(But Fed’s Lockhart says Fed can’t rule out QE tapering next month.)

As if on cue, the bond market took the jobs data and treated it as tapering announcement, driving the yield on both the 10-year and 30-year Treasury bonds up about 14 basis points in early trading. Meanwhile, stocks rallied, with the Dow Jones Industrial Average climbing 95 points, or about 0.6%, to 15,688.56 by afternoon. The S&P 500 index added nearly 1%.

“The market is saying we probably should have tapered in September, and that's why we're getting the sell-off in Treasuries now,” said Dan Toboja, vice president of fixed income at Ziegler Capital. “I think this latest data definitely puts tapering back on the table. Right now, the market is telling you it's ready for tapering and it's giving you an excuse to do it now.”

One of the major wrinkles with regard to tapering is the impact of the head fake that Fed Chairman Ben S. Bernanke threw the financial markets in September by not beginning to taper after implying in May that such a move would be imminent.

“This time around, I'm not sure you'll see the same kind of buildup you saw in September when the markets thought there would be some tapering,” said Cam Albright, director of asset allocation at Wilmington Trust Investment Ad! visors.

Mr. Albright, who believe there now is a 50% chance of a tapering announcement this year, said any Fed action will still be heavily data-dependent and will be driven especially by the next jobs report, which comes about 10 days before the December Fed meeting.

The other major wrinkle that could be stalling tapering activity is the fact that Mr. Bernanke is expected to pass the Fed chairmanship to Janet Yellen on Feb. 1.

That reality has sparked a new level of handicapping around the unprecedented five-year quantitative easing program, which has already swelled the Fed's balance sheet to beyond $3 trillion.

“If Bernanke were going to remain, tapering would certainly be back on the table now, but it all has to do with the transition of power at the Fed, and that's one of the reasons they didn't taper in September,” said Sean Clark, chief investment officer at Clark Capital Management Group.

“Janet Yellen's stamp will be to begin tapering at her will,” he added. “And there's a potential for her to make Bernanke look hawkish by comparison.”

And then there are those like Dan Veru, chief investment officer of Palisade Capital Management, who believes the Fed's motivation for tapering has gone well beyond the stated dual mandate of managing inflation and employment.

“I don't want to make too much out of two discreet pieces of specific data, but 200,000 is not enough to force the Fed to start tapering,” he said, referring to the number of jobs added in October. “I think it's wrong to assume that the liquidity is going away, because this decision to taper is also subject to political winds and there's another big budget debate coming in January.”

With tapering essentially off the table, Mr. Veru thinks the stock market can gain add another 3% to 5% between now and the end of the year.

The backburner theory is also supported by Paul Schatz, president of Heritage Capital LLC.

“Before the jobs report we were hearing consen! sus estim! ates that tapering would possibly start in March, but it could be as far away as June, but now suddenly people are saying tapering is back on the table,” he said. “I just don't believe one jobs report changes the Fed's plan.”

Mr. Schatz, who sees the stock market gaining at least another 2.5% by January, doesn't believe the economy is even strong enough to absorb any reduction on the quantitative easing program.

“I don't believe the market or the economy can stand on its own two feet year, so as long as there's no inflation I think they should increase quantitative easing,” he said. “In our economy right now, banks, housing, and everything is predicated on historically low rates, and if rates begin to spike imagine what that does. The fed cannot afford that ah-ha moment.”

NVIDIA to Return $1 Billion to Investors This Year

Graphics specialist and mobile chip maker NVIDIA (NASDAQ: NVDA  ) intends to return $1 billion of capital to investors this fiscal year, the company announced today.

The return will be in the form of share repurchases as well as dividends, including $100 million in stock being repurchased in the current quarter.

The company launched its quarterly dividend program in November 2012, and has since returned $200 million to shareholders to date. That total includes $100 million in stock buybacks and $100 million in dividends so far. Most of the $1 billion will be through the company's repurchase program. The company's quarterly dividend is $0.075 per share, amounting to about $50 million a quarter.

CEO Jen-Hsun Huang expressed confidence in NVIDIA's cash-generating capabilities, saying its strategies are gaining traction.

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L.A.'s Sunset Strip Goes Corporate: Whisky a Gone Gone

Michael Tullberg/Getty Images Los Angeles County's fabled Sunset Strip -- home to numerous legendary nightclubs -- is going corporate. Goodbye, Rat Pack and Guns N' Roses; hello, Marriott International (MAR). Gangsters and Guitarists Through a quirk of urban planning, the Strip -- a 1.6-mile stretch of Sunset Boulevard -- was part of unincorporated land within Los Angeles city limits (these days, it belongs to the micro-city of West Hollywood). As such, it was overseen not by the L.A. Police Department, but by the more lax County Sheriff's department. Entrepreneurs took advantage of this, and in the early 20th century the Strip soon became the hottest entertainment destination in the L.A. area, home to clubs, bars and the occasional house of ill repute. In the 1940s and 1950s its nightclubs frequently hosted the top stars of the era. Many a band across the subsequent decades rose to prominence playing joints like The Roxy, Whisky A Go Go (still going strong at 50), and the Viper Room. Throughout the world, the Strip was nearly synonymous with nightlife. So much so that, according to some, its name was cribbed by the burgeoning city of Las Vegas to title the strategic section of its main thoroughfare. For many years now, the heart of Las Vegas Boulevard has been known simply as "The Strip." The City That Sometimes Sleeps The Strip is not the only game in town for visitors. Close by is the gay mecca of West Hollywood's "Boy's Town" neighborhood, while the tiny city's location in the kernel of L.A. makes it the perfect springboard for visiting Hollywood, L.A.'s beaches, and the neighboring Beverly Hills. Tourism is big business for West Hollywood. Twenty percent of the municipality's fiscal 2013 take came from the transient occupancy (i.e., lodging) taxes levied on those visitors. This brought in a cool $18 million that year -- 18 percent higher year over year, by the way -- making it WeHo's No. 2 revenue source. And there's more where that came from. Last year, West Hollywood hotels collectively had an occupancy rate of 82 percent, according to industry watcher STR. This is much higher than the 2013 national figure of 62 percent, as calculated by the American Hotel & Lodging Association -- indicating that there's plenty of room for growth. Here Come the Hoteliers So it's no surprise to learn that some big names in the sector are very interested in West Hollywood, and where better to build than its famous street? A host of hotel projects on the Strip are in various stages of development. Developer CIM Group has cleared a pair of parcels on either side of the intersection of busy La Cienega Boulevard and the Strip. One is to be home to the 286-room four-star James Los Angeles hotel, comprised of a pair of 10-story towers. The other parcel will be the site of residential buildings. Meanwhile, across the street from The Roxy, the sun will rise on an Edition Hotel, Marriott International's boutique brand. The company plans to construct an Edition boasting nearly 200 rooms, which should open in 2017. Marriott has partnered with industry veteran Ian Schrager on the Edition line. Schrager is a co-founder of Morgans Hotel Group (MHGC), and that company's flagship Southern California property is the Strip's Mondrian Hotel. The Last Encore? The wave of hotels threatens to obliterate the Strip's smaller businesses, which include some places that give the stretch its character and reputation. According to Bloomberg, a division of engineering company AECOM Technology (ACM) is aiming to build a complex on the eastern end of the Strip anchored by a 149-room hotel. At the moment, that land is occupied by the local iteration of Live Nation's (LYV) House of Blues concert hall chain. According to a spokesman for the club, it is finding a new location. The building itself will probably suffer the fate of the Strip's first theater, the nearly 50-year old Tiffany. That venue was razed by CIM Group last year to make way for its La Cienega project. That seems to be the trajectory of the neighborhood -- fun stuff out, lodgings in. Across the street from Whisky A Go Go lies the Hustler Store, the main retail outlet of the notorious porn empire. Like House of Blues, it's packing up and moving elsewhere. In the Bloomberg article, a West Hollywood Community Development Department official speculated on what the future of the building could be. It might, he mused, be torn down to be replaced by -- yep -- a new hotel project. More from Eric Volkman
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Americans still hesitant to spend more

NEW YORK (CNNMoney) Americans' incomes are rising, but they aren't spending their extra cash.

Personal income rose 0.4% in May, according to the Bureau of Economic Analysis. It may not sound like much, but it marked the fifth straight month in a row that incomes rose. Not only that, but incomes are rising faster than inflation -- an encouraging sign that people are gaining more buying power.

After accounting for both taxes and inflation, disposable income is up 1.9% from a year ago. This is an important development because consumer spending drives the bulk of the U.S. economy.

But here's the catch: Consumers haven't been going out and spending. Instead, they're choosing to sock that money away.

After accounting for mildly higher prices, consumer spending has actually fallen for two months in a row. In May, Americans cut back on eating out, going to the movies, and buying clothes. They spent less on necessities like groceries and utilities. Meanwhile, health care spending has fallen considerably since the beginning of the year, and has now been flat for two months in a row.

The few exceptions to these trends include spending on housing, gasoline and cars, which are rising.

"Consumers bought more homes and cars, saved a little more for a rainy day, and ...that was about it. Not much left for anything else," said Jennifer Lee, senior U.S. economist with BMO Capital Markets.

  Pritzker: minimum wage is insufficient

As of May, Americans were saving about 4.8% of their monthly income.

To put that number in perspective, consider two extremes: Befor! e the recession in 2005, when many Americans were overextending their finances, they were saving less than 3% of their income each month, on average. At the height of the crisis in 2009, they became more conservative, saving about 6% of their income. We're now in between those two levels.

Looking further back through history, the savings rate was at its highest level on record in the early 1970s, when it was in the 12% to 14% range.

What it means for the Fed: Prices are rising and the job market is improving, but the economy remains far from robust. Federal Reserve Chair Janet Yellen has made it clear that she's watching a variety of indicators, including wages, to determine when the Fed should start to pull back on its stimulus efforts.

In a press conference last week, she said that she expects to see wages rise faster than inflation this year, thereby increasing Americans' take-home pay. That, in turn, should boost consumer spending and the broader economy this year.

"My own expectation is that as the labor market begins to tighten, we will see wage growth pick up," she said.

But if that fails to happen and wages don't keep up with inflation, she would worry about consumer spending falling.

As of May, inflation is up 1.8% over last year, falling below the Fed's target for 2% inflation.

What millennials don't know about the job market

When Ben Carpenter's daughter Avery landed a dream job in broadcasting not long after graduating from college, the family was overjoyed. But then Avery had a question.

"She wanted to e-mail and say, 'Can I put my start date off for a week so I can apartment hunt?' " Ben Carpenter, vice chairman of CRT Capital Group, recalled. "I started shaking. I couldn't believe it."

Carpenter realized, he said, that his highly educated daughter had no inkling of the ways of the workplace.

This is a tough job market for millennials, those born between the early 1980s and 2000. The unemployment rate in March for recent college graduates was 12.2%, according to the Bureau of Labor Statistics. A study by Accenture found that roughly 40% are employed in jobs that don't require a college degree.

But why? Aren't these kids well educated, with technology expertise and social networking skills like no other generation?

Yes, but that's not all they need to be successful in landing a job and navigating office culture, experts say. Employers regularly cite attributes like integrity, leadership and work ethic as crucial. And a recent study indicates that many of them question whether millennials have what it takes to succeed in the workplace.

In that survey, State of St. Louis Workforce 2013, a lack of communication skills, a poor work ethic and a lack of critical thinking and problem solving were the biggest shortcomings of the job applicants they were seeing. " 'Soft skills' once again far outpaced technical skills such as math and computer skills as the most lacking in the workforce," the study concluded.

Similarly, a 2013 study commissioned by Bentley University found that 35% of business leaders give recent college graduates they have hired a "C" or lower on preparedness, and 37% of recent college graduates give themselves the same grade range.

CIA? STARBUCKS?: Millennials see both as dream jobs

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On top of the skills mismatch, millennials are making it harder by being too laid back about their job searches, said Carpenter, whose experience with his daughter led him to write "The Bigs: The Secrets Nobody Tells Students and Young Professionals About How to Find a Great Job, Do a Great Job, Be a Leader, Start a Business, Stay Out of Trouble, and Live a Happy Life."

"They almost all regret that they didn't start the process of their job search earlier. I hear that over and over again," he said.

Sanjeev Agrawal, whose company, Collegefeed, connects college students and recent graduates with employers, agreed that millennials' job hunting process is flawed, though he argued that it's not really their fault. "About 50% of the problem is the process that is used to hire college graduates and young alums who don't have a strong, established professional network," he said.

When millennials do land jobs, they face the added challenge of fitting into workplace culture. Unfortunately, research suggests that they are not ready for that either.

In a study commissioned by Bentley University, 74% of the non-millennials surveyed said they believed millennials did not have the same work ethic as previous generations, but 89% of the millennials said they have a strong work ethic. Also, 70% of those beyond the millennial years said millennials should be more willing to "pay their dues."

A 2012 report on the metro St. Louis workforce cited a Boeing official as saying, "New hires and younger workers certainly have a positive work ethic; however they often have an immature or impatient approach toward career development/progression. They have an expectation that their career development will somehow be on the fast track, without a full understanding of the commitment it takes beyond the 9-to-5 world. At times they seem to lack an understanding that you need to work until the work is done."

What can millennials do about these challenges? For st! arters, t! hey should recognize that traditional job hunting assistance only goes so far, Agarwal says. Career development offices and job boards often do a less-than-stellar job of connecting individual job seekers with opportunities that would let them leverage their unique skills.

Carpenter suggests that college students start the job search well before spring of their senior year by choosing a field to pursue, contacting seniors who have landed jobs in that area and asking coaches or favorite professors for experts you can contact in that field.

Agarwal said many new, young employees need to develop more persistence and determination—"this idea of staying the course, of grit, of fight, of 'I won't give up no matter what happens.' "

Still, millennials' obvious skills in technology, networking and teamwork are assets that employers need to leverage. And just as many millennials need to develop some new traits to succeed in a the workplace, Agarwal said, smart organizations are thinking about ways to adapt so that they can attract the best and brightest millennials.

"Companies that want to attract millennial talent need to be aware that different generations do things differently," he said. Thirty years from now, someone who is a millennial today will be running your company."

© CNBC is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.

3D Systems Corporation and Staples Inc. Add In-Store 3-D Printing to Partnership

3D Systems (NYSE: DDD  ) and Staples (NASDAQ: SPLS  )  today announced a partnership that will give customers at individual Staples stores in New York City and Los Angeles access to 3-D printing capabilities.

Source: 3D Systems.

The two locations will allow for "an immersive 3D printing experience," which will give customers the ability to use 3-D hardware to print and create personalized products, according to a 3D Systems press release. In addition, customers can bring pre-made files and designs to have them printed in-store.

"Staples' established reputation as a leader in home office and small business solutions makes them an ideal partner for testing out live, consumer-facing 3D print services," 3D Systems Vice President Rajeev Kulkarni said in the announcement. "We have been thrilled with the retail experience and response from our audience, and the difference it makes being able to see, touch and experience 3D printing."

The press release noted that the centers will allow for both individuals and small-business customers to be educated further surrounding 3-D printing. They'll also be able to use software that will provide design and creativity functionality and have access to a 3DMe photo booth that can capture customers' facial images to create for things like personalized figurines.

"3D printing offers enormous potential for small businesses, and by using Staples, they can print with the technology without having to invest in it," Damien Leigh, Staples senior vice president of business services, added in the release. "The test with 3D Systems will help us learn about our customers' needs for a local 3D printing service, and how Staples can help them make more happen for their business through 3D printing."

The two stores will each have an on-site expert from 3D Systems, as well trained Staples associates to give customers greater understanding and guidance as they create a 3-D product. This announcement narrowly precedes the one-year anniversary of Staples announcing it would be the first major retailer to provide customers the ability to purchase the Cube printer from 3D Systems.

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Lemon suit tests Tesla's restrictive sales deals

A lemon-law suit by an unhappy Tesla Model S owner who wants his money back could be the first test of Tesla's restrictive customer sales agreements.

The Wisconsin lawyer handling the state lawsuit against Tesla, a specialist in automobile lemon-law cases, says he believes state law there will overcome what he calls one of the the most unusual sales agreements that he's ever seen -- one he believes are aimed at keeping owners from being able to sue over bad cars in the first place.

Milwaukee attorney Vince Megna also says that Tesla's policy of selling cars directly to consumers -- rather than having franchised dealers -- is another reason that it is tougher for customers to take action if they are dissatisified with their car.

"They are a company that doesn't have to follow state rules," says Megna. "It really puts a person in tough, tough situation."

Megna represents physician Robert Montgomery, who says the $94,770 Tesla Model S that he had delivered in March, 2013 and in the first five months it was out of service 66 days according to Megna, and he wants a refund. Megna says that Montgomery's three demands for a buy-back under the Wisconsin lemon law went unanswered.

Tesla officials, reached for comment, say they can't talk about pending court cases.

Montgomery has had a laundry list of troubles -- not turning on, not going into "drive," door handles that don't work, a faulty battery coolant system and and more. Adding to the lost time, because Tesla has no Wisconsin facilities, the car had to be transported to Chicago for major repairs.

Because the car was out of service for 30 days or more, according to the suit and Megna, it falls squarely under Wisconsin's lemon law -- state laws that generally provide recourse for car buyers if a car is faulty and the maker can't make good on it.

But the case is complicated by Tesla's sales agreement that buyers sign, which Megna is designed to thwart lemon-law suits.

For one, he says, Tesla's deal says tha! t legal disputes must be filed in northern California, where Tesla is based, and where the owner lives. The agreement also mandates that Tesla or the owner can demand arbitration, which could pretty much allow Tesla to prevent cases from going to trial. And if there is a settlement, you can't tell anyone.

"Tesla is like a dictator," Megna says.

Megna argues, however, in the suit that Wisconsin's lemon laws supersede Tesla's sales contract and that is should be allowed to go forward there.

Megna also has done a humorous video to promote the case and we've included it here. As you'll see, the self-described "King of the Lemon Laws" bears more than a passing resemblance in both his deadpan delivery and his eyebrows to Eugene Levy, perhaps best known as the dad in the American Pie movies series.

Can Valentine stocks pay off ahead of Feb. 14?

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com.

Q: Can Valentine stocks pay off ahead of Feb. 14?

A: Professing one's love on Feb. 14 has been a time-honored tradition since the Middle Ages. But some investors might say, forget the mushy stuff, can I profit from this day?

There's no question Valentine's Day has increasingly become a time to buy cards, gifts and flowers for one's beloved. As long ago as the 1700's in Europe, the holiday was already a way to use one's wallet to display affection.

But things have only accelerated the in modern era as companies are quick to produce Valentine's Day themed goods. For some companies, especially some makers of chocolates and providers of flowers, Valentine's Day is their make-or-break season.

Profiting from Valentine's Day, for investors, isn't quite as easy. Many of the giants in the industry are privately held, and cannot be invested in. Kansas City, Mo, is home to two of the kings of Valentine's Day: Card seller Hallmark and boxed candy maker Russell Stover Candies. Both are private and cannot be invested in. American Greetings was the largest publicly traded greeting card company until 2013, the year it decided to go private.

TRACK YOUR STOCKS: Get real-time quotes with our free Portfolio Tracker

There are some options, though. Hershey, the largest U.S. maker of candy, is public and trades by the symbol HSY. And then there's the recently spun-off flower delivery service, FTD. It trades by the symbol FTD. Most of the large diversified food companies, too, make Valentine themed candies. And don't forget L Brands, the company that owns Victoria's Secret.

There's also the matter of timing, which complicates things even more. Shares of Hershey actually fell 1.2%in the five days after Valentine's Day last year. Investors anticipate the February bump in business at the Valentine's-related companies and price the stocks! accordingly.

So it seems that Valentine's Day isn't just a bust for Charlie Brown, but for investors, too.

Tuesday’s Dividend Changes: 8 Companies Raise Their Payouts (CCE, SEP, SU, More)

Markets saw a nice rebound today after Monday’s nasty sell-off, allowing stocks to get some much-needed relief. On top of a prosperous day on the Street, a total of eight companies announced raises to their dividend payouts.

AGL Resources, Inc. Raises Dividend 4.3%

AGL Resources, Inc. (GAS) raised its quarterly dividend from $0.47 to $0.49 per share. The new dividend will be paid on 3/1/2014 to shareholders on record as of 2/14/2014. The stock will go ex-dividend on 2/12/2014.

Coca-Cola Enterprises Raises Dividend 25%

Coca-Cola Enterprises (CCE

Week's Winners & Losers: Walmart's Donkey Trouble; Disney Works More Magic

Alamy Companies can make brilliant moves, but there are also times when things don't work out quite as planned. From another cheap swipe at the country's second-largest discounter to a timely analyst upgrade on the world's leading family entertainment provider, here's a rundown of the week's best and worst in the business world. Walmart (WMT) -- Loser A recall of donkey meat in China's Walmart stores may seem like an absurd story, but the real hook to the story is that the recall was done because fox DNA was found in the meat. Donkey is a delicacy in China, and to maintain its status as the world's largest retailer, Walmart has to cater to local tastes. The recall may be making news closer to home given the oddity of fox meat being passed off as donkey meat by a Walmart supplier in China, but it's hurting the retailer's reputation in the world's most populous nation. Disney (DIS) -- Winner At least one analyst is feeling more upbeat about the family entertainment giant's prospects. Guggenheim's Michael Morris upgraded his rating on Disney from neutral to buy -- raising his price target from $77 to $87 -- on better than expected box office results for "Frozen" and "Thor 2." He's also encouraged by how Disney's theme parks are faring in this improving economy -- visitors are flocking to them, as anyone who arrived at Florida's Magic Kingdom on New Year's Eve to find that it was turning guests away because it was operating at capacity could attest. And you do know that Disney's new "Star Wars" movie is now slated to come out next year, right? The mouse just keeps getting richer. Target (TGT) -- Loser This just hasn't been the holiday shopping season Target was aiming for. The chain has already lost the trust of shoppers with the data breach that potentially exposed debit and credit card information on 40 million transactions during several weeks last month. Now even the store's own plastic is suspect. The discount department store chain revealed on Tuesday that some gift cards sold during the holidays were not property activated. Target claims that the issue impacts less than 0.1 percent of the number of cards sold, but that's still one in a thousand shoppers who will be embarrassed when they attempt to use their cards. Target's doing the right thing. It will honor the cards that weren't activated. Customers can also call the number on the back of the cards to verify that they have the right amount on them. Wall Street -- Winner The market itself was a big winner in 2013. The S&P 500 closed out the trading year with a 29 percent gain, making this the best return since 1997. The strongest year on this side of the millennium was a refreshing surprise, especially when so many naysayers were bracing for the worst when 2013 began. Fears of rising interest rates and the end of a payroll tax break that had returned 2 percent of paychecks to earners in 2011 and 2012 threatened to derail the market's chances for a buoyant 2013. However, anyone following the market for awhile knows that it pays to be a contrarian. All of those pundits figuring that global stock markets would be challenged when the year began merely provided a bigger pool of skeptics to be won over when consumer spending and home prices kept moving higher despite the initial headwinds. Netflix (NFLX) -- Loser Netflix bounced back in 2013, and its stock nearly quadrupled, but it's making a mistake by offering a cheaper monthly subscription plan to some new users. Reports indicate that the leading video service is testing out a plan that will set video buffs back just $6.99 a month, a buck less than Netflix's popular streaming solution. The catch to the cheaper plan is that is only streams in standard definition and that it can only be seen on one screen at a time. The traditional $7.99 a plan includes high-def videos when feasible and it can be viewed by two family members simultaneously. This test might sound like a reasonable idea if you're a frugal cord-cutter, but investors don't want to see Netflix making less money per account. Also, it sends the wrong message if Netflix is testing lower pricing tiers at a time when its flagship service seems to be doing just fine.

Confident investors push stocks to record levels

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U.S. Stocks Rise to Records as GDP Growth Tops Estimates

The Standard & Poor's 500 Index has capped its biggest weekly gain since October, as data showing faster-than-estimated growth boosted confidence in the world's largest economy.

The S&P 500 added 0.5% to a record 1,818.32 Friday. The Dow Jones Industrial Average rose 42.06 points, or 0.3%, to 16,221.14, also an all-time high. About 9.2 billion shares changed hands on U.S. changes in the busiest trading since June as futures and options contracts expired today in a process known as quadruple witching and the operator of the S&P 500 rebalanced the index in a quarterly move to adjust member weightings.

“The market is feeling somewhat confident,” said Robert Pavlik, chief market strategist in New York at Banyan Partners, which manages about $4.5 billion. “It's encouraging as an investor and consumer to see GDP get up to these levels. GDP reaching 4% makes you feel good about the economy and where we're headed.”

The S&P 500 rose 2.4% this week, halting a string of two weekly declines and erasing a loss for the month, after the Federal Reserve's decision to slow the pace of its stimulus boosted investor confidence that the recovery in the world's largest economy is on course. The Dow's weekly advance of 3% was its biggest since September.

GDP EXPANSION

Data Friday showed the rate of expansion in the third quarter was faster than previously estimated as consumers stepped up spending on services such as health care and companies invested more in software. Gross domestic product climbed at a 4.1% annualized rate, the strongest since the final three months of 2011 and up from a previous estimate of 3.6%, Commerce Department figures showed.

“This revised GDP number was really positive,” Colleen Supran, a principal at San Francisco-based Bingham, Osborn & Scarborough, which manages about $3 billion, said in a phone interview. “It helps complete the story on what the Fed did this week and that is, the Fed has some belief that the economy is getting close to being able to stand on its own.”

The S&P 500 has rallied 27% so far in 2013, on course for its best performance since 1997. Three rounds of central-bank bond purchases have helped propel the equity benchmark 169% higher from a 12-year low in 2009.

The Fed will probably reduce its bond purchases by $10 billion in each of its next seven meetings before ending the program in December 2014, according to the median forecast in a Bloomberg survey of 41 economists conducted on Dec. 19.

VOLATILITY GAUGE

The Chicago Board Options Exchange Volatility Index (VIX) dropped 2.5% Friday to 13.79. The gauge ! of S&P 500 options known as the VIX fell 13% this week.

Announced index changes, such as the addition of Facebook Inc.'s inclusion in the S&P 500, took effect after the markets closed.

Money managers needed to buy and sell about $13.8 billion of shares as they shuffled their funds to mimic changes in the S&P 500 quarterly rebalance, according to estimates from Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices in New York. He forecast utility companies will see the biggest increase in their representation while the weighting of consumer staples will drop the most.

Nine of the 10 S&P 500 main industries advanced. Utility and technology shares rose more than 0.8% to lead gains. Phone stocks fell 0.6% for the only decline.

(Bloomberg News) Like what you've read?

Funding Real Estate Development Isn't as Simple as You Think

Whenever you see a new project being built in your neighborhood, there is typically a single real estate entrepreneur (usually known as a developer) that is credited as the owner. The developer garners the majority of the public attention, and receives both the accolades and criticism that come with the project. What most people don't know is that this developer has, in fact, only invested a small fraction of the total money needed for the project.

Funding a Real Estate Deal: Debt and Equity

In almost all real estate deals, both debt and equity play enormous roles. Most projects require some level of traditional bank debt. Whether the project costs $1 million, $10 million, or $100 million, a bank is normally involved, providing 60%-80% of the total capital.

So for a $10 million property, a bank might lend $7 million (70%) of the capital, leaving $3 million of equity required. The bank will charge an annual interest rate on the loan they make but will not receive any actual ownership in the property.

So where does the $3 million of equity come from? The developer will then raise 80%-95% of the remaining capital from investors. So in the example above where the developer raised $7 million in debt, he might then raise $2.7 million (90%) of equity from investors and invest $300,000 (10%) himself.

Developer:   $300,000 (3%)
Investors:  $2,700,000 (27%)
Bank:         $7,000,000 (70%)
Total:      $10,000,000

While 3% may not sound like much, $300,000 is a fair amount of money for a single individual or small team to have available as cash. This becomes even truer when you realize that many real estate projects are much larger than $10 million and most real estate developers usually have several projects going at any one time. In short, it adds up.

If you are interested in more details, here is an example of real estate development financials for a property in Washington, DC.

These financial breakdowns also raise a question: if the real estate developer is only providing a fraction of the equity, who is investing the remaining 80%-90%?

Who Really Owns Local Real Estate?

The fact that developers have their names attached to projects has created a misconception that these developers own and control most local real estate. On the contrary, the vast majority of equity is coming from outside investors: high net worth individuals or large investment funds. This outside source of capital is in fact the major driver of how a project gets developed – ultimately these outside investors are the majority owner of the property.

In today's world, raising money from individuals is very inefficient and time-intensive and as a result, most developers choose to raise money from private equity funds.

When a private equity fund invests in a project, it typically holds a super-majority of the equity and therefore keeps the governance rights over major decisions and ultimately has the power. This can cause large problems for the developer if he does not stick closely to the agreed-upon business plan. When push comes to shove, the investment fund can even take over the property and kick out the developer. These realities have resulted in private equity funds becoming the primary driver of real estate development.

There are many consequences of this major corporate ownership, most notably that a fund's primary goal is to drive returns for their investors — not to focus on developing the right project for a neighborhood.

To learn more, check out the investments and developers on Fundrise.

If you're not investing in real estate...

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Legally-married same-sex couples get retirement boost from DOL

The Labor Department has released guidance on same-sex couples who are legally married, defining them as spouses — regardless of which state they live — in the context of retirement plans. The agency's ruling hews closely to the Internal Revenue Service's and Treasury Department's Ruling 2013-17, which expands “spouse” and “husband and wife” to include gay couples in the context of federal tax law.

Further, both the IRS/Treasury ruling and the DOL guidance recognize same-sex marriages based on where the couples were married, rather than the state in which they live.

“A rule for employee benefit plans based on state of domicile would raise significant challenges for employers that operate or have employees in more than one state or whose employees move to another state while entitled with benefits,” the Labor Department noted in its guidance.

In reality, had the agency decided to go with recognizing marriages based on where couples reside, the validity of spousal elections and consents on plans could change if the spouses were to move to a jurisdiction that didn't recognize their marriage. This would be an administrative nightmare for record keepers, as they'd have to keep track of changes in residence and tweak their benefits accordingly.

Such was the concern brought by the SPARK Institute Inc., an advocacy group for retirement plan record keepers and service providers.

Furthermore, same sex-spouses could lose their rights if they went to a state that didn't recognize their marriage.

The Labor Department's guidance not only covers the entire U.S. and Puerto Rico, but all of the U.S. territories, including the Virgin Islands, American Samoa, Guam and the Northern Mariana Islands.

Apple Is Tops in Customer Satisfaction: Survey

NEW YORK (TheStreet) -- Consumers aren't so thrilled with their computer purchases lately, according to a new report by the American Consumer Satisfaction Index.

Overall, PC makers dropped 1.3% from last year, coming in with a consumer satisfaction score of 79 -- a C-plus in some grading systems.

But Apple (AAPL) came out at the top of the group and managed a one-point increase from last year. Toshiba and Hewlett Packard (HPQ) also improved by one point.

Dell (DELL) and Acer got dinged in their annual scores, however. The 79 rating for the group isn't so bad, said David VanAmburg, ACSI's managing director. ACSI, which offers a ratings benchmark for various consumer products, grades on a curve. "It doesn't mean manufacturers are making shoddy products," VanAmburg said. "Not at all. It means that when you've created something pretty neat, the next time around, (consumers) are going to expect something better. It's a trend in all high-tech industries, like TVs, smartphones, you name it. There are constantly rising expectations." Top-satisfying brands in some industries tend to score in the mid 80s, as PepsiCo (PEP) does. Very few reach the 90s. Heinz received a 91 in 2005, and Ford's (F) Lincoln brand hit 90 last year. The lowest, the cable industry, hovers in the 60s. Around 2,700 consumers were surveyed by the ACSI this spring about recent computer purchases and asked to rate a variety of factors on a scale of 1 to 100. Visual appeal scored the highest, at 86. Call center satisfaction was the lowest, at 70. Apple, which consumers ranked as the most satisfying computer company, managed an 87. Second-place HP came in at 80. Dell dropped 2 points to 79, Toshiba increased a point to 78 and Acer, which owns brands like Gateway, fell 2 points to 77. Other computer and device brands, including Lenovo, Amazon's (AMZN) Kindle, Samsung and ASUS, were lumped into the "All Others" group, which fell 4 points from last year to 76. The falling numbers likely reflect a mediocre welcome to the past year's big computing events. Consumers gave a lackluster reception to Microsoft's (MSFT) new Windows 8 operating system.

And although many reviewers loved the high-resolution screen on the iPad 3 released last fall, they recommended that consumers skip an upgrade if they already owned an iPad 2.

Intel (INTC) introduced its faster fourth-generation chip, but that didn't start showing up in PCs until June, a few months after consumers were surveyed by ACSI.

"Generally, the lesson for manufacturers is to understand what consumers want and be aware that consumers have extremely high expectations of their products," VanAmburg said. "The bar is set high. It's more like they are victims to their own success and have to continuously innovate to be out in front of what consumers want next."

Apple has scored relatively well in the annual ACSI survey over the past decade, saying mostly in the 80s, although it did dip below 80 in 2007, the year Apple launched the first iPhone. In 2010, the year Apple released the first iPad, the company scored an 86. (Product introductions were likely revealed after consumers were surveyed each year.) The company's high score speaks to its continued rise in computing. Apple used to have a tiny PC market share, but in the U.S. it now has an 11.5% market share, ranking third behind HP and Dell, according to market research firm IDC. ACSI also included tablets in the survey, which likely helped Apple score high and help the overall PC device category to remain in the high 70s. Tablets are expected to surpass the sales of PCs by the end of 2015, according to IDC. The four-year growth rate of tablet sales is forecast to hit 71% growth by 2017, compared to 8.7% for laptops and a decline of 8.4% for desktops, says IDC. Another consumer-ratings company, J.D. Power and Associates, surveyed consumers for satisfaction on tablets earlier this year. It too put Apple at the top, with 824 points out of 1,000. Amazon Kindle came in second, at 829. Interestingly, the J.D. Power study discovered that satisfaction rates increased if the consumer shared the tablet. "When a tablet is only used by one person, overall satisfaction is 824 (on a 1,000-point scale), 28 points lower than when a tablet is shared by four or more persons (852)," J.D. Power said.

The ACSI says that higher satisfaction rates with a brand should help a shopper's buying decision. But the statistics aren't so straightforward in helping make a computer-buying decision. Although Apple ranks the highest, consumers who have been using Windows PCs still must decide whether it's worth switching to a completely new operating system, VanAmburg said.

But when it comes to comparing Windows PC makers, he added, "Certainly when comparing Dell to an Acer, those are the kinds of comparisons consumers can make (based on the ACSI report)."

Email Tamara Chuang at news@tamara.net

Follow @Gadgetress This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Tamara Chuang is an outside contributor to TheStreet. Her opinions are her own.

Twitter: Yes or No at the New, Higher, IPO Price?

Clearly the hype and demand surrounding Twitter’s IPO this week is building. The company upped its price range to $23-$25 a share from $17-$20 Monday, and there are reports out that it priced the IPO above the increased range.

That's still unlikely to price many investors out.

The folks handling Twitter’s IPO have learned a thing or two from Facebook's(FB) notorious debut last year.

Twitter is looking to raise much less than Facebook did, offering fewer shares, and pricing them lower. Forget for a moment that Facebook was a bigger company, and profitable, at the time of its IPO. Facebook raised the number of shares it was selling, the number of shares insiders would sell and the pricing in the days before it began trading.

Facebook raised $16 billion. But the stock priced plunged and struggled for much of the next 12 months.

Twitter’s is selling 70 million shares, priced between $23-$25. If all goes as planned, they’ll raise around $2 billion, the smaller offering will be met with overwhelming demand, and shares will jump. Given the results of some other IPOs this year - Container Store Group, for example, doubled on its first day of trading on Friday – Twitter shares could rise rapidly.

“The obvious question is should you still participate?” analyst Richard Greenfield of BTIG wrote on Monday. At the higher price range, shares will equal nine times the firm’s 2015 revenue estimate and 5.9 times its 2016 revenue estimate. Another ratio, EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation and amortization) now sits at 52 times 2015 revenue estimate and 24 times 2016.

“We would participate within the $23-$25 range,” Mr. Greenfield writes. But the firm’s view was that Twitter could go to $30 “over the next year.” That level might come much sooner than people think.

One aspect of the company that Mr. Greenfield likes is that Twitter’s monetization efforts are still at an early stage. “Advertising on Twitter only began in the middle of 2010,” he wrote, “not to mention, mobile advertising did not even really exist before 2010.” The company has a light “ad load” (roughly 1% of the tweets on mobile devices are ads), which gives it room to increase ads. “We expect a lot of growth ahead in advertising.”

Still, Twitter is operating from a smaller base than Facebook, and is likely to continue operating from a smaller base. “We believe investors should assume that Twitter’s penetration and user base will be materially smaller than Facebook’s,” Sanford Bernstein wrote. The firm sees Twitter with about 100 million active users monthly in the U.S., and 575 million overseas, by 2018. Facebook has more than 1 billion monthly active users.

The bottom line that investors can’t completely dispense with, though, is this: Twitter is not profitable, and might not turn a profit for several years. While it’s unlikely that another competitor could completely supplant Twitter, the way Facebook did to MySpace, for example, a new competitor could come along and siphon off some of the audience and eyeballs.

Heard of Knotch, for example? No? Well, that won’t be the last one you hear about. Twitter may be “sticky,” as the cool kids say, but that doesn’t mean it won’t face rivals, and that will add another pressure to its bottom line.

The hashtag #twitterprofits is going to be a lonely space for the time being.

At $30 and above, Barron’s Andrew Bary wrote, Twitter’s valuation becomes harder to justify. “Barron’s tends to be cautious on richly valued stocks,” he wrote, “but Twitter would look appealing at an IPO price of $20. Pay much more than that, however, and you might be tweeting your regrets later.”

Investing Sabermetrics: A Formula for Financials and Holding Companies

"There's a way to do it better — find it." — Thomas Edison

Open any Berkshire Hathaway (BRK.A)(BRK.B) annual letter and the first thing you see will be a listing of the yearly gains in the book value per share of BRK.A from 1965 to the present year. At the bottom of the year-by-year synopsis lies the compounded annual growth rate (CAGR) of those gains in equity. Later in the article I will show the mathematical formula for calculating those compound gains.

Buffett believes that gains in book value per share are a better reflection of the growth in value of BRK.A as opposed to gains in the price per share of the company. Buffett uses book value as opposed to price per share since he feels that the market does not always assign a fair valuation to his company. He then compares changes in the equity of BRK.A to changes in the value of the S&P index while adding back in dividends.

This is Buffett's acid test for evaluating his efficiency in allocating capital at Berkshire Hathaway. After all, if the gains in the equity of his company were not significantly superior to gains in the S&P plus the dividends which they accrue, why would any sane individual choose to invest in BRK.A instead of an S&P index fund?

Rest assured that Buffett has passed the acid test with flying colors. Since 1965 Berkshire's book value has compounded at an annual rate of 19.8%, while the S&P with dividends included has compounded at an annual rate of only 9.2%. That means that Buffett has outperformed the S&P at a compounded rate of 10.6% since the inception of the current Berkshire Hathaway holding company in 1965. That translates into a gain in excess of 500,000% for the original stockholders. Alas, if only I had invested a double sawbuck of my grade school allowance in 1965.

All that said, today's article is not about singing the praises of "The Oracle." Rather, it is about introducing a better investing sabermetric in evaluating the efficiency of the management of a company. For reasons! which I discuss later, today's analysis is best suited for evaluating financial stocks and holding companies.

The thesis of today's article is that investors should focus on businesses which have a 10-year annual compounded growth rate of book value per share in excess of 15 percent. Further, investors should only purchase these companies when they are trading at a 25 percent discount to their 10-year cyclically- adjusted price to book value ratio.

The idea is simple: Buy stocks with high quality management when they are inexpensive in relative terms.

Incidentally, GuruFocus has all the information you need to access this information — and you thought you knew everything about GuruFocus. More on that later.

Book Value as the Key Metric for Financial Stocks and Holding Companies

Traditional earnings multiples do not supply investors with relevant evaluation tools in the case of many financial stocks or holding companies. When looking at holding companies the reason is clear. Take the example of BRK.A: The only earnings which are derived from their extensive investment portfolio are the dividends or interest payments they receive from the various securities.

The reason is not so clear to investors when evaluating financial companies; however, asset-based evaluation metrics are generally superior to earning-based metrics in evaluating such companies for the following reason:

Many financial companies have extensive investment portfolios which only record earnings gains on dividends, interest payments or capital gains if a security is sold. Therefore, the value of the these investment portfolios, particularly the unleveraged portions of the investments, is not reflected by the earnings power of the business. For my purposes, the unleveraged portion is defined as total invested assets less the float (prepaid premiums and other money held in investment accounts that does not belong to the company).

Allow me to illustrate the point since I am sure th! at many r! eaders are confused by the previous paragraph. Let's compare two mythical insurance companies. Assume that both companies have earned $1 in investment earnings for the last five years. Suppose Company A has $50 million in equity on their balance sheet whereas Company B has equity of $100 million.

Let's further assume that both companies possess equal float which is invested in government agencies and treasuries which supply exactly the same interest yield for the two stocks. However, Company B is also an unleveraged equity portfolio which is valued at $50 million. For the sake of simplicity, say it contains stocks that pay no dividends. Company A has no unleveraged capital to utilize for investment purposes; it merely invests the amount of its float in fixed-income investments.

According to an earnings-based metric such as a price to earnings ratio, the companies are equivalent in value in terms of investment earnings (of course their operating earnings are a different matter). However, what if Company B decides to sell its equity holdings tomorrow and distribute the after-tax proceeds to its shareholders in the form of a special dividend? In such cases, the intrinsic value of Company B is much better reflected by its price to book ratio rather than its price to earnings ratio.

To reiterate, price to book ratios offer a better measurement of the value of a company's investment holdings, particularly the unleveraged portion of a financial company's investments. Thus, investors are generally better served by estimating a financial company's intrinsic value by using asset-based metrics rather than earnings-based metrics.

Gains in Equity per Share as the Key Metric in Financial Stocks and Holding Companies

I will now return to our previous discussion involving Company B and its unleveraged equity portfolio. As we discussed earlier, Company B is definitely cheaper than Company A in terms of its price to book ratio. But is it necessarily a better investment merely because! it is ch! eaper? The answer lies in evaluating the long-term CAGR of the book value per share of Company B vs. Company A.

Let's journey back ten years and examine the two companies. Ten years ago, Company A had $20 million in equity and Company B had had $40 million, so both companies have grown their equity by 150 percent. Therefore, are they roughly equivalent? Hardly. Further examination reveals that Company B had $40 million shares outstanding ten years ago. Now they have 100 million shares outstanding. The extra shares were created by a secondary offering and stock options which were granted to management.

On the other hand, Company A still has the same amount of shares outstanding as they did ten years ago — 20 million. So the book value per share of Company A has increased from $1 per share to $2.50 per share in the past ten years. For Company B, the book value per share has remained at a $1 per share, although their equity has risen 150 percent. Furthermore, the equity portfolio still has the same market value as it did ten years prior. Additionally, the combined ratio for Company B is inferior to that of Company A, indicating the company writes inferior business. All these factors have played a part in the divergence of the growth of equity per share between the two companies.

In this illustration, the management of Company A has clearly performed in a superior manner when compared to the management of Company B. Their superiority is reflected in the equity growth per share in the business. It would seem that the discount to book that the market is offering on Company B is really no bargain after all.

Gains in equity per share reflect the effectiveness of management decisions in terms of capital allocation as well as revealing the operating efficiencies of a business. For instance, if stock options are issued and exercised they show up in the figure. The same is true for all stock buy-backs and secondary offerings as well as increases or decreases in the retained earnings ! of a comp! any.

So long as the management exercises veracity in their accounting practices, evaluating the CAGR of equity per share is an excellent measurement of business efficiency and the effectiveness of management.

Calculating CAGR

As promised earlier, I will now unveil the mathematical formula used to calculate the compound annual growth rate (CAGR). The following example calculates the CAGR of the S&P 500 from 1986 through 2005, brought to you courtesy of allfinancialmatters.com.

CAGR = [(Ending Value ÷ Beginning Value)1/n] – 1

Where "n" is the number of time periods (20 years for this example)

Substituting the numbers from the example, the equation looks like this:

CAGR = [($95,421.19 ÷ $10,000)1/20] – 1

CAGR = [9.542119.05] – 1

CAGR = 1.119392 – 1

CAGR = .119392 or 11.94%

[ Enlarge Image ]

Finding CAGR of Book Value and Tangible Book Value per Share on GuruFocus

GuruFocus provides CAGR per share in its 10-year financial section. Just go to the 10-year financials section and click on book value per share and you will be transported to a page that shows the following information:

Everest Re Ltd Annual Data

	Dec02	Dec03	Dec04	Dec05	Dec06	Dec07	Dec08	Dec09	Dec10	Dec11
Total Equity	2,368.6	3,164.9	3,712.5	4,139.7	5,107.7	5,684.8	4,960.4	6,101.7	6,283.5	6,071.4
Preferred Stock	--	--	--	--	--	--	--	--	--	--
Total Shares Outstanding	50.9	55.7	56.1	61.9	65.0	62.9	61.4	60.4	55.0	53.7
Book Value per Share	46.5	56.9	66.2	66.9	78.6	90.4	80.8	101.1	114.3	113.0

The yearly price to book value range for a stock can also be accessed in the 10-year financials section. The price of the stock appears directly under Book Value Per Share listed as Month End Stock Price. One can easily calculate the average price to 10-year book ratio of a stock by performing the simple mathematics.

A Formula for Success in Purchasing Financials and Holding Companies

Our goal is to purchase outstanding companies at discounted prices based on their 10-year CAGR of book value per share and their 10-year average price to book multiple. It is imperative that we add back dividends into the formula since they represent equity which was distributed to shareholders.

We are looking for financial stocks or holding companies which have grown the highest CAGR of BV per share, including dividends, trading at a minimum of a 25% discount to their 10-year average price to book multiple.

Thus our revised formula for CAGR of BV now reads as follows:

CAGR of BV per share = [(Ending Value + dividends ÷ Beginning Value)1/n] – 1

Where

CAGR of BV per share is > 15%

And

The stock price is< .75 its 10-year average price to book ratio

If investors prefer to eliminate intangibles from the equation they should feel free to do so. I have decided to include goodwill and other intangible assets in my price to book ratios due to accounting changes enacted in 2002.

Goodwill is now impaired rather than amortized; therefore, theoretically, it will disappear from the balance sheet if it contains no real economic value. That said, I ! fully und! erstand the subjective nature of goodwill impairments. Fortunately, many financial stocks show little in the way of goodwill and other intangible assets on their balance sheets, unless they engage in serial acquisitions. In the case of holding companies that is another story.

RE a Perfect Example of Value Uncovered by the Formula

Last August, I purchased Everest Re (RE) when it fell within the value parameters outlined in today's article. I wrote an article about the stock titled: Everest Re: Low Risk High Reward http://www.gurufocus.com/news/143388/everest-re-low-risk-high-reward

At that time RE had generated 10-year CAGR of BV per share with dividends included was 26.8%. The stock qualified under the investing sabermetric since it was trading at approximately .7x its book value in August with a 10-year average price to book value of 1.115; therefore it was trading at approximately 63% of its mean price to book ratio.

Currently RE has reached a 52-week high and is trading at about .89x book value. It would qualify as a buy under the investing sabermetric if the price the price dropped below $89 per share using the latest financials to determine its current book value per share.

Summary

1) Warren Buffett uses CAGR of book value to track the progress of Berkshire Hathaway and his management efficiency.

2) A similar method which tracks CAGR of book value plus dividends can be use to identify high quality financial stocks and holding companies.

3) It is imperative that investors purchase these high quality companies at favorable prices; I suggest buying the companies at less than 75% of their ten-year average price to book ratio.

4) The formula is as follows:

CAGR of BV per share = [(Ending Value + dividends ÷ Beginning Value)1/n] – 1

Where

CAGR of BV per share is > 15%

And

The stock price is < .75 its 10-year average price to book ratio

5) The formula is best suited in evaluating financial stocks! and hold! ing companies.

Absent Higher Rates, Comerica Has Probably Gone Far Enough

Comerica (NYSE:CMA) is a curious bank in multiple respects. Although it has a sizable commercial loan book, the net interest margin isn't all that impressive. On the other hand, this looks like one of the most asset-sensitive of the larger banks, and income could accelerate relatively quickly if rates head meaningfully higher. All things considered, while I think Comerica's market position in Texas and California is worth more than average, I think the shares don't offer all that much promise unless you have a firm belief that the company can generate significantly better long-term returns on equity than the sell-side presently expects.

Another Familiar Pattern In Second Quarter Earnings
Add Comerica to the list of banks reporting okay net interest income and beating quarterly estimates on the basis of fee income and lower credit costs. Commerce Bancshares (Nasdaq:CBSH) actually reported the opposite, but other banks like Bank of the Ozarks (Nasdaq:OZRK), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) have been following this basic pattern for the second quarter.

SEE: Citigroup Continues The Theme Of Decent Big Bank Earnings

Operating revenue declined 2% from the year-ago level, but rose about 1% sequentially. Net interest income declined slightly on a sequential basis as the net interest margin ticked lower (down 5bp) on lower purchase accretion. Again, that slim sequential decline was consistent with Wells Fargo and Citigroup's experiences. Fee income rose 5% sequentially and expenses were flat, leading to a 4% sequential improvement in adjusted pre-provision earnings.

Growth Is Still Lacking
Comerica saw just 1% sequential loan growth, better than Wells Fargo and Citigroup, but weaker than Commerce (which also focuses on commercial lending and is looking to grow its loan book in Texas). Commercial lending was up about 2% over all, though commercial real estate lending was softer. Deposits declined 2% (on an end-of-period basis), marking the second straight sequential decline. With Comercia's capital position on the weaker side of "okay" (at least relative to peers), I'm starting to wonder if this softness in deposits will constrain lending capacity at some point or force the company to turn to more expensive wholesale/borrowed sources of funds.

Quality Improving, But Capital May Be A Little Thin
Comerica reported some solid improvements in multiple credit metrics. Non-performing loans declined 38% from the year-ago level and 9% from the first quarter, and the non-performing asset ratio declined again (from 1.78%/1.18% in the prior year/quarter to 1.05%) - far below the level of Citi and Wells, but more than double the rate of Commerce. The net charge-off ratio dropped again (from 0.42%/0.22% to 0.15%) and is very low.

The reserves are interesting, though. While the decline in non-performing loans has lifted the reserve/NPL percentage to almost 137% (from 93% a year ago), the reserves-to-loans ratio of 1.35% looks a little thin to me, particularly as the the Tier 1 common ratio of 10.4% isn't exactly a peer-leading number. That said, Comerica did fine in the Fed's stress test earlier this year and has the all-clear to return capital to shareholders, which is a meaningful detail in a growth-poor banking industry.

SEE: Foreclosure Activity Tumbles In 1H

The Bottom Line
With close to 10% of Comerica's loan book going to car dealers, Comerica should be taking advantage of a pretty healthy car market in the U.S. Likewise, the company's position in the energy sector ought to be a positive assuming the North American energy market has indeed seen its trough. And as I mentioned earlier, this is a lender with above-average leverage to higher rates, as about 80% of the portfolio is variable rate (with about 70% indexed to 30-day LIBOR).

There aren't too many cheap bank stocks left, though, and Comerica isn't one of them. A 10% estimate for long-term ROE suggests a fair value today in the low-to-mid $30s, and you have to go up to about 13% to get a target ahead of today's price. While Comerica's geographically concentrated business may give it an above-average chance of returning to the higher ROEs of yesteryear, I still think that's a pretty bold assumption to use today. On the other hand, the company's return on tangible assets suggests a fair price/tangible book value multiple of around 1.4x, which implies a fair value of about $47. So not unlike Citi, there seems to be a dichotomy in how the market is viewing/valuing the long-term prospects for some of these banks.

While I think Comerica is a relatively good way to play higher rates, I think at least some of that expectation is already built into the stock price today. With mediocre loan growth and still above-average expenses, I'll continue to be on the sidelines with this stock.