Matthews Japan Fund’s Top New Stock Buys of Q3

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Royce Funds Commentary – ‘Trick or Treat? Slow Global Growth Hits Cyclical Sectors Hardest’

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If You Are Holding AT&T Just For The Dividend, Sell Now

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Coach’s Profit Takes a 45% Hit

Coach’s Profit Takes a 45% Hit After Losing Market Share

By Income Research Team


A new line of bags found its way into Coach (COH) stores last month (thanks to its new creative director). But it wasn’t soon enough…

Coach’s first-quarter sales took a hit. In fact, its profit fell by nearly half as North American comparable sales fell for the sixth consecutive quarter.

As devastating as this may sound, the profit actually beat analysts’ forecasts…

Meanwhile, international sales were strong, boasting double-digit sales growth in Europe. China’s sales grew by 10% (half the pace of the prior quarter). In spite of that small silver lining, though, overseas sales were no match for the weakness in North America (which makes up two-thirds of revenue).

Trying to recoup, Coach plans to close some of its stores and place a little more focus on revamping its merchandise.

Fashion Wars

While Coach used to completely dominate the (affordable) luxury market for handbags, that’s just not the case anymore.

Daniela Nedialkova, Atlantic Equities analyst, said, “We expect the first quarter to be the low point for comp and gross margin for the year, though pressure will persist.”

The handbag maker’s shares (which fell by nearly 36% this year), dropped even further in early trading.

With rivals like Michael Kors (KORS), Kate Spade (KATE), Tory Burch, and Marc Jacobs, Coach has simply lost market share. In fact, over the past two years, its handbag share fell all the way down to a measly 18%.

One factor that differentiates Coach from its other main competitors is that it boasts a dividend yield of 3.93%, while all others mentioned above don’t pay out dividends.

But given Coach’s recent mishaps, it’s hard to say whether this dividend will last, or if it’ll dwindle away along with the company’s profits.

Income Research Team

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Verizon (VZ): Another High Yield Telecom for Current Income

Verizon Communications Inc. (VZ) provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. This dividend achiever has paid dividends since 1984 and increased them for 10 years in a row. The most recent dividend increase was in September 2013, when the Board of Directors approved a 2.90% increase in the quarterly…

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Turn Out the Lights for CFLs

Cree, Inc. Releasing New Generation of LED Bulbs

By Guest Contributor

If you’ve been shopping for light bulbs lately, you know that the old-fashioned tungsten light bulb is a thing of the past.

In 2007, Congress, along with President Bush, effectively banned tungsten light bulbs by passing a law that required energy efficiency far in excess of what the old tungstens could deliver.

Unfortunately, the initial replacement – compact fluorescents – cast an ugly shade of light, flickered, and faded over time. On top of that, they contained mercury, a dangerous heavy metal. The EPA’s instructions for cleaning up a broken CFL bulb run to almost a thousand words!

But the government loved them, so for a time, we were stuck with them.

Today, though, another alternative – called light-emitting Diodes (LEDs) – is set to become the king of light bulbs.

A Brilliant Opportunity

Cree, Inc. (CREE), headquartered in North Carolina, is the leading company in the LED business. Cree has spent years making LEDs for specialty applications such as flashlights, outdoor lighting, and floodlights. And it’s successfully competed against lower-cost Chinese competitors by being a technology leader.

CREE’s stock is volatile, as we’ve seen over the past few months when the price took a nearly 50% dive. But the company has a good balance sheet, is solidly profitable, and is well managed.

Best of all, Cree just announced the next-generation LED light bulb, something it hinted at on an earnings conference call last week. The new bulb is at a lower price point than the old bulb, looks more like a regular bulb, creates better light, is fully dimmable, and uses only 11 watts to create the same light as the old 60-watt bulbs.

This light is so new, in fact, that it’s not even on shelves yet. Not to worry, though. Cree has an exclusive deal with Home Depot (HD), and the bulbs should be on the shelves next week.

For now, you should do two things.

First, you should pre-order one of these bulbs on Home Depot’s website. I’ve got the prior generation bulbs, and I’m very happy with them. The new ones should be even better, and at $ 7.97, can save you $ 100 or more over the life of the bulb. I’m confident that after you install one of these, you’ll replace every light in your house.

Secondly, you should buy some CREE stock. It’s up almost 15% from recent lows on the announcement of the new bulbs, but is still well off the levels where it traded before the early-October stock market swoon (and the company’s earnings disappointment).

These lights are going to be a big hit, and you can expect more from this technology leader in the future, like brighter bulbs at the low price point.

Bottom line: Save $ 100 per light in your house, and make even more by investing in the company itself. What could be brighter than that?

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American Realty Capital Properties, Inc. – Shareholder/Analyst Call

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Key Ingredients for Successful Dividend Investing

There are four key attributes that need to be considered, in order to be successful at dividend investing. These ingredients include focusing on quality, earnings growth, entry price and sustainable distributions. In this article, I would focus in more detail behind each of these four items. Quality I believe in purchasing quality dividend paying companies. This means that I try to focus…

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4 Keys to the Heart of Dividend Investing

There are four keys that lead to successful dividend investing: quality, earnings growth, entry price and sustainable distributions.

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Brazil Election Sends Stocks Plummeting

Petrobras Stock Price Down: Is this a Good Buy?

By Richard Robinson, Ph.D., Financial Analyst

In Brazil, incumbent President Dilma Rousseff – who faced a tight runoff against pro-business candidate Aécio Neves – won last Sunday’s election.

Brazilian stocks and ETFs responded by suddenly moving lower in Monday’s trading session.

You see, investors are disappointed because Rousseff’s re-election effectively dashed any hopes of a meaningful reform in Brazil’s economy.

Yet, at the same time, this may be an excellent opportunity for investors to pick up some dirt-cheap stocks…

Take Petrobras (PBR), the Brazilian oil and gas company, for example…

In Monday’s stock session, PBR traded down a whopping 13.6% to close at $ 11.16, with more than 164 million shares trading hands. That represents a four-fold increase in volume compared to the company’s 90-day average of 38 million shares.

As the chart below illustrates, the company currently trades just a dollar above its 52-week low of $ 10.20 – a decline of more than 18.65% YTD.

Petrobras, Year-to-Date

Petrobras: Value Play… or Value Trap?

From a purely fundamental analysis, Petrobras represents an interesting play at this price level.

The company is currently trading with a trailing P/E of 9.14, which compares to its industry average of 11.1 and an S&P 500 average P/E of 18.4.

Petrobras’ forward P/E represents an even more compelling value at its current reading of 8.3.

The company’s P/B is currently 0.5, which represents a 61.5% discount to the industry average of 1.3, and a prodigious discount to the S&P 500 average of 2.6.

An examination of the company’s quick and current ratios shows that Petrobras is in a stronger financial position than many of its competitors. PBR’s quick ratio reads 1.36, while its current ratio is 1.91.

Lastly, the company’s debt-to-equity ratio of 0.81 is relatively low, although it remains higher than its industry peers.

Government Incompetence

While Petrobras has all the features of a value play, there’s trouble brewing…

The company’s Q2 2014 filings show PBR reported revenue of $ 36.9 billion, a 3.7% increase over the same quarter a year earlier. This is a slight premium to the industry average of 3.2%, but the company’s net income really suffered…

PBR’s net income decreased by 25.7% compared to the same quarter a year ago, falling from $ 2.9 billion to $ 2.2 billion.

And with Sunday’s election results, investors can expect this trend to continue.

You see, the Brazilian government looks at Petrobras as a cash cow and a means to achieve political ends.

Thus, while the detrimental government policies will accomplish no real long-term benefits for Brazilians, you can count on the government to ultimately choke the company until it nears bankruptcy.

That’s because almost half of Petrobras’ sales originate in Brazil at below-market prices, a feeble effort by the government to control inflation. In other words, the Brazilian government is forcing Petrobras to subsidize its own refined product sales.

It’s not surprising, then, that Petrobras reported a downstream unit loss of $ 2.6 billion in the last quarter, compared to a $ 1.79-billion loss reported in the same period the previous year – a number sure to widen with significantly lower market prices for oil.

Ultimately, this is the reason Petrobras isn’t a compelling value play… yet. But prudent investors should still keep PBR on their radar. If the company can free itself of government malfeasance, the stock will soar!

Until then, however, its wings are clipped.

Richard Robinson

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By Richard Robinson


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