As the auto industry has been booming, some investors have been disappointed that General Motors (GM) has not been making as strong of gains as other companies. Its new money-back, no-haggle-price promotion is an attempt to attract more customers and gain market share, but in comparison to promotions involving Chrysler, Nissan, Honda (HMC), Toyota (TM), Ford (F) and even eBay (EBAY), this does not seem like such a big deal. I think the General Motors promotion has received too much hype and will ultimately have no significant impact on the company. Due to its low price, I suggest watching for other developments, but I would not recommend this stock quite yet.

General Motors is currently trading around $21, which is at the low end of its 52-week range of $19 to $31.30. It has a market cap of $31.11 billion and a trailing P/E of 5.98. GM’s revenue and gross profit numbers are up from this point last year, though perhaps not as much as investors would like.

Other companies have been passing by General Motors this year, as auto sales grew by 15% industry-wide, but sales increased by just over 6% for General Motors’ Chevrolet brand. As a result, General Motors is offering a 60-day money-back promotion, where customers will be able to return unwanted new Chevrolet, GMC, Buick, and Cadillac vehicles within 60 days of their purchase. The requirements are quite reasonable, furthermore, as the vehicle must be undamaged, it must have less than 4,000 miles, and the customer must be up to date on payments. To continue reading, click here.

One of the leading independent energy companies leading the way in the exploration and development of natural gas liquids (NGL) is Devon (DVN). While other energy companies are searching out alternative resources because of the downward pricing of natural gas, Devon is going for the liquid.

This is a smart move especially when analysts are expecting this company’s growth, due to NGL, to be close to 13% this year. Of course NGL is not Devon’s only energy resource to bring to market. The company is expecting growth of up to 24% from its oil plays. In the most recent quarter, the company reported record production of 694,000 barrels of oil equivalent (BOE) per day in the most recent quarter, up 10% from the first quarter of 2011. Devon is a company that I believe investors should not just keep a keen eye on, but own the company while watching its phenomenal growth.

Two of Devon’s competitors, Apache (APA) and Anadarko (APC) are in for a surprise when Devon’s plans finally begin to take hold. Lesser competitors such as Cabot Oil & Gas (COG), Comstock Resources (CRK), and Canadian Natural Resources (CNQ) will also need to be on their toes as Devon begins taking action on its lofty goals. The company has set a goal to spend $1 billion more than originally planned for oil exploration, or close to $6.5 billion, with expectations of increasing its oil and gas production by 6% to 8% on an annual basis over the next five years.To continue reading, click here.

Hewlett-Packard (HPQ) is a well-known brand in the technology industry. Over the years, the company has managed to build a strong reputation in the global market with a diverse portfolio of products and services. In this analysis, I will discuss some of the most recent developments that will affect the company’s competitive advantages. The most prominent among these developments are acquisitions and divestment plans that the business has announced recently, formation of new partnerships, launch of new innovative products and introduction of aggressive market expansion strategies.

Hewlett-Packard has always targeted a greater market share with its diversified portfolio of innovative products and services. It has recently launched the HP 3PAR, a program that allows clients to boost returns on investment in server utilization by effectively doubling the performance of physical server virtual machines. This innovative new technology has tremendous commercial applications in the future as it promises to boost the capacity of virtual servers by two times.

Apart from this, the company remains as dedicated as ever to push for greater share of the business market. For this reason, Hewlett-Packard has recently unveiled its latest fleet of state-of-the-art high-tech business-oriented commercial computers that are specifically engineered to cater to designing, reliability, performance and security needs of businesses and end-users. This will significantly help Hewlett-Packard in widening its competitive moat in the global market for Ultrabooks.

Hewlett-Packard has assembled a temporary moat around its server and cloud computing businesses.To continue reading, click here.

In an era when authenticity and complete transparency rule, Yahoo (YHOO) is failing miserably, and shareholders are not happy. The company is currently engaged in a battle for eyeballs with Google (GOOG) and a tussle for corporate control with the hedge fund Third Point. The hedge fund’s vocal leader, Daniel Loeb, has been on a tear lately as he asserts his company’s 5.8% ownership of Yahoo to empower change within the organization.

Loeb’s latest ammunition comes by way of recent findings that suggest that Yahoo’s CEO, Scott Thompson, grossly misrepresented himself in company documents that detail his educational background. In response, Yahoo has admitted that it may have misstated the educational background of its new CEO. Yahoo attributed the discrepancy to an “inadvertent error.” This news would barely make a ripple if Yahoo was on a tear, but that is not the case. If anything, Yahoo has been in a holding pattern trying to figure out its next move, and the stock is down a few percentage points this week while flirting with a dip below $15 per share. Certainly the company did not imagine its ideal next step as a PR rebuttal to cover its collective behinds.

In past weeks, Loeb was nothing more than a bully shooting spitballs through a straw at Yahoo, but armed with new data, Loeb’s little spitballs are now grenades. Citing falsified documents in which the current Yahoo CEO claimed educational accolades that were never achieved, Loeb’s voice of discontent is certainly louder than it’s ever been.To continue reading, click here.

For the past several years, Sprint Nextel (S) has endured some difficult financial circumstances which, despite its best efforts, have resulted in continued losses entering the second quarter of 2012. Sprint reported a loss of $863 million in the first quarter of 2012, which comes on the heels of its dismal 2011 that saw it lose a reported $1.3 billion.

As a result of the continued losses sustained by Sprint, its share price dropped from its 52 week high of $6 in June, 2011 all the way down to $2 in December, 2011.

Although it may be easy to discount Sprint as a lost cause with no substantial upside, recent news and the rise in Sprint’s customer base have begun to show that it is on the rebound. As a result its share price, after finding its floor during the middle of 2011, has started to rise.

Despite the first quarter losses reported by Sprint, there was also an abundance of good news including a reported 5% rise in growth for the first quarter of 2012. This growth was the result of the additional 1.1 million net new customers that joined the Sprint network in the first quarter of 2012.

This is great news for Sprint as its figures surpassed AT&T (T), which reported 736,000 net new customers for the first quarter and Verizon (VZ), which reported 734,000 net new customers for the same time period.

A significant factor to Sprint’s substantial rise in new customers was its entry into the Apple (AAPL) iPhone market. To continue reading, click here.

In the Barrick Gold (ABX) 2011 annual report, President and CEO Aaron Regent noted that (pdf) while the value of the oldest gold bullion ETF – the SPDR Gold Trust (GLD) – had increased by 260% since the ETF went public in 2005. Barrick’s net income had increased by 900% and operating cash flow was up by 500%. Unfortunately for Barrick Gold shareholders, the share price has gained only 72% over the seven year time period and investors have picked up another 10% or so in dividends. One way to look at the under-performance by Barrick shares is that there is a significant amount of unrealized value in the company’s gold mining operations.

As the world’s largest gold mining company, Barrick benefits significantly from economies of scale. The company’s cash production cost per ounce of $460 in 2011 was one of – if not the – lowest in the industry. In comparison, the second largest gold mining company, Newmont Mining (NEM) reported a cost of $591 per ounce in 2011. Gold Corp (GG) – considered to be one of the most efficient gold producers – reported cash cost per ounce of $534 for the year. Going into 2012, cost for the mining companies are expected to increase somewhat dramatically – at least $100 per ounce – and the cost advantages of Barrick Gold may turn out to be significant, depending on what happens with the price of gold.

The combination of very good growth numbers in 2011 – revenue up by 30% and adjusted net income up by 33% – and a declining share price over the last year has left Barrick Gold trading at just 8.3 times the consensus 2012 earnings forecast. To continue reading, click here.

Biopharmaceutical investments can be quite viable based on successful or unsuccessful drug trials. For example, Human Genome Sciences (HGSI) rose 5% in early April due to its announcement of a cash influx of $183 million. In contrast, Keryx (KERX) dropped 5% due to the failure of the Phase III trial for Perifisone. This drop is set to continue, and I predict that it will even out very low. While this is disheartening news for anyone that has Keryx stock, there is some hope in the backup drug Zerenyx. Keryx has announced that it will direct all of its efforts (meaning $31 million) at the completion of the Phase III study for Zerenyx. If the study succeeds, then we will see a rise in Keryx’s stock that will not be as great as it would have been with the Perifisone success, but will help nonetheless.

While the big news with Keryx right now is the failure of Perifisone, there are a couple of factors that could save Keryx. The first positive being the aforementioned development of the Perifisone-backup, Zerenyx, could bring stocks right back up in the fourth quarter when the phase III testing is complete. Another plus for Keryx is that the patent for Perifisone was set to run out in 2013. To continue reading, click here.

There are dozens of ideas being bandied about dealing with how Netflix (NFLX) should address increasing competition and rebuild a loyal following. That includes partnering with cable providers, which could bode well for the entertainment video giant that has long been seen as overvalued by investors.

When Netflix came onto the scene in 1997, it was a darling in the eyes of consumers and investors alike. It was rewarded with a fast-growing subscriber base, as also eager investors, that drove the stock above $300. However, as quickly as it rose, it fell, and now it is trying to redefine its self to its customers and to investors. To help it with these goals, Netflix should consider partnering with cable companies, according to a report released this week by Moody’s Investors Service.

As Moody’s correctly points out, such a partnership could open another sales channel that could lead to an increase in subscribers. I believe that Netflix is in dire need of having as many avenues as possible to deliver its service so a partnership can help it tap into a market of potential customers that it had not previously been able to access. This is imperative if it wants to increase its membership numbers. Netflix’s huge misstep last year with regards to running up its charges on subscribers resulted in a significant loss of customers.

The company increased subscription rates by as much as 60%, and simultaneously set the stage for the exodus of almost 1 million customers. To continue reading, click here.

It was really just a matter of time. As a percentage of assets, large, money center bank loans outstanding are usually well under 50%. For instance, at year’s end 2011, just 31% of JP Morgan Chase’s (JPM) assets were its loan portfolio. The loan percentage was 42% at Bank of America (BAC), and at Citigroup (C), 36%. And for these larger banks, within their loan portfolios we have many commercial and industrial scale loans, and a relative trickle of home loans. Many of these home loans are purchased by the money center banks from the originating bank. Regional ranks typically have 60% or more of their assets tied up in their loan portfolios. So, I have long believed it was just a matter of time before some of the same mortgage fraud allegations that have been brought against the likes of Citibank and Bank of America were brought to bear against regional banks as well. That day has arrived.

Last month, the Department of Justice and 49 state authorities announced a $25 billion omnibus settlement with the country’s five largest mortgage servicing companies, the three money center banks listed above, Ally Financial, and Wells Fargo (WFC) on claims of mortgage foreclosure abuse such as the infamous “robosigning” and lost paperwork. Of that $25 billion, nearly $800 million was in the form of fines on behalf of the Federal Reserve.

This week, The Wall Street Journal reports that the Federal Reserve plans to fine eight regional banks, including such top tier names as US Bancorp (USB), Suntrust Banks (STI), and PNC Financial Services Group (PNC), for loose paperwork in their mortgage foreclosure practices. To continue reading, click here.

Automatic Data Processing (NASDAQ: ADP), with a market capitalization of about $26.6 billion, is the largest global provider of payroll, human resources, tax filing, data processing, and benefits outsourcing services. The company has a commanding position in the large company segment of the payroll processing industry but also counts small and medium sized business among its more than 570,000 clients.  The company’s principal competition comes from Paychex (NASDAQ: PAYX), with a market capitalization of about $11.4 billion, which operates in the small and medium-sized business payroll processing space.  Ultimate Software (NASDAQ: ULTI), and Insperity (NYSE: NSP) are much smaller players focused on human resources outsourcing and software with relatively less exposure to direct payroll processing services. Ultimate Software has a market capitalization of about $1.8 billion while Insperity’s market capitalization is about $800 million.

By capturing the large company part of the payroll processing market, ADP has created competitive advantages that have led to robust cash flow growth of around 10%, solid operating margins north of 31%, and strong returns on invested capital just under 22% since 2007.  The company’s primary competitive advantages are high barriers to entry because a large infrastructure is needed to process a large number of employees; economies of scale once the infrastructure is in place because of its ability to add incremental recurring revenue without material capital expenditures and which leverages fixed infrastructure costs over an ever increasing customer base; high customer switching costs due to the company’s long-term contracts and the difficulty in switching human resources processes to another outsourced provider- average client retention is estimated to be longer than 10 years and revenue is highly recurring in nature; pricing power with customers due to the high switching costs; and a brand image that gives ADP an advantage as it competes for new customers and retains existing ones because clients must trust the entity that conducts its critical payroll and human resource functions.

ADP is fundamentally a play on the U.S. economy and with recent signs of a turnaround in the job market, revenue and earnings growth are poised to improve, taking the share price beyond the estimated current intrinsic value of about $70 per share on a discounted cash flow basis. This estimated value is about 30% above the recent share price of about $54 and reflects assumed growth in free cash flow of about 6% annually which is a sizeable reduction from the approximately 10% annual growth rate in free cash flow since 2007.  However, free cash flow has grown by only about 2% since 2002 so a 6% growth assumption is aggressive but warranted given the expected economic recovery and concurrent job growth that ADP can exploit with its competitive advantages.

ADP trades at a multiple to future growth above its smallest peers but well below that of its largest peer.  Analysts estimate that ADP’s earnings growth will be about 9.8% which is better than Paychex at about 7.2%, and with a forward price to earnings ratio of about 18x compared to about 19x for Paychex, ADP has a more attractive price to earnings to growth multiple of about 1.8x compared to about 2.6x for Paychex.  Insperity has the lowest price to earnings to growth multiple at about 0.81x while Ultimate Software’s price to earnings to growth multiple is about 1.2x.  Both of these companies have much higher growth rates as they are growing off much smaller revenue and earnings bases than either ADP or Paychex.  I believe that the projected earnings growth rate for ADP at about 9.8% is reasonable given that earnings grew by about 5% for the year ended June 2011 even with the significant drag of weak employment all throughout the year.  Furthermore, the company’s competitive advantages will be more fully exploited as the jobs market recovers thus growing the customer base, expanding operating margins, and growing cash flow.  Operating margin was only about 31.7% last year compared to a five year average of about 38.5%, leaving significant room for improvement as customers and services offered are added.  Operating cash flow, which was only about 17.3% of revenue last compared to an average of about 18.1% since 2007, grew by only about 1.7% last year.  This rate of growth is much less than the approximately 7.1% annual rate for the past five years which I anticipate will be closer to the rate going forward.  The $70 per share intrinsic value estimate pegs cash flow growth at 6%.

Although the economic outlook and the job market in particular are forecast to be improved in the next two years, their impact will be moderated by low interest rates through 2013 which hurts ADP’s interest income from holding client funds, which has declined to about 6.9% of revenue last year from about 10.4% of revenue in 2007.  Declining income from interest on client funds will be a headwind for the company for the foreseeable future but investors should gladly accept this drag on earnings because I firmly believe the company will not be tempted to reach for yield by placing customers’ funds in high risk investments.  Such a move might be advantageous to income in the short term but would expose the company to real and permanent value destruction if losses in risky accounts caused harm to a client(s) operations or financial position.  The company has never shown an inclination toward such behavior and I doubt it ever would.

ADP has a high current payout ratio of about 55%, which is well above its long term average of about 40%.  Paychex’s current payout ratio of about 84% is much higher than its historic average of about 65% but I believe that in both cases it is temporary until earnings growth moves back toward the historical averages for a sustained period of time.  ADP should increase dividends annually going forward as it has in the past, but at a slower rate than earnings growth to allow the payout ratio to revert to its mean.

ADP ‘s focus on the large business market allows the company to dominate the niche and enjoy its many competitive advantages, but this strategy does limit ADP’s exposure to the higher growth rates and greater volatility of small and medium sized businesses.  Overall, ADP is well positioned to take advantage of the recovery in the jobs market and at its current price of about $54, the shares are a strong buy.  Even if cash flow projections do not materialize to the assumed 6% growth rate going forward or are delayed by a downturn in the economy, the shares are fairly valued at the current price and investors can collect a sustainable 2.9% dividend.

Has automaker General Motors (NYSE: GM) finally recovered from its near extinction in the throes of the Great Recession and become a good buy? North American operations have been growing strongly despite the poor economic environment as the public has embraced a new generation of vehicles. Still, GM is a turnaround in progress. I looked at the companies fundamentals as well as its market outlook to see if it is time to move General Motors to the buy category.

The company has a recent share price of $27 which places it in the middle of its $19.05-$36.15 52-week trading range. It has a reported earnings per share of $4.57 which translates to a tiny 5.98 price to earnings ratio. The share value is definitely at depressed levels, with its price per sales of 0.46 and a price to book of 1.24. More enticing is the book value per share which comes out to be $21.96.

Its February 16 earnings announcement for 4th quarter 2011 showed healthy North American operations growth with those divisions pumping out $23.1 billion in revenues for $1.5 billion in pretax earnings, a cool $1 billion increase in year over year numbers. But despite those exciting numbers, the overall profit was only $0.39 a share, a number which missed analyst predictions by $0.02 for in fact North America was fine but the rest of the global operations was a quagmire.

The big loser was General Motor’s European Operation where the company bled over $700 million in losses. The Opel AG Division in particular was staggered by a number of restructuring costs and ended up in the red to the tune of $600 million by itself. GM has come out to say that it is moving to resolve the problems, but I cannot see how any significant progress will be made while the Euro credit crisis plays out, and the while some observers think 2012 will see a rebound I expect 2013 to be the earliest the European operations will come anywhere near to breaking even, or showing a small profit.

Meanwhile South American operations continue to underperform with a $200 million quarter loss. There is more of a vision for a positive future here though. General Motors’ product mix has been aging here and a number of new models are starting to hit show rooms and if the reaction is half as good as that seen in the North American run outs there should be some excellent 2012 results in Latin America.

Other international results, especially in China, have been positive, with earnings at over $400 million before taxes, a $100 million improvement year over year.

Taken together there were high points and lows, but management was only able to squeeze out a return on assets of a miserable 2.56%. Take that with the overall disappointing earnings report and it is little wonder that investors are skeptical. Worse, General Motors is still struggling with its pension plans legacy. Those pension plans are underfunded to a tune of around $24.5 billion, still rising in 2011 year over year despite agreements between the company and its union to mitigate the damage.

So, General Motors has an extremely cheap price with lots of upside, but it still has to show it can find a way through the many problems it has to turn the company to consistent profitability. It has to contend with Ford (NYSE: F) not only for customers but for investors too. The rival has a recent share price near $13 with a price to earnings ratio of 6.70 – similarly low priced to General Motors and it too has seen an underperforming European  division. But Ford has shown much more consistent improvement and in fact profits have stabilized so much that Ford reinitiated paying a dividend which now pays a 1.24% yield.

Of course the opposite end of the competitor scale is Toyota (NYSE: TM) which has a price near $84 with a price to earnings ratio of 41.70 – priced like an emerging tech stock. That is because Toyota’s earnings were shattered due to the Japanese earthquake fallout of 2011 and is only now starting to recover its production capacity. The problem is with the current price most of the potential growth is already priced into the stock and I see no opportunity here.

With current valuations General Motors is at an attractive price point. I have no doubt that the company will sort out its issues and return to a more aggressive profitability. My doubts are the timing, and I expect there will be more quarters of disappointment before General Motor’s turnaround is complete. I would want to watch a little longer before entering a position but investors with lots of patience probably can buy now. However, my preference is its competitor Ford, which has an almost identical price valuation, but is much farther along in establishing profits and dealing with its own problem areas.