Don’t be fooled by the attractive price multiples of U.S. and Japanese automaker stocks. Yes, they are often trading at cheap price multiples. However, these discounts come at the cost of higher risk. Ford (F) is highly leveraged and General Motors (GM) is eager to follow suit. Japan’s automakers are suffering setbacks from angry Chinese counterparties and customers. They are also domiciled in a country with an expensive and appreciating currency.

The Bait: Low Valuations

Current financial metrics illustrate how these stocks appear attractive on the basis of price multiples:

Ford has the debt one would expect from a financial services company, because to a large extent it is an auto-loan company that also sells cars.

General Motors is not far behind based on news that it is gaining access to an $11 billion revolving line of credit. This borrowing facility consists of $5.5 billion which will mature in five years and $5.5 billion which will mature in three years. This credit line doubles its $5.5 billion five year facility that was meant to mature in 2015. General Motors’ website said that this new credit line “offers improved pricing and terms, and the ability to borrow in currencies other than U.S. dollars.” This will give its financial business, GM Financial, twice the ability to borrow. More than thirty-five institutions from fourteen countries participated in this gargantuan deal.

This expanded line of credit gives the GM more borrowing power than Ford which has access to $9.3 billion in credit facilities. To continue reading, click here.

The second half of this year has been great for gold. Prices have jumped from a low of $1560 in July to its current $1700. Early in October, prices were knocking on $1800, but failed to get over the milestone. However, gold has seen a pullback since then, and I believe that we could see a resurging gold market after these election results. Understandably, investors have been turning to gold as a hedge against the uncertainties that the market faces such as the U.S. fiscal cliff, Europe’s debt crisis and China’s cooling economy.

When it comes to gold, there are a wide variety of ways to invest. For the purposes of this article, we will talk about gold miners. My favorite play is AngloGold Ashanti (AU). To be fair, AngloGold recently settled a worker strike in South Africa, which was losing the company 32,000 ounces of gold each week. However, the strike is over, and workers will be heading back to work; hopefully, the company can make up a little of that production in the coming weeks.

Lets take a look at the fundamentals to determine the strength of AngloGold Ashanti. To start, the gold miner has a forward price to earnings ratio of 6.86, PEG of 0.96 and has a reasonable debt load, with the debt to equity ratio at 0.45. I like to see a current ratio of 2.72, because that tells me that the company is in strong enough financial position to pay off any unforeseen costs or liabilities. To continue reading, click here.

The tech industry is often mentioned as one of the highest-growth sectors, with many top performers delivering strong, rapid growth. Google (GOOG), Apple (AAPL), Microsoft (MSFT), AT&T (T), Cisco (CSCO), and Amazon (AMZN) have an enviable reputation in the sector, creating beautifully simple, intuitive products across all device segments. The sector is worth trillions of dollars, with a number of fast-moving companies attracting the attention of investment managers across the board.

One of them, Google, recently announced financial results for the quarter ended September 30th, 2012. Revenue was up 45% year-on-year, and the company earned its first $14-billion revenue in a quarter, an increase of 45% compared to the third quarter of 2011. The GAAP operating income in the third quarter of 2012 was $2.74 billion, or 19% of revenue, compared to GAAP operating income of $3.06 billion, or 31% of revenue, in the third quarter of 2011. Its revenues (advertising and others) were $11.53 billion, or 82% of consolidated revenue, representing a 19% increase over third quarter 2011 revenue of $9.72 billion. Google’s revenue from the United Kingdom totaled $1.22 billion, representing 11% of Google’s revenues in the third quarter of 2012, compared to the 11% in the third quarter of 2011.

I believe that Google is significantly overvalued based on valuation at its current price around $679 per share, but I also think its stock price could increase in the next few years. While many of its rivals are fretting about competition and decrease in market share, Google executives are excited that at just 14 years of age, the company has recorded a $14-billion revenue for the first time in a quarter. To continue reading, click here.

There are few things quite so profitable as a government sanctioned monopoly. And when that monopoly is granted in a market with growing demand (the result of irresistible demographic forces), the stage is set for considerable value creation.

Yes, the pharmaceutical industry is a profitable one. But that river of profits comes with a dark side. Regardless of the size of these companies, they and their shareholders have learned, to the dismay of both groups, that research and development efforts do not necessarily scale. That is, it is difficult to forecast the payoff of an incremental $1 billion spent in R&D. With a need to constantly replenish their roster of patent-protected drugs, many pharmaceutical companies have aggressively used their financial heft to buy the innovation that they are increasingly hard-pressed to deliver internally. Great deal for biotechnology companies, questionable deal for pharma shareholders.

Here I will analyze five of the giants, and see how they stack up. In this analysis, I will focus on measures suggestive of management’s ability to operate with financial discipline, rather than digging into the pipeline of drugs in development for each of these behemoths.

Pfizer (PFE)

SG&A: Over the past three years, SG&A as a % of sales has jumped to 32.5% from 30.5%.

Research & Development: While this expense increased 16.5% between FY09 and FY11, when viewed as a % of sales, it appears that management has managed to wring some efficiencies out of their massive R&D program. The amount has dropped more than two percentage points, to 13.5% from 15.9%.

Cash and Short-Term Investments: $3.5 billion in cash and $23.3 billion in short-term investments sat on the balance sheet as of FY11.

Debt: Net Debt is $42.3 billion, down considerably from $55.7 billion in FY09. Leverage has dropped to 1.4x, from 2.2x. To continue reading, click here.

The market is set up for fuel prices to relax from their highs. This is good news for travel-related stocks. We will review online travel search as a business model and consider which of these stocks is most attractive.

Clicks Vs. Bricks

Hotels and airline companies compete against their peers on price. Online search companies compete against each other based on the attractiveness of their platforms. The platform with the most vendors and traffic provides the best environment for search. Online search sites do not compete for vendors, banner ads, or users primarily based on the prices they charge participants. Hotel and airline vendors are more concerned about making sure their prices are seen and purchased by a large number of potential consumers.

In addition to sidestepping head-on price competition, the online search business model requires less capital expenditure. This is great news for investors, who should vehemently hate cash outflows. Since this newer business model is more attractive, investors should be willing to pay higher valuations for online search stocks.

The Case for Travel Stocks: Oil Price Decline and Economic Recovery

Gas prices might be at their 2012 peak in the U.S., but according to analyst estimates they could drop to their yearly lows by the end of 2012. This price drop would rest on dormant oil refineries starting production again. The onset of winter will also decrease miles driven, leading to lower demand.

Prices at oil service stations could fall by as much as 6.3% per gallon, which translates to a final price of about $3.54. To continue reading, click here.

Thanks to mortgage rates remaining at historical lows, mortgage REITs continue to reap the benefits while at the same time rewarding their investors with high dividend yields and growth of share price. In this article, I will discuss why American Capital Agency (AGNC) will continue providing its double-digit dividend at least through 2014.

Analyzing the Fundamentals

With its monthly dividend of $0.10 per share, American Capital has been paying out a dividend yield in excess of 17%. Although the company’s second-quarter 2012 financials were not as exhilarating as they were in 2011, or even in the first quarter of 2012, it is expected that this REIT industry leader will continue rewarding dividend-seeking investors with a yield between 10% and 14% in both the short and long run.

While using a great deal of leverage tends to increase the risk for investing in REITs, American Capital has reduced this risk in some areas by investing most of its assets in guaranteed U.S. government agency securities. Of late, American Capital has been providing investors with one-year returns of over 23%, and three-year annualized returns of approximately 30%. In addition, the company’s shares seem to be reasonably priced, with a book value of just under $29.50 per share.

Where Other REITs Stand in Comparison

Due to a recent decline in mortgage applications — primarily due to a slight hiccup in interest rates — many REITs have seen a slight lowering of share price. And, in a recent slew of downgraded ratings by FBR Capital Markets, even REIT industry leader Annaly Capital Management (NLY) was not immune. To continue reading, click here.

Microsoft (MSFT) is solid undervalued long-term investment on the market that could increase significantly in stock price within the next few years. Microsoft has innovative technologies on the horizon to regain its leadership in the tech sector once again.

Microsoft is also forming powerful partnerships with industry leaders in order to compete with Apple (AAPL) and Google (GOOG) as the tech industry evolves. Its expansive influence in multiple industries along with its proven success for decades from increased capital and revenues makes Microsoft one of the most favorable investments on the market. The stock price has been relatively flat for some time, but Microsoft is making plans that could certainly double, if not triple, its stock price within the next four years. Microsoft is clearly undervalued at its current stock price of approximately $30 per share; this is an opportune time to invest in Microsoft now before the price increases to reflect its true value.

Its stock price has ranged from around $23 to under $33 for the past year. Microsoft has increased revenue to over $55 billion, which is a 6% increase from last year. It is essentially free of long-term debt and has a significant amount of capital as well. Microsoft has increased earnings by over 9% from 2008 into 2011. A net income margin of 30% from 2008 to 2012 also shows promise and sustainability, despite the flat stock price. Microsoft has a market cap of over $250 billion and dividend yield over 2%, even without the innovations and advantageous partnerships on the horizon; this is a promising long-term investment as the current stock price.To continue reading, click here.