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.

Mobile computing devices, such as smartphones and tablets, are displacing laptop and desktop computer sales in developed economies. This structural shift in the technology sector has sent shares of many personal computer companies down in price. Are their valuations low enough at today’s market prices to justify the risk of investing in a losing sector?

The End of An Era

After being number one in market share for six straight years, Hewlett-Packard Co. (HPQ) has dropped to second place behind Lenovo Group (LNVGY.PK). Surely this change was no surprise for HP CEO Meg Whitman, since it was widely anticipated by analysts and did not happen overnight.

Market research firm Gartner cited Lenovo’s acquisition of IBM‘s (IBM) personal computer unit seven years ago as a crucial source of its success. Lenovo captured 15.7% of sales in the last quarter, as compared to Hewlett-Packard’s 15.5%, according to a Gartner’s report.

Hewlett Packard’s sales slump is widely attributed to the decline in the demand of PC units after the sudden emergence of smartphones and other mobile devices like the iPad. Reigning since 2006, Hewlett-Packard has been unable to compete against Lenovo in developing markets.

Lenovo gained mostly in the less-developed countries – its planned acquisitions and high penetration in the emerging markets are outpacing the developed ones. Pacific Crest Securities analyst Brent Bracelin said, “It’s a whole new bigger trend coming, not just Lenovo.”

Don’t Pay Premiums in Troubled Sectors

Many firms in the personal computer ecosystem are seriously threatened by the evolution of consumer computing. Stock investors must demand a discount in the form of low valuations before even considering investing in these firms. 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.

Although life expectancy has greatly increased over the past several decades, this doesn’t necessarily mean that people are living healthier. Along with longer lives can also come the potential for many more physical and mental ailments – most of these requiring at least some form of pharmaceutical medication to cure, or to at least keep at bay.

This can be very good news for big pharmaceutical – or big pharma – companies that spend millions, or even billions, each and every year testing and applying for their meds to get on pharmacy shelves and physician’s prescription pads. When successful, a medication can literally equate to tremendous profits for these drug manufacturers and distributors.

In this article, I will discuss why one of the world’s biggest pharmaceutical companies, Eli Lilly (LLY), could provide a lot of income and growth for its investors.

With a market cap of over $53 billion, Eli Lilly is a worldwide manufacturer and seller of pharmaceutical products, with a focus on medications that are used to treat depression, diabetes, obsessive-compulsive disorder, bipolar issues, and fibromyalgia, among a variety of others. These products are distributed via independent wholesale distributors as well as directly through pharmacies across the globe.

Throughout the past year, Eli Lilly has experienced over 5% in its sales growth and a net profit margin of more than 17%. But these numbers could increase a great deal if Sola, an Eli Lilly drug that is designed to slow down the progression of Alzheimer’s disease, receives acceptance from the FDA. To continue reading, click here.

First Solar (FSLR) is not afraid of a little competition, even if it is coming from an industrial behemoth. After initial delays, GE (GE) plans to enter First Solar’s market in 2013 and compete alongside First Solar, the lowest cost producer of solar modules. GE got its hands into thin-film solar technology by acquiring PrimeStar Solar in 2011. First Solar, the maker of cadmium telluride solar modules, has comfortably commanded most of the market, yet it sees upside in the new rivalry. After several years of a knockout battle among solar technologies, cadmium telluride has been given a huge endorsement. Below, I will explain why the rivalry between First Solar and GE could push both stocks higher next year, making now the best time to buy both stocks.

A ratcheting up of the competition is the push First Solar needs to fortify its market position. If it can best its record of pushing solar cell costs below $1 per watt, the grumbling over China stealing market share in solar gear may soon turn to a whimper. With Chinese solar companies commanding about 70% of US solar installations this year, the forecasted loss of market share may not seem so obvious. Unmistakably, this shift in solar market leadership is already underway.

Sliding gross margins are often an indicator that a company is losing market share to a competitor. In a solar market struggling with overcapacity and supply shortages, First Solar’s operational metal stacks up impressively against its Chinese competitors. To continue reading, click here.

Is Ford (F) a bargain or a total lemon to stay away from? On the plus side, Ford’s earnings per share look good overall compared to Toyota (TM), Tata Motors (TTM), or even General Motors (GM). Ford currently has EPS of $4.40, with Toyota at $4.67, Tata Motors at $4.06, and GM at $2.81.

Looking at share price, some people think Ford is a real bargain, but the charts show a different story. The company suffered serious losses over the summer, and its share value has never really recovered. Ford’s share value sank, even though its sales increased by 13% in the U.S. in August. Ford has delivered some bestselling models, including the Escape SUV, the Focus compact, and the Fusion sedan. News reports indicate that sales for the new Escape increased by 37%, and Fusion sales increased by 21%.

The problem is that Ford’s success in its home market is not being duplicated overseas. The biggest problem for Ford is Europe, where its sales are now in free fall because of aggressive competition and a lousy economy. Ford’s European business reported a $404 million pretax operating loss in the second quarter of 2012. That is more than double the loss for the same period last year. Ford admitted that it lost $1,125 per car it made in Europe in the last year, and that its losses on the continent for this year might exceed $1 billion.

What this seems to indicate is that for every dollar it makes in the U.S., it loses in Europe. To continue reading, click here.