Is Costco Set to Move Higher Post-Earnings?

With shares of Costco (NASDAQ:COST) trading around $114, is COST an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Costco is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, and through majority-owned subsidiaries in Taiwan and Korea. The company's depots receive container-based shipments from manufacturers and reallocate these goods for shipment to its individual warehouses, generally in less than 24 hours. Costco's typical warehouse format averages approximately 143,000 square feet, where many products are offered for sale in case, carton, or multiple-pack quantities only.

On Tuesday morning, Costco reported earnings per share of $1.40, missing by 6 cents, with revenue of $31.77 billion, as its net profit grew 1.3 percent to $617 million. Comparable sales rose 5 percent, with the U.S. up 5 percent and international up 4 percent (7 percent excluding foreign exchange.) Membership fees grew 3.2 percent, to $716 million. Costco hopes to open 11 new warehouses before the end of the calendar year.

T = Technicals on the Stock Chart Are Strong

Costco stock has been exploding to the upside in recent years. The stock is currently trading sideways as it digests gains from its recent bullish run. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Costco is trading between its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Costco options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Costco Options	22.24%	90%	89%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
October Options	Flat	Average
November Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Costco’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Costco look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	0.72%	18.18%	37.78%	30.14%
Revenue Growth (Y-O-Y)	0.83%	4.86%	8.29%	9.65%
Earnings Reaction	2.43%*	-0.94%	1.27%	-0.60%

Costco has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Costco’s recent earnings announcements.

* As of this writing

P = Excellent Relative Performance Versus Peers and Sector

How has Costco stock done relative to its peers, Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Pricesmart (NASDAQ:PSMT), and sector?

	Costco	Wal-Mart	Target	Pricesmart	Sector
Year-to-Date Return	15.56%	7.05%	5.34%	24.34%	13.62%

Costco has been a relative performance leader, year-to-date.

Conclusion

Costco is a warehouse chain that sells large and bulk items to consumers looking to save an extra few bucks. A recent earnings release has investors excited about the company. The stock has been surging higher in recent years and is now trading slightly below all time highs. Over the last four quarters, earnings and revenues have been on the rise, however, investors have had mixed feelings about recent earnings announcements. Relative to its peers and sector, Costco has been a year-to-date performance leader. Look for Costco to OUTPERFORM.

Why These Tesla Investors Got Burned

Tesla's Model S sedan. Photo credit: Tesla Motors.

Tesla Motors (NASDAQ: TSLA  ) is a stock that many people -- including quite a few professional investors -- love to hate.

Whether it's because of the politics of electric cars, because billionaire CEO Elon Musk's brash and snarky manner, or simply because its valuation sparks comparisons to the wilder stocks of the old dot-com bubble era, plenty of folks either don't want Tesla to succeed, or just honestly don't believe that it can.

Many of those folks have put their money where their ideas are, by investing in a short position in Tesla's stock.

And at least this week, a lot of those folks got burned in a big way. Here's what happened.

How a short position lets investors bet against a stock
First, let's explain. When investors take a short position, what they're doing is borrowing someone else's stock and selling it, betting that they can buy it back later (to repay the loan) at a lower price.

If investors think that a company's stock is overpriced, they can ask their broker to set up a short position that will give them a profit when the stock price falls. The farther it falls, the bigger the profit.

But whether the stock price goes down or up, the investor still has to pay back the loan. And the investor has to pay interest on the stock he or she borrowed in the meantime, which typically isn't cheap.

If the stock skyrockets, the investor can lose a lot of money -- far more than the original investment. And the longer that person waits to close their position, the more interest he or she has to pay.

In other words, selling a stock short is a risky move. That's why smart investors save it for cases when they think a stock is wildly overvalued, where its price is so high that it doesn't seem to make sense.

Where it seems like a sure thing to crash, in other words.

Now let's look at Tesla.

From this perspective, Tesla looked like a classic short candidate
There's a case to be made for Tesla, but it's the case against Tesla that we're interested in right now. It's easy to sum up: Here's a company that has been around for a decade but hadn't had a quarterly profit ever until this past week. It's selling a new kind of product -- electric luxury cars -- that competes against massive global companies, and it's unclear that enough consumers want that new kind of product to make the business worthwhile.

I mean, would you pick some unproven California startup to go up against the likes of Ford or Toyota (NYSE: TM  ) ? (Yes, Toyota is actually a Tesla investor, but bear with me here for a minute.)

Whether you would or not, a lot of people have chosen to invest in Tesla, and that meant that Tesla's stock price went way up -- even though the company hadn't yet earned any money.

That was an irresistible situation for many investors, who opened up big short positions on Tesla. And when I say "many investors," I mean many: As of a few days ago, about 40% of the Tesla shares on the open market had been sold short, according to The Wall Street Journal.

That's huge. And it set the stage for what happened next.

A textbook "short squeeze" was like rocket fuel for the stock
That big percentage, what we call a high short interest in Tesla, meant that the stock was primed for a short squeeze. That's what happens when there's a big positive development on a stock with a high short interest that drives the price up.

When there's a high short interest on that stock, the price can go up very very quickly. That's because all those short investors are rushing to buy the stock to cover -- close out -- their investments before the stock gets even more expensive.

In other words, those short investors get squeezed.

That looks like exactly what happened. Tesla's stock closed at $55.79 on Wednesday. After that, two things happened:

Tesla announced a profit. After the market closed on Wednesday, Tesla announced its first-ever quarterly profit. It was small -- only $15 million or $0.12 a share excluding some special items -- but Wall Street had expected just $0.04 a share. The stock went up big in after-hours trading. Consumer Reports threw fuel on the fire. The next morning, Consumer Reports announced that Tesla's Model S sedan, shown above, had scored 99 out of 100 in its testing. That's equal to the best cars the magazine has ever tested. That's a big, big seal of approval for a start-up carmaker, and it added even more fuel to the rocket driving Tesla's stock price higher.

So even though its price was already high,Tesla's stock soared on the one-two hit of great news. That probably led many shorts to rush to close their positions, and that in turn drove the stock up even higher: Tesla closed at $69.40 on Thursday. And it kept going: Tesla stock closed at $76.70 on Friday. It might go even higher next week.

But won't it eventually come down?

Tesla could return to Earth ... eventually
Sure, it might. While Tesla has done a very impressive job of executing on its business plan, there's still a long way to go before it will make enough money to justify anything like its sky-high stock price. And it may never get that far, for two big reasons.

First, electric cars are still a niche market, and that might not change. Tesla might be able to sell enough cars every year to make a profit, but it might be a small profit that only justifies a share price of $10, not $70.

Second, if electric cars do start to get popular, there are massive competitors waiting to step in: all of the world's big automakers. They all have research resources and economies of scale that absolutely dwarf anything Tesla will be able to muster. How Tesla will survive and thrive when it's competing against the big automakers is an open question, and a daunting one.

All of that could drive the stock down in time. Probably will, say some analysts.

But there's an old saying among stock traders: The market can stay irrational longer than you can stay solvent. Short sellers who are making big interest payments may not be able to afford to hang on until Tesla's price falls -- if it ever does.

Long story short (so to speak), they're getting burned. If you own Tesla stock, enjoy the ride.

Leave short selling to the pros. The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Coke Stock Is Today's Dow Winner

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is rebounding after yesterday's big drop. As of 1:15 p.m. EDT the Dow is up 142 points, or 0.97%, to 14,741. The S&P 500 (SNPINDEX: ^GSPC  ) is up 1.24% to 1,572.

There were four U.S. economic releases today.

Report

Period

Result

Previous

Consumer price index	March	(0.2%)	0.7%
Core CPI	March	0.1%	0.2%
Housing starts	March	1.04 million	968,000
Building permits	March	902,000	939,000
Industrial production	March	0.4%	1.1%

Source: MarketWatch U.S. Economic Calendar.

The two to focus on are the housing numbers. February's rate of housing starts was revised upward from 917,000 to 968,000. In March, housing starts rose to a seasonally adjusted annual rate of 1.04 million -- the highest level since late 2008.

Growth in housing starts for both February and March is good news for the ongoing recovery of the housing market, which has been strengthening over the past year. There are worrying signs ahead, however: Building permits dropped in March from 939,000 to 902,000. Building permits are a leading indicator of future housing starts. While permits were down 4% month over month, they are still up 17% from March 2012.

US Housing Starts data by YCharts.

Coke stock leads the Dow
Today's Dow leader is Coca-Cola (NYSE: KO  ) , up 5.6% to $42.35 after it reported first-quarter earnings. The company earned $0.39 per share, or $0.46 when you exclude one-time items. That's better than the year-ago quarter's $0.45 and better than analyst expectations of $0.45. Revenue was $11.04 billion, down 1% from the year ago but better than analyst expectations of $11.02 billion. Worldwide, the company saw 4% growth in volume, with 3% growth in the U.S. and 5% growth abroad.

In the U.S., Coke announced that it will sell some of its internal bottling operations to its five U.S. independent bottlers: Coca-Cola Bottling Co. Consolidated (NASDAQ: COKE  ) , Coca-Cola Bottling Company United, Swire Coca-Cola USA, Coca-Cola Bottling Company High Country and Corinth Coca-Cola Bottling Works. No details were released, but the company did say it expects to close the deals in 2014.

Long-term Coke shareholders should be concerned by the rising tide against soda in the U.S. However, Coke's diversification into global markets and other beverages like juice and tea both cap this risk over the long run.

Coca-Cola's wide moat has helped provide its shareholders with superior gains in the past, but the company faces some new threats to its continued market dominance. The Motley Fool recently compiled a premium research report containing everything you need to know about Coca-Cola. If you own or are considering buying shares in the company, you'll want to click here now and get started!

Banks Will Pay for Misleading Customers

Ongoing litigation in the U.K. means that banks will likely be on the hook for mis-selling products to small business and individuals. According to the U.K.'s Financial Services Authority (FSA), the banks may have mis-sold up to 90% of the products under review. Claims have been coming in for over a year, and banks are just now undertaking a review of their sales, to determine which customers need to be compensated.

The banks facing the first wave of investigation are Barclays (NYSE: BCS  ) , Royal Bank of Scotland (NYSE: RBS  ) , HSBC (NYSE: HBC  ) , and Lloyds Banking Group (NYSE: LYG  ) . These companies are going to pay out something, as they've already admitted that rules were broken. The question remains -- how much will it cost?

Swaps explained
The charges related to rate swaps that the banks tacked on to variable rate loans in the middle of the last decade. Customers who wanted -- or were urged -- to hedge against interest rates going up could agree to a "cap" and "floor" -- together forming a "collar" -- on the rates. If interest rates rose above a certain amount, the cap rate would come into effect, with a customer paying only that rate, not the higher, actual rate.

If rates fell below the floor, then customers would pay the floor rate plus the difference between the floor and the actual rate. Clearly, the banks were selling the collars under the pretense that rates would be rising, as they did until 2008 -- when they suddenly fell.

Mis-selling to consumers
Once rates started to plummet, customers began to see their costs rise. Ironically, the very thing causing them to rise was a move designed to help borrowers. As the rates collapsed, customers approach their banks to cancel their coverage, only to discover that there was an often massive fee associated with cancellation. 

The key to the litigation is not the product itself, which is relatively straightforward -- it's the selling of the product. Claimants believe that they were not given a choice when purchasing a collar, not fully made aware of the fees to cancel the product, or not given enough explanation to fully understand the risks involved.

Now the FSA believes that over 40,000 of these products were sold in the last decade. While many of these will have expired, or be of such low value that banks won't be harmed, many are likely to result in repayments. As an example, Barclays announced that it has set aside $1.3 billion to repay harmed customers. 

While the final tally won't be known for some time, it's a sure bet that this is one more hurdle for the banks to overcome before they can return to respectability -- investors beware.

Many investors are scared about investing in big banking stocks after the crash, but the sector has one notable standout. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

JPMorgan Profit Misses; Posts $1 Billion Legal Expense

Frank Franklin II/AP JPMorgan Chase reported lower-than-estimated third-quarter profit Tuesday as unexpected legal expenses of $1 billion caught analysts off guard and offset strength in its capital markets and lending businesses. The bulk of the costs came from setting aside money to resolve government probes into alleged rigging of foreign-exchange rates, Chief Financial Officer Marianne Lake said. JPMorgan, the biggest U.S. bank, also reported higher-than-expected operating costs, with compensation, technology and marketing all up. Lake cited strong business growth, and added that JPMorgan may breach its annual expense target of $58 billion this year. "We continue to be focused and diligent on managing expenses," she said on a conference call with analysts. JPMorgan and other big banks have been trying to bolster profits through cost-cutting for years, as low interest rates and new regulations have crimped revenue growth. But the efforts have been overshadowed by multibillion-dollar fines and higher costs for technology and compliance. A year ago, JPMorgan reported its first loss since 2004 due to $7.2 billion in litigation expenses. Overall, the bank agreed to pay nearly $20 billion in 2013 to settle various legal issues. Yet other matters, like the foreign-exchange probes, remain unresolved. "The ongoing high level of litigation expense after last year's ... mega settlement is a bit disturbing," said Chris Kotowski, an analyst with Oppenheimer & Co. "At some point, it ceases to become a 'special' item." Overall, JPMorgan reported earnings of $5.6 billion, or $1.36 a share, compared with a loss of $380 million a year earlier. Analysts expected earnings of $1.38 a share, on average, according to Thomson Reuters I/B/E/S. Revenue rose 5 percent to $24.2 billion from $23.1 billion in the third quarter of 2013. 'Model of Stability' JPMorgan was hit with a technical glitch on Tuesday as its earnings release appeared hours ahead of schedule due to a "human error" at a vendor that handles its investor relations documents. The earnings report was the first since Chief Executive Officer Jamie Dimon, 58, underwent radiation and chemotherapy for throat cancer. The illness has raised questions about who might succeed him if he steps down. Dimon said his prognosis remained "excellent," allowing him to maintain a busier schedule, but added that he was still monitoring his health with regular doctor visits. Dimon told reporters on a conference call that the bank was seeing "a broad-based recovery" in the United States, both in consumer and corporate markets. A recent uptick in volatility helped JPMorgan's trading business, but Dimon said products that deliver more stable earnings in the retail bank weren't affected by brief market swings. Revenue from fixed-income, currency and commodity trading rose 2.1 percent to $3.51 billion in the latest quarter compared with a year earlier. Total investment banking revenue rose 2 percent to $1.54 billion, driven by higher advisory fees. But net income from mortgage banking fell 38 percent $439 million. "The headline numbers have come out slightly below expectations, but the model of stability is there, and that's ultimately what you want from a bank," said Simon Maughan, head of research at financial analysis firm OTAS Technologies in London. JPMorgan (JPM) shares fell 0.3 percent at $58 in afternoon trading. -.

Managed to get that raise or promotion? Fantastic -- now don't go out there and spend it all immediately. In classic "keeping up with the Joneses" fashion, too many of us see an increase in salary or a sudden windfall (like an inheritance) as an excuse to take our lifestyle up a notch. We buy bigger houses than we need, get the latest gadgets even though ours work just fine,and spring for fancy steak dinners just because we can.

Banco Espirito Santo: A Portuguese Disaster, Not A European Crisis

The ratings agencies Moody's and S&P have sharply downgraded the long-term debt ratings of the troubled Portuguese bank Banco Espirito Santo (BES). Both ratings agencies cite as the principal reasons for the downgrade the financial problems of BES's ultimate parent, the Espirito Santo Group (ESG), and the possibility that the ring fence supposedly separating BES from its parents might prove insubstantial. Here is Moody's explanation:

The downgrade of BES's standalone financial strength rating to E/ca from E+/b1 reflects the risks associated with the bank's direct exposure to the Espirito Santo Group and the likelihood that it may become liable for any further obligations stemming from the group. These concerns are heightened by the lack of information on BES's ring-fencing against these risks.

S&P cites management instability within BES itself as well as its exposure to ESG:

We see persistent uncertainty regarding Banco Espirito Santo's (BES) management, reflected in further recent announcements about proposed, yet-to-be approved changes to BES' management team.

At the same time, negative reports on what increasingly appears a fragile, and possibly deteriorating, financial position of several entities within the Grupo Espirito Santo (GES), of which BES is a part, have intensified.

There is good reason for concern. As my colleague Raoul Ruparel explains, ESG's complex and opaque corporate structure has enabled some exceedingly dodgy internal financing (my emphasis):

Friday Links

NEW YORK (CNNMoney) -

A weekly collection of design, data and interactive links. Photo/Video Seismik | Herman Kolgen explores vertical layering dislocations 8-Bit 3D Art | Ron Burgundy and Boba Fett rendered in 3D printed pixels Kodama | 20syl's new music video Milky Way | Michael Shainblum shares 3 tips for photographing the Milky Way Design/Data viz Maschinenangst | Vera Idelson's costume and set design illustrations for the Italian Futurist play The Anguish of the Machines The Story of EBoy | Watch the video, it's great Visualizing MBTA Data | An interactive exploration of Boston's subway system LazerBlade | The affordable laser cutter and engraver Can you find Benghazi? | Can you accurately locate Benghazi? Code ArnoldC | A programming language based on the one liners of Arnold Schwarzenegger Web Starter Kit | Boilerplate & tooling for multi-device development from Google See last week's links Have a nice weekend! @dubly and @talyellin

TD Ameritrade, Schwab put third-party exams on lawmakers' radar

Congress doesn't have a direct role in determining whether the Securities and Exchange Commission will require investment advisers to use private-sector firms for compliance examinations, but industry officials are making sure lawmakers are aware of the idea.

During meetings with legislators and their staffs as part of the Investment Adviser Association's Lobbying Day on Capitol Hill on Thursday, executives from Charles Schwab & Co. Inc. and TD Ameritrade Institutional brought up third-party exams.

SEC Commissioner Daniel Gallagher floated the idea of third-party exams in public appearances last month. He proposed it as a way for the agency to increase coverage of the approximately 11,000 registered investment advisers at a time when the agency says it lacks the resources to examine more than about 9% annually.

Although there are potential drawbacks to such reviews, including costs and developing standards for the private examiners, it's an approach that should be considered, the industry leaders said.

“We would like to see the SEC retain both the rulemaking and the exam process,” said Bernie Clark, Schwab executive vice president for adviser services, between meetings on Capitol Hill. “Perhaps there's a third-party option that needs to be utilized. We would like to create options to solve the problem of frequency of exams.”

In the partisan atmosphere that permeates Capitol Hill, it's unlikely that the SEC will get the funding it seeks or that Congress will approve a bill sponsored by Rep. Maxine Waters, D-Calif., and ranking member of the House Financial Services Committee, that would allow the SEC to charge advisers user fees for exams.

“We think there ought to be an open and thorough discussion of [the third-party exam] approach,” said Jeff Brown, Schwab senior vice president and acting general counsel.

Skip Schweiss, managing director of adviser advocacy at TD Ameritrade Institutional, said he, too, wants third-party exams to be considered.

“It's something that ought to at least be entered into the discussion,” said Mr. Schweiss, who participated in the IAA Lobbying Day. “It's a concept that works well [for corporate accounting audits], and could it work as well to increase the frequency of exams for advisers?”

Lawmakers and their staff members expressed interest in the user fee and third-party approaches.

“The receptivity is there for both of these ideas,” Mr. Schweiss said.

In a letter to Mr. Gallagher earlier this week, the IAA expressed concerns about third-party exams, while saying that it was an idea worthy of discussion. It would prefer greater funding for the SEC Office of Compliance Inspections and Examinations, according to Neil Simon, IAA vice president for government relations.

“We want to talk! about strengthening SEC oversight,” said Mr. Simon, whose group brought 30 advisers to Washington. “We think there are far better options [than third-party exams]. We want to staff up OCIE."

Third-party exams are not directly a legislative issue. The SEC has the authority to write a rule, according to Chairman Mary Jo White. But the SEC does listen to lawmakers.

“They could communicate to the SEC that they think this is a viable option,” Mr. Schweiss said.

The World Is Full Of Small Conspiracies

Many people are fascinated by the belief – or at least the prospect – of world dominating conspiracies. The Illuminati seems to regularly have a pronounced position in such fantasies. We should also pay due homage to the Knights Templar, the Freemasons, and the Bilderberg Group. Of course, there are others. When it comes to world domination, of equal substance is Spectre, K.A.O.S, and, topping the list, Hydra.

Back to the real world… when it comes to world domination, however, no one, no group, no grand conspiracy has ever been successful. Simply put, there's no one in charge. Complicating any search for a grand conspiracy is the fact that at the core of so many secret organizations is the exotic and even the arcane.

The esoteric with promises of majesty (sometimes even immortality) can make the imagination soar. It can be intoxicating and motivating. Unfortunately, as Umberto Eco exemplifies in has literary masterpiece, Foucault's Pendulum, the most powerful secret – the true underpinnings of these grand conspiracies – is "a secret without content."

The lack of world dominating conspiracy in no way discounts the existence of conspiracies. It's just that these grand conspiracies for a plethora of reasons, such as the unquestionable inability to effectively run such an extensive and influential bureaucracy secretly, do not exist. Instead, what are pervasive in society are small conspiracies. From illegal conclusion among technology companies to insider trading rings, and from corporate and political payoffs to organized crime syndicates working cooperatively, the world is littered with small conspiracies.

Small conspiracies are rampant inside and between some organizations and sometimes common in the financial services arena. There are leadership substitutions and a broad range of governmental and corporate espionage. You can no doubt come up with a multitude of examples, and if you're having trouble, just turn on the news.

Now, if the malicious element – the illegality and injurious nature – that defines, in part, a conspiracy was stripped away, we have some brilliant networking resulting in collaborative business at its finest. It's this superb networking that's foundational and critical to success of any small conspiracy.

Taking a step back… in critically examining the way self-made millionaires and some accomplished professional criminals build social networks to achieve their agendas, there's actually a high correlation in the nature of the strategic thinking and processes they employ. So, if you're looking to excel, creating and managing a non-malevolent conspiracy (i.e., a legal and ethically sound conspiracy) might very well get you the professional outcomes you're looking for.

Tweedy Browne Comments on Cenovus

n addition to this new position, we got a trading opportunity in Cenovus (CVE), the Canadian oil sands company, and added it to the Global Value Fund and Global Value Fund II – Currency Unhedged. It had previously only been held in the Worldwide High Dividend Yield Value Fund. We also added to our positions in Banco Santander Brasil, Antofagasta, Bangkok Bank, Imperial Tobacco, and Unilever.From Tweedy Browne (Trades, Portfolio)'s first quarter 2014 letter to investors.Also check out: Tweedy Browne Undervalued Stocks Tweedy Browne Top Growth Companies Tweedy Browne High Yield stocks, and Stocks that Tweedy Browne keeps buying

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Benzinga's Volume Movers

Related VRNT Morning Market Movers Benzinga's Top #PreMarket Gainers

Verint Systems (NASDAQ: VRNT) shares rose 3.88% to $48.75. The volume of Verint Systems shares traded was 881% higher than normal. Verint reported better-than-expected fourth-quarter results and issued a strong full-year forecast. Verint reported its adjusted earnings of $0.91 per share on revenue of $257.1 million.

Durata Therapeutics (NASDAQ: DRTX) shares climbed 5.30% to $14.18. The volume of Durata Therapeutics shares traded was 861% higher than normal. The FDA Advisory Committee unanimously recommended the approval of Durata's Dalvance.

Intuitive Surgical (NASDAQ: ISRG) shares moved up 10.89% to $485.70. The volume of Intuitive Surgical shares traded was 617% higher than normal. Intuitive Surgical announced the FDA clearance and U.S. introduction of the new da Vinci Xi Surgical System.

Balchem (NASDAQ: BCPC) surged 13.56% to $59.19. The volume of Balchem shares traded 499% higher than normal. Balchem announced its plans to aquire SensoryEffects for $567 million.

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Foxconn's worker hours still excessive - report

Foxconn, one of the largest suppliers for Apple and other big tech companies, has drawn harsh criticism from labor activists in the past few years.

NEW YORK (CNNMoney) A watchdog group says conditions at facilities of Apple supplier Foxconn have improved in recent months, though the factories are still in violation of Chinese laws on work hours.

In a report released Thursday, the Fair Labor Association said three Foxconn facilities in China employing an estimated 170,000 workers have made "steady progress" in improving working conditions over the past 15 months. The FLA worked with the company to develop an action plan to address the issue.

The group said Foxconn had constructed additional exits and restrooms at the three facilities, and had revised its policies to limit overtime hours to 36 per month and three per day.

But the report found that workers at one of the factories had worked more than 60 hours a week on numerous occasions between March and October of this year, and that all three had exceeded the monthly overtime limit.

"Progress has been made with respect to hours of work, but the three factories are not in compliance with Chinese labor law," the FLA said.

The FLA is a non-profit organization that formed in 1999 following a series of sweatshop scandals involving Nike and other apparel makers. Nike (NKE, Fortune 500) was one of the founding members of FLA, which requires its members to meet a labor-standards code of conduct.

The FLA performs audits of its members' facilities to monitor labor compliance, though it has also been criticized by activists for drawing funding from the same companies it oversees.

Foxconn, one of the largest suppliers for Apple (AAPL, Fortune 500) and other big tech companies, has drawn harsh criticism from labor activists in the past few years following a spate of suicides at its facilities. A Pulitzer Prize-winning series published last year by The New York Times documented hardships faced by Foxconn workers, including long hours and unsafe conditions.

  I worked in a Chinese labor camp

In a report released last year, the FLA found dozens of major labor-rights violations at Foxconn facilities, including excessive overtime, unpaid wages and salaries that aren't enough to cover basic living expenses.

In response, Apple and Foxconn pledged to implement reforms including a reduction o! f working hours, full payment of overtime wages and improved safety procedures.

Foxconn said Thursday's report "demonstrate[s] substantial overall progress by our company in carrying out the 15-month remedial program in many areas."

"[W]e recognize that there is more to be done, and that we must continue to sustain this progress and further enhance our operations," the company said.

An Apple spokesman said in a statement that the company has "already addressed 99% of the FLA's recommendations, and we continue to make progress through our own supplier responsibility program."

"Apple has led the industry in addressing excessive overtime at Foxconn and other suppliers, reducing the average workweek to 53 hours," the spokesman said, noting that Apple is the first and only tech company admitted to the FLA.

"[W]e are committed to reducing excessive overtime even further as we continue this journey with our supplier partners."

The news comes amid scrutiny of fellow Apple supplier Pegatron Corporation, which is based in Taiwan. Apple recently dispatched a team of medical experts to inspect a Pegatron factory in China following reports that a number of workers from the facility have died in recent months.

Has the Contrarian Investors' Day Come?

One by one, the bears have fallen.

And now there are precious few leading investors who admit to taking bearish positions on U.S. equities. Indeed, various surveys show that among investment advisers and individual investors the ratio of bears to bulls has rarely, if ever been as low as it is now.

Whisper it quietly, but this is a classic signal for contrarian investors.

The latest high profile bear to capitulate is Hugh Hendry, at the hedge fund Eclectica Asset Management. Although relatively small–Eclectica had $1.3 billion under management at the start of the year–Mr. Hendry has had a high profile for much of the past decade, having been a prominent bear in the run up to the 2007 crash.

But having taken pain from being on the wrong side of a soaring market during the past couple of years, he said recently that he’d thrown in the towel. He hates the market, but is now positioned for it to go up further.

Jeremy Grantham of the giant fund GMO and another prominent bear recently figured the U.S. market could advance another 30%, despite being some 50% overvalued. John Hussman, of Hussman funds and another bear, also figures there are risks of a further market “blowoff”–i.e. a continuation of the recent upward trend. As does Bob Janjuah at Nomura.

None of the high profile bears has actually come out and said that they believe in a bull case, that markets are cheap and need to be bought at these levels. By and large they all expect a correction and for deep market underperformance. But they’ve mostly pared back their bearish positions. But after the U.S. equity market tacked on another 30% this year, having already doubled from 2009 lows by last year, there’s not a lot more pain these investors can take.

As John Maynard Keynes is reputed to have said: “The market can remain irrational longer than you can stay solvent.”

Even if bears haven’t entirely disappeared, they seem to be in deep hibernation.

“Absolutely everyone is long U.S. equities,” said one salesman at a large European investment bank.

“Most fund managers don’t know why they made money this year,” he added, pointing out that the longs at the start of the year took their positions on the view that the U.S. economy would recover strongly. Equities advanced despite the lackluster growth. Or maybe because of it–the economy’s listlessness has caused the Federal Reserve to maintain its asset purchase program.

And that’s one of the reasons former bears think shares could continue to advance. The Fed has shown itself reluctant to upset equity markets.

Why could there be considerably more upside?

For one thing, retail investors haven’t fully thrown themselves into the frenzy as they had during the tech bubble or the run up to the financial crisis. For another, central banks keep pumping liquidity into the system–though it’s not clear how rising bank reserves are causing equity markets to bubble up.

And yet this might be one of the best times to make a bearish call. It would be a highly contrarian trade. And bearish equity options are cheap.

But it takes a brave soul to stand so far apart from the crowd. As the financial crisis showed, there’s a certain amount of safety in numbers–you can survive losing money if everyone else is as well. But not if you’re the only one.