GM ad move followed failed Facebook pitch: sources

By Ben Klayman and Bernie Woodall | Reuters  –  DETROIT/NEW YORK (Reuters) – Facebook may only have itself to blame for why General Motors rained on its IPO parade this week. GM announced the decision to drop Facebook paid ads on Tuesday in what was the first highly visible crack in Facebook’s strategy and illustrated doubts about its perceived advantage over traditional media. GM’s decision followed Facebook officials’ failure to convince top marketing executives at the U.S.

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By Ben Klayman and Bernie Woodall | Reuters – 

Facebook IPO shares tough task for small investors

By DAVE CARPENTER | Associated Press  –  CHICAGO (AP) — Hoping to get in on Facebook ‘s hotly anticipated public stock offering?

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By DAVE CARPENTER | Associated Press – 

Be selective with preferred-stock ETFs and funds

SAN FRANCISCO ( MarketWatch ) — Preferred-stock buyers: It pays to be choosy. These high-yielding hybrids — not quite common stock, not quite corporate bond — appeal to income-hungry investors. But while their current 6% to 7% average yields are certainly spectacular, preferred securities and the mutual funds and exchange-traded funds that own them come with trade-offs that deserve a close look.

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SAN FRANCISCO (MarketWatch) — Preferred-stock buyers: It pays to be choosy.

These high-yielding hybrids — not quite common stock, not quite corporate bond — appeal to income-hungry investors. But while their current 6% to 7% average yields are certainly spectacular, preferred securities and the mutual funds and exchange-traded funds that own them come with trade-offs that deserve a close look.

Against ordinary stock, preferreds have status. They’re typically less volatile than common shares and provide a generous income stream akin to high-yield bonds. In the 2008 market meltdown, for instance, the largest preferred-stock ETF, the $8.5 billion iShares S&P U.S. Preferred Stock Index (PFF), lost about two-thirds as much as the Standard & Poor’s 500-stock index (:^GSPC), according to investment researcher Morningstar Inc.

Plus, companies must pay dividends to preferred shareholders before they pay a common-stock dividend, hence the “preferred” label. And like common-stock dividends, preferred-equity dividends typically are taxed at the favorable 15% maximum tax rate.

“The investor who buys preferreds wants steady, reliable income,” said Harry Domash, publisher of the Dividend Detective investment newsletter. “But you don’t have much appreciation potential.”

Know the risks

The past few years have been highly preferential for preferreds, which are most attractive when interest rates are relatively stable or declining.

For example, iShares S&P U.S. Preferred Stock Index returned 22% annualized over the three years through April, boosted by its recent 6% yield and heavy tilt toward the recovering financial-services sector. That is more than two percentage points better than the S&P 500 over that time, and nearly five points above the average high-yield bond fund, Morningstar reports.

Actively run funds with strong three-year returns include Nuveen Preferred Securities (NPSAX), up 27.5% a year through April, and Principal Preferred Securities (PPSAX), up 23.5% annualized.

In exchange for a yield kicker, however, preferred stockholders shoulder risks that are the bane of bond investors.

For starters, preferreds are sensitive to interest rates. But unlike bonds, these securities either will never mature or in some cases will return principal only after 30 years, maybe even 50. As interest rates rise, the price of the preferred falls (and vice versa), and an investor could be stuck with lower-valued paper that a corporate issuer may never redeem.

Meanwhile, when stocks are soaring, “there’s limited upside in a preferred because the issuer has certain redemption rights,” said Donald Crumrine, chairman of Pasadena, Calif., investment firm Flaherty & Crumrine Inc., which oversees several preferred-stock mutual funds, including Destra Preferred & Income Securities (DPIAX) and closed-end Flaherty & Crumrine/Claymore Total Return (FLC).

Those rights typically include a “call” provision, where the issuer can buy out shareholders at face value after five years from the issue date. When interest rates decline, the chance of a security being called is higher because new securities can be issued at a lower yield. The opposite is true when rates rise.

Credit risk is also a concern. While many issuers of preferreds are major banks considered “too big to fail,” their competitiveness in a still-struggling economy has to be considered. Troubled companies can suspend preferred dividend payments, and in a bankruptcy, preferred stockholders, unlike bondholders, are out of luck.

Holders of preferred-stock funds have to be “comfortable with the credit risk of owning financial-services securities and feel the financial sector is on its way back up,” said Morningstar ETF analyst Timothy Strauts, who said to beware of portfolios exposed to European banks.

A good bet?

That said, one type of preferred share commonly found in funds and ETFs should hold its edge at least a bit longer, thanks to the Dodd-Frank legislation. Under the law, banks will be prohibited after 2013 from counting a class of taxable “trust preferred” securities toward their regulatory capital requirements.

As such, it is expected that many banks will call these popular shares. Funds and ETFs, in turn, would then need to replace them with other stripes of preferreds, which could alter the funds’ risk and potential return.

For now, Strauts said, the prospect of redemptions is keeping trust preferreds’ prices close to their $25 par value. That presents a unique opportunity for fund managers to buy trust preferreds currently trading below par, he said, collecting an above-average yield in anticipation of the shares being called at a higher price.

Jonathan Burton is MarketWatch’s money and investing editor, based in San Francisco.

More From MarketWatch

Wall St Week Ahead: All eyes on European elections

By Rodrigo Campos | Reuters  –  NEW YORK (Reuters) – After Wall Street ended its worst week of the year on Friday, U.S. stock investors will look across the Atlantic next week to take their cue from Europe as France and Greece go to the polls. That could offer some respite from a string of weak U.S

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By Rodrigo Campos | Reuters – 

Winans' Preferred Stock Index has Been Added to Thomson Reuters' MetaStock® Charting Software

NOVATO, Calif., May 4, 2012 /PRNewswire/ — The Winans International Preferred Stock Index™ (WIPSI) is featured in Metastock’s latest product, Winans Preferred Stock Studies . Preferred stocks have historically been one of the best performing investments and have grown increasingly popular with investors due to their attractive dividend yields and strong price appreciation in recent years. The WIPSI is the only major index that tracks the price, yield and volume of preferred stocks as far back as 1900.

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NOVATO, Calif., May 4, 2012 /PRNewswire/ — The Winans International Preferred Stock Index™ (WIPSI) is featured in Metastock’s latest product, Winans Preferred Stock Studies.

Preferred stocks have historically been one of the best performing investments and have grown increasingly popular with investors due to their attractive dividend yields and strong price appreciation in recent years.

The WIPSI is the only major index that tracks the price, yield and volume of preferred stocks as far back as 1900.

“As a long-time user of MetaStock, it is an honor to have the Winans International Preferred Stock Index (WIPSI) added to MetaStock’s platform. This new feature will be a game-changer for traders and investors alike,” says Ken Winans, President & Founder of Winans Investments.

Equis (a subsidiary of Thompson Reuters) develops and markets the award-winning MetaStock range of products, which are the premier brand in the charting and technical analysis arena. The MetaStock product suite targeted toward the individual investor includes both real-time and end of day variants of the software along with data subscriptions, add-ons and third party products. Products can be purchased at www.equis.com.

More information on the Winans Investments Capital Management & Research or the Winans International Preferred Stock Index can be found at www.winansintl.com. More information on Ken Winans is available at www.kenwinans.com.  Ken Winans’ award-winning book, Preferred Stocks – The Art of Profitable Income Investing, is available on Amazon.com

Tight Closes Could Signal Stock Ready To Break Out

How To Spot A Fine Chart: Fifth In A Series Savvy investors know there’s no such thing as a sure winner.

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How To Spot A Fine Chart: Fifth In A Series Savvy investors know there’s no such thing as a sure winner. But they boost their chances of success by looking for stocks in proper bases that show tight price action.

Weekly closing prices that vary 1% to 2% from the prior week in a period lasting a of couple weeks or more indicate that the stock may be getting ready to break out.

The logic goes as follows: Tight trading over a period of time is a sign that the stock is being supported by institutional investors — banks, mutual funds, pension funds and so on.

These funds typically buy shares over time, rather than all at once, to avoid running up the share price and to keep a low profile. As interest in the stock builds, the “supply” of shares that investors are eager to sell dwindles. As demand strengthens, the price rises.

So it pays to figure out where the big funds are putting their money. Sustained institutional demand typically shows up in patterns marked by low volatility. These include flat bases, handles in cup bases and three-weeks-tight patterns, in which one week’s closing price is within 1% to 1.5% of the prior week’s close.

In addition, the stock’s intraday or weekly trading range may narrow and volume will be subdued, indicating high investor conviction as the stock builds its base.

Let’s look at Australian mining giant BHP Billiton (BHP – News). The stock began forming a cup with handle in early April 2004 as strong global economic growth was boosting demand for everything from coal to iron ore and oil.

The right side of BHP’s cup shows four straight weeks in which closing prices varied less than 2% from the prior week’s close (1) as volume slowly picked up. This was a sign that institutional support was building after the stock had bottomed.

Trading in the handle was also tight (2), and volume trailed off as you’d like to see.

The stock broke out above a 19.70 buy point from the base on Sept. 21, 2004, (3) in volume that was more than four times the stock’s average daily turnover. Over the next 18 months, BHP soared 158%, peaking at 50.74.

A stock’s chart can be found in the Stock Checkup section at Investors.com. In addition to a stock’s chart action, its up-down volume ratio and IBD’s proprietary Accumulation-Distribution Rating indicate which stocks are attracting institutional demand.

While tight trading signals institutional support, weekly swings of 10% to 15% or more in a stock’s price may point to a lack of conviction. The result is often a V-shaped base featuring sharp rises and falls, suggesting conflicting views about the stock.

Holding company stock in a 401(k) is a risky bet

(Money Magazine) — I work for a Fortune 500 company that matches my 401(k) contributions in company stock, which I can then re-allocate to other investments every quarter if I wish.

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(Money Magazine) — I work for a Fortune 500 company that matches my 401(k) contributions in company stock, which I can then re-allocate to other investments every quarter if I wish. Given that I won’t retire for several decades and I think my company has great growth potential, how much of my 401(k) do you think I should have in my company’s stock? John, Minneapolis, Minn.

How do I put this? How about zero, none, nada, zilch.

Other than whatever shares of your company that might be owned by an index fund or other broadly diversified mutual fund that’s on your 401(k)’s investment menu, I don’t think you should keep a dime of your 401(k) in your employer’s stock, regardless of how spectacular you may think the company’s growth prospects are.

Why do I take this hard line? One reason is common sense. You’ve already got a lot of your financial security riding on your employer in the form of your paycheck. Investing in your employer’s stock only compounds the problems you might face if your company runs into trouble.

Investment analysts have long known that people who concentrate their portfolio in an employer’s stock — or shares of any single company for that matter — don’t earn high enough returns to compensate them for the extra risk they take on by holding an inadequately diversified portfolio.

Best investments at ages 55-plus

Economist Lisa Meulbroek notes in “Company Stock In Pension Plans: How Costly Is It?” that “even employees who work for relatively safe ‘blue chip’ firms are significantly worse off by concentrating their wealth in company stock.”

There are plenty of examples that illustrate the perils of loading up on company stock. The most famous is Enron, the energy firm that was the darling of the investment community until it collapsed in 2001, taking the 401(k) plans of thousands of employees down with it.

More recent high-profile corporate implosions, like that of Bear Stearns and Lehman Bros., also serve as warnings of why it’s dangerous to have much of your wealth invested in your employer’s shares.

And your company doesn’t have to actually go belly up for you to get hurt, a fact I know only too well from personal experience. Even though I never voluntarily put a cent of my 401(k) dough in my employer’s stock, I acquired a decent size stake of Time Warner shares over the years via matching contributions that I wasn’t permitted to move. After the combination of the late ’90s stock frenzy and the AOL Time Warner merger in 2000 sent the price of my company shares into the stratosphere, I found myself with a 401(k) that had roughly half of its value in employer stock I was locked into.

Unfortunately, as investors began to recognize just how disastrous this merger was shaping up to be, the price of my company shares began to plummet. Only when the stock neared the bottom of its more than 80% slide were plan participants given the option of moving out of our company shares. By then, the damage had already been done, in my case a loss of several hundred thousand bucks that’s taken roughly a decade to recoup. Thankfully, the 2006 Pension Protection Act has since ushered in new rules that make it much easier for 401(k) participants to diversify out of company stock.

However, there is one scenario in which holding onto company shares in a 401(k) could make sense. If someone is closing in on retirement and has a big slug of employer stock that’s been acquired at very low prices over the years, that person may qualify for a tax break known as “net unrealized appreciation,” or NUA, by taking possession of the actual company shares rather than rolling them over into an IRA.

I want to emphasize I’m not suggesting anyone invest in company shares during their career to take advantage of this strategy. But if someone has already acquired a large amount of company shares with a low cost basis and is nearing retirement, then NUA is a move worth considering.

Even then, it’s important to remember that this strategy has potential downsides even beyond the risk of having so much of one’s wealth tied to a single stock.

Bottom line: I recommend you transfer out of company shares as soon as you’re legally permitted to do so and spread the money proportionally among the other investment options you’ve chosen.

If you’re so tempted by the growth potential of your employer’s stock that you simply can’t resist taking a flier on it, then at least minimize the potential damage by keeping your overall exposure to company stock, including your 401(k), stock options, stock grants, etc., to no more than 10% of your wealth.

Saving and investing for retirement is tough enough. Don’t make it harder by engaging in a strategy that increases risk without a commensurate boost in return.

Do you know a Money Hero? MONEY magazine is celebrating people, both famous and unsung, who have done extraordinary work to improve others’ financial well-being. Send an email to nominate your Money Hero. 

First Published: May 2, 2012: 11:09 AM ET

Will a Stock Split Make Google or Coke More Valuable?

Fools know the value of a stock split: zero. It’s a non-event. Instead of a $20 bill in your wallet, you now have two $10 bills.

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Fools know the value of a stock split: zero. It’s a non-event. Instead of a $20 bill in your wallet, you now have two $10 bills. So if they mean nothing, why do them? There are a few reasons, none of which has anything to do with whether the stock is a good investment. Here are the usual ones:

• To make the stock look cheap.
• To increase liquidity.
• To meet stock-exchange listing requirements.
• To express a bullish management sentiment.   

Regardless of the reason, though, markets tend to view splits as positive events, and a company’s shares can get a short-term boost from the news. But if the company isn’t a good, long-term business, it doesn’t matter if its shares split, or whether you buy them before or after.

That’s why we pair up stock-split announcements with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock pickers think a company’s long-term potential is outstanding, and the company is giving off bullish signals, maybe investors should take notice.

Here are two stocks that recently announced their intention to split their shares.

Stock	CAPS Rating (out of 5)	Split Ratio	Pay Date	Current Share Price
Coca-Cola (NYSE: KO  )	*****	2:1	8/10/12	$76.63
Google (Nasdaq: GOOG  )	****	2:1	NA	$614.98

NA = not available.

Don’t blindly buy into a split — you still need to do some research. Use the announcement as a jumping-off point to determine whether its shares are as good as before.

Drink up!
Coke and Diet Coke are the two most popular soft drinks. PepsiCo‘s (NYSE: PEP  ) Pepsi remains third. Both Coke and Pepsi have four brands in the top 10; rounding out the other two spots are Dr Pepper Snapple (NYSE: DPS  ) beverages. Sadly for Pepsi, the drink that accounts for 20% of its revenues, Mountain Dew, lost market share while Coke’s Fanta and Sprite gained.

But the real secret to Coke’s success is its presence in emerging markets. Volume growth in North America might have been up 2% last quarter, but it was up 20% in India and 9% in China. Even in financially wracked Europe, it was experiencing growth. And it’s not just the fizzy stuff that sells. Packaged water volumes were up 15%. That’s one of the reasons CAPS member Savant111 likes the drink maker, along with its ability to control costs.

In essence, this is what a company executing perfectly on its business plan looks like. But as the Fool’s Dan Caplinger cautions, Coke at 20 times earnings is not as cheap as it once was: “… even if the share price gets cut in half in the near future, the stock will still trade at around 20 times earnings — no longer the bargain that you could have fetched a few years ago.”

While that’s a premium to Pepsi, the better operational performance may warrant the higher sticker price. Tell us on the Coca-Cola CAPS page or in the comments section below if Coke will taste just as sweet at half the price. Add the stock to your watchlist to see if management’s enthusiasm for making its stock more attractive to a broader investing audience ends up gearing it for making short-term decisions instead.

Evil is as evil does
Google’s come a long way from its “do no evil” days; many now think it personifies the very practices it once criticized. Running the company for the benefit of its founders, as the proposed split suggests it would, could be another step on its path to the dark side.

The search king’s split isn’t the feel-good future growth vision that most splits offer, but rather is an attempt to consolidate power in Larry Page’s and Sergey Brin’s hands. The split would create a new class of publicly traded, nonvoting capital stock. Current Google shareholders would receive one new share of the nonvoting stock for each share of stock they own, giving investors twice the number of shares they had before. As Page and Brin recently wrote: “we have decided that maintaining this founder-led approach is in the best interests of Google, our shareholders and our users”

No doubt they have. But that’s why the hackles have been raised on the necks of corporate governance firms. And analysts say the two founders are determined to run the company the way they want so consolidating power in their hands, as the split would do, allows them to spend shareholder resources on wind farms, space ventures, and any other cockamamie idea the two dream up. Mark Zuckerberg will be maintaining control of Facebook after its IPO and no doubt Brin and Page jealously want a similar amount of control.

When you compare the quarterly results Google just posted, where revenues were in line with expectations, with those of say Apple, it explains why I chose the latter to invest in rather than the former.

I’ve rated Google to underperform the market over the next few years because I think many investors will see management has little interest in running the company other than for the benefit of insiders and will abandon the stock. It may be dominant in certain fields, but being able to go off on a whim without consideration for the greater shareholder good is abhorrent to good governance.

Add Google to the Fool’s free portfolio tracker if you want to watch the Darth Vader of stocks complete its transformation from Jedi Knight to head of the Evil Empire.

Split the difference
Head over to the completely free CAPS service and let us hear what you’ve got to say about these or any other stocks that you think we should split hairs over. And if you’re looking for dividend-paying stocks to balance out your portfolio, check out The Motley Fool’s free report “2 Dirt-Cheap Stocks With HUGE Dividends.” You can be among the first to get analysis of a market leader in payment systems and a high-yielding energy company by accessing this just-released report. Simply click here — it’s free.

8 New Apps You Don’t Want To Miss

By Emily Price | Mashable  –  Avengers AR The Avengers are headed to theaters soon, but a new mobile game has already hit iTunes and Google Play.

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By Emily Price | Mashable – 

Brydge Turns Your iPad Into a Laptop [VIDEO]

By Emily Price | Mashable  –  A new iPad case is attempting to blur the lines between laptop and tablet. Called Brydge, the special case has a built-in keyboard that transforms your iPad into a more laptop-like device capable of performing many of the same functions you know and love from your traditional computer. [More from Mashable : What Would It Take to Beat Apple?] Made out of aerospace-grade aluminum, the case looks and feels like your iPad.

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By Emily Price | Mashable – 

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