Is Green Mountain Coffee Roasters Well Positioned for the Future?

With shares of Green Mountain Coffee Roasters (NASDAQ:GMCR) trading around $72, is GMCR 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

Green Mountain Coffee Roasters is engaged in the specialty coffee and coffee maker businesses. The company roasts Arabica bean coffees including single-origin, Fair Trade Certified, certified organic, flavored, limited edition, and blends offered in K-Cup portion packs, and whole bean and ground coffee selections. It also offers other specialty beverages, including tea, hot apple cider, and hot cocoa also offered in K-Cup portion packs. The coffee and relative drink trend has been exploding over recent years. Green Mountain Coffee Roasters makes this trend as personal as possible by bringing favorite beverages to the comfort of homes and businesses. As the specialty and related beverage trend operates in full force, look for companies like Green Mountain Coffee Roasters to see rising profits.

The maker of Keurig-brand single cup coffees and brewers posted higher-than-expected profit for the third quarter. Sales of Green Mountain's K-Cups and single-cup brewers rose during the quarter, bringing in a profit of 89 cents per share for the quarter when analysts had expected the figure to be around 75 cents. Green Mountain has been working to offer more varieties of its K-Cups as grocery stores have begun introducing off-brand versions, Bloomberg reports.

T = Technicals on the Stock Chart Are Strong

Green Mountain Coffee Roasters stock has been in recovery mode from a major press setback that occurred a couple of years ago. The stock is currently on a strong move higher and looks poised to test all-time highs. 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, Green Mountain Coffee Roasters is trading between its rising key averages, which signals neutral price action in the near-term.

Source: Thinkorswim

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Green Mountain Coffee Roasters Options	53.24%	0%	0%

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

	Put IV Skew	5 Best Performing Stocks To Invest In Right Now Call IV Skew
December Options	Average	Average
January Options	Average	Average

As of Thursday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral 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 Green Mountain Coffee Roasters’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Green Mountain Coffee Roasters look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	42.63%	65.22%	50%	6.06%
Revenue Growth (Y-O-Y)	8.53%	11.26%	13.53%	15.61%
Earnings Reaction	16.81%*	-3.5%	27.84%	-5.35%

Green Mountain Coffee Roasters has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Green Mountain Coffee Roasters’s recent earnings announcements.

*As of this writing.

P = Excellent Relative Performance Versus Peers and Sector

How has Green Mountain Coffee Roasters stock done relative to its peers – Starbucks (NASDAQ:SBUX), McDonald’s (NYSE:MCD), and Dunkin’ Brands (NASDAQ:DNKN) — and sector?

	Green Mountain Coffee Roasters	Starbucks	McDonald’s	Dunkin’ Brands	Sector
Year-to-Date Return	76.27%	51.15%	10.91%	41.62%	45.98%

Green Mountain Coffee Roasters has been a relative performance leader, year-to-date.

Conclusion

Green Mountain Coffee Roasters provides coffee and related products to eager consumers around the world. The maker of Keurig-brand single cup coffees and brewers posted higher-than-expected profit for the third quarter. The stock has been on a powerful path toward higher prices and looks poised to test all-time highs. Over the last four quarters, earnings and revenue figures have been on the rise, which has really excited investors in the company. Relative to its peers and sector, Green Mountain Coffee Roasters has been a year-to-date performance leader. Look for Green Mountain Coffee Roasters to continue to OUTPERFORM.

Modern Day Horror Stories: 'And Then My Money ... Vanished'

Getty Images They come slinking out of the shadows like disembodied spirits, trying to steal your life and all that goes with it. No, not ghosts, ghouls or vampires: We're talking about a more modern diabolical threat -- identity thieves looking to make off with your hard-earned cash. On this day of tricks and treats, we offer you a few tales of the unfortunate victims of such tricks -- and treat you to some advice about what to do if it happens to you. Double Trouble Credit card fraud affects around 10 percent of all Americans each year, according to the Federal Trade Commission, so odds are it will strike you at some point. Keeping an eagle eye on your credit card charges is key -- the sooner you alert your credit card issuer to fraudulent charges, the faster you can stop the crook. The good news is, credit card companies have become quite familiar with fraudsters' patterns now, and most are good about removing the charges quickly. Ghouls Go Shopping There's not much you can do to thwart a determined thief other than keep a close watch on your wallet. But carrying only one card around can at least make the theft a little less painful. It's also a good idea to photocopy all your cards, front and back, in case you need to contact your banks and credit card companies quickly. Bad News Bidders Phishing has become ubiquitous -- if you have an email account, it's likely you've been targeted -- and the tricksters are moving their scams to text messages now, too: Ferris Research says more than 4 million phishing texts were sent in 2012. There's one fail-safe way to avoid phishing scams that look like they come from your bank, credit card issuer, or popular sites like eBay (EBAY) and Paypal. Simply delete the message and type the company's web address directly into your browser. If the message is legitimate, eBay, Paypal, and many financial companies store it in an online "message center" in your profile that you can access from their sites. If you're really concerned, call the company to check. There are plenty of scammers out there, but you can keep scary situations from becoming true nightmares with a little knowledge and planning. Happy Halloween!

First Take: Fed gives markets little to cheer

Despite recent signs of weakness, the Federal Reserve thinks that the economy is growing strongly enough for it to trim its bond-buying program by $10 billion, to $65 billion a month, the Fed said Wednesday.

Your mileage may vary, however.

The Fed started to taper its bond purchases, which are designed to keep long-term rates low, in December. Low long-term rates help borrowers, particularly mortgage borrowers, to refinance loans or take out new mortgages at affordable rates. In theory, as the economy starts to gain momentum, markets will no longer need the Fed pushing long-term rates lower than they would normally be.

NEWS STORY: Fed continues to pare stimulus

FED STATEMENT: Full text

DAVID MARSH: Tests loom for Janet Yellen

But the economy is by no means up and dancing, despite the efforts of outgoing chairman Ben Bernanke. Tuesday's report from the Conference Board on its Consumer Confidence Index, a good leading indicator of the economy, showed a rise from December's levels, but it's still well below its average for recovery periods from 2003-2007 and 1997 to 2000. And Tuesday's report on durable goods – big-ticket items expected to last a long time -- was also a disappointment. Wages are stagnant, and employment remains stubbornly high.

For that reason – and because fourth-quarter corporate earnings have seen some big misses, most notably from Apple and Yahoo – financial markets aren't likely to cheer the Fed's decision to take its foot gently off the monetary accelerator. Tapering simply means the Fed isn't adding money to the system as it was before. It's not taking money out of the system.

That's unlikely to happen this year. The Fed probably will not nudge its key short-term fed funds rate, now at zero to 0.25%, until 2015, when the unemployment rate is expected to fall below 6.5%.

For savers, that means another 12 months of negative returns, when adjusted for inflation, which has gained 1.5% for the 12 months ended December. And for! stock investors, who have grown used to "taper tantrums" when the Fed slows down its market-friendly easing, Wednesday's announcement could mean more rocky sessions ahead.

Bond yields fell on the news, which mainly reflects worries about turmoil in emerging markets, particularly Turkey and South Africa, which have raised rates recently.

"Emerging markets weakness is driving the ship right now," says Anthony Valeri, Investment Strategist for LPL Financial. "But the economy is doing well, and rates should track higher. This could be a good selling opportunity for bonds."

HUDCO's Rs 750-cr tax-free bond issue hits market today

Hot Financial Stocks For 2015

The bonds are in the nature of secured, redeemable, non-convertible debentures.

The minimum application size for the issue is five bonds of Rs 1,000 each and in multiples of one bond thereafter.

Also Read - IIFL secured bond issue opens today

The issue opens today and will close on October 14. The bonds will be listed on the BSE.

A coupon rate of 8.14 percent, 8.51 percent and 8.49 percent, payable annually for 10, 15 and 20 years respectively is offered for qualified institutional buyers, corporates and high networth individuals applying for bonds of over Rs 10 lakh.

An additional 0.25 percentage points will be given to retail individual investors subscribing up toRs 10 lakh. Forty per cent of the issue is reserved for retail investors.

CARE and India Ratings have assigned a high degree of safety rating regarding timely servicing of financial obligations.

The bonds will be issued in both physical and dematerialised forms.

Meanwhile, Rural Electrification Corporation which came out with a tax-free issue for Rs 1,000 crore on August 30, with a green-shoe option of Rs 2,500 crore, has closed its offer on Monday ahead of the closure date of September 23, as it had been oversubscribed.

Is a High Yield, High Beta Stock the Best Way to Book Big Dividends?

A recent article on Benzinga detailed how to use sniper tactics to buy stocks when the dividend yields are higher.

The method involved setting a dividend yield as the target, and then buying at that price. From that, the stock has a lower price and a higher dividend yield.

There are many blue chip stocks with high dividends and high betas such as BP PLC (NYSE: BP), the major oil firm, and Caterpillar (NYSE: CAT) -- the world's largest heavy equipment maker and a member of the Dow Jones Industrial Average.

Another one to consider is Cohen & Steers Inc (NYSE: CNS), an asset manager based in New York City.

While the dividend yield for a member of the Standard & Poor's 500 Index averages around 1.9 percent, for Cohen & Steers it is just over 5 percent, much higher than that for BP or Caterpillar. Cohen & Steer's has a beta of 1.56, which means the share price moves up and down nearly 60 percent more than the stock market as a whole, which has a beta of 1.

Related: BP Energy Output is Bullish for Coal

So if an investor wanted to triple the average yield of an Standard & Poor's 500 member, it would set the buy price for Cohen & Streets nearly 20 percent lower. At present, Cohen & Steer's is just under $37. For the 6 percent yield, the purchase price would have to be around $30.

That range was the 52-week low for Cohen & Steers.

It is impossible to time the market. Do not even try to buy at the lowest price. But there is no reason not to buy at a desired dividend yield. Cohen & Steer's has no debt, a profit margin of 23.80 percent and high returns, so the balance sheet and income statement are solid. As such, it is an ideal stock to buy for the long term with the dividend yield setting the purchase price.

Posted-In: Long Ideas Dividends Markets Media Trading Ideas Best of Benzinga

(c) 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Can Target Stock Rebound?

With shares of Target (NYSE:TGT) trading around $59, is TGT 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

Target operates general stores in the United States as well as online, where it sells merchandise at discounted prices. It operates in three segments: U.S. Retail, U.S. Credit Card, and Canadian. Target's online presence is designed to enable consumers to purchase products either online or by locating items in one of its stores with the aid of online research and location tools. Groceries, clothing, household items, and general merchandise can be found at Target, making it an efficient shopping experience for consumers throughout the nation.

Target will end health insurance for part-time employees in April, joining Trader Joe's Co., Home Depot Inc. (NYSE:HD) and other U.S. retailers that have scaled back benefits in response to changes from Obamacare. About 10 percent of part-time employees, defined as those working fewer than 30 hours a week, use Target's health plans now, according to a posting yesterday on the Minneapolis-based company's website.

Target is the second-largest U.S. discount retailer by sales and had about 361,000 total employees last fiscal year, according to data compiled by Bloomberg. The U.S. Patient Protection and Affordable Care Act is the largest regulatory overhaul of healthcare since the 1960s, creating a system of penalties and rewards to encourage people to obtain medical insurance. The law known as Obamacare doesn't require most companies to cover part-time workers, and offering them health plans may disqualify those people from subsidies in new government-run insurance exchanges that opened in October.

T = Technicals on the Stock Chart Are Weak

Target stock has been pulling back over the last couple of months. The stock is currently trading sideways and may need time to stabilize before heading higher. 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, Target is trading below its rising key averages, which signal neutral to bearish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Target options	19.27%	36%	34%

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

	Put IV Skew	Call IV Skew
February Options	Steep	Average
March Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bearish 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 Mixed 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 Target’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Target look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	-43.75%	-10.38%	-25.96%	0.81%
Revenue Growth (Y-O-Y)	1.95%	2.01%	-0.95%	6.76%
Earnings Reaction	-3.45%	-3.60%	-4.01%	-1.45%

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

P = Average Relative Performance Versus Peers and Sector

How has Target stock done relative to its peers, Wal-Mart (NYSE:WMT), Costco (NASDAQ:COST), Kohl’s (NYSE:KSS), and sector?

	Target	Wal-Mart	Costco	Kohl’s	Sector
Year-to-Date Return	-6.73%	-4.38%	-4.17%	-8.79%	-5.01%

Target has been an average relative performer, year-to-date.

Conclusion

Target operates discount general stores across North America where consumers continue to enjoy their shopping experience. The company will end health insurance for part-time employees in April. The stock has been pulling back over the last couple of months and is currently trading sideways. Over the last four quarters, investors in the company have had conflicting feelings, as earnings have been decreasing while revenues have been rising. Relative to its peers and sector, Target has been an average year-to-date performer. WAIT AND SEE what Target does the rest of this quarter.

Time Warner Gains-But CBS Gains More-as Deal to Restore Programming Reached

In the Door’s song “the End,” Jim Morrison sang about wanting to kill his father. After today’s deal between CBS (CBS) and Time Warner (TWX) that restore CBS programs to subscribers, T.V. viewers might no longer want to kill their cable provider.

Getty Images

The Wall Street Journal explains what happened:

Time Warner Cable and CBS Corp. announced a new accord on the fees that the cable operator will pay to carry CBS programming, ending the blackout at 6 p.m. Eastern time. Terms of the agreement weren’t disclosed.

“We are receiving fair compensation for CBS content,” CBS Chief Executive Les Moonves said in a note to employees.

Time Warner Cable Chief Executive Glenn Britt said that “while we certainly didn’t get everything we wanted, ultimately we ended up in a much better place than when we started.”

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The fact that terms weren’t disclosed hasn’t stopped analysts from speculating about what it might look like. B. Riley & Co.’s analysts offer their view:

While economics were not disclosed, we believe CBS did bend slightly on its demands for $2/sub/month, (which would have been a 300% hike in fees), and agree to between $1.50 – $1.75/sub, depending on the DMA. In turn, we believe TWC agreed to give up any streaming economics which currently CBS currently books on library product from its various deals with OTT providers, (examples – Cheers, Everybody Loves Raymond, Hawaii 5-0, Twin Peaks, CSI Miami, etc.).

Wunderlich’s Matthew Harrigan offers his thoughts:

CBS likely secured a monthly fee not quite immediately in line with its $2 monthly target, but likely to eclipse that threshold near the end of the five- to six-year deal term. The CBS network was back on 6pm Monday, in time for Gino Smith’s likely debut as starting quarterback for the New York Jets. CBS CEO Les Moonves did suggest to staffers that CBS now has latitude to secure domestic subscription VOD deals for CBS and Showtime, including Showtime Anywhere, significant positives for monetizing digital platform carriage. TWC CEO Glenn Britt is suggesting that the MSO was successful in somewhat moderating CBS’s more extreme demands.

The analysts sound as if they believe CBS got the better of the deal-and the market appears to agree. Shares of CBS have gained 3.7% to $53.00, while Time Warner has gained 1.1% to $61.19. Shares of Disney (DIS) are little changed at $60.81, while shares of Cablevision Systems (CVC) have dropped 0.3% to $17.69.

Here's how you can be a good investor

Rupee hits a low, interest rates rise, stock prices fall, vegetable prices zoom a common man is hit from all sides. What should one do with the investments in such a scenario?

Many an investors feel too much anxiety about their personal finances, especially when the investments are made in a market that exhibits price volatility.

Professor Sheena Iyengar of Columbia Business School in her book, the Art of Choosing, narrates one experiment carried out by a psychologist in the year 1965. Here is a short description of the experiment and the findings:

Dr. Martin Seligman and team began the experiment by leading mongrel dogs into a white crucible, one by one, and suspending them in rubberized cloth harness. Panels were placed on either side of each dog's head, and a yoke between the panels across the neck help the head in place. Every dog was assigned a partner dog placed in another cubicle.

During the experiment each pair of dogs was periodically subjected to physically nondamaging yet painful electrical shocks.=, but there was a crucial difference between the two dogs' cubicles: One could put an end to the shock simply by pressing the side panels with its head, while the other could not turn it off, no matter how it writhed.

The shocks were synchronized, starting at the same moment for each dog in the pair, and ending for both when the dog with the ability to deactivate pressed the side panel. Thus, the amount of shock was identical for the pair, but one dog experienced the pain as controllable, while the other did not.

The dogs that could do nothing to end the shocks on their own soon began to cower and whine, signs of anxiety and depression that continued even after the sessions were over. That dogs that could stop the shocks, however, showed some irritations but soon learned to anticipate the pain and avoid it by pressing their heads.

In the second phase of the experiment, both dogs in the pair were exposed to a new situation to see how they would apply what they had learned from being in or out of control.

Researchers put each dog in a large black box with two compartments, divided by a low wall that came up to about shoulder height on the animals. On the dog's side, the floor was periodically electrified. On the other side, it was not.

The wall was low enough to jump over, and the dogs that had previously been able to stop the shocks quickly figured out how to escape. But of the dogs that had not been able to end the shocks, two-thirds lay passively on the floor and suffered.

The shocks continued, and although the dogs whined, they made no attempt to free themselves. Even when they saw other dogs jumping the wall, and even after researchers dragged them to the other side of the box to show them that the shocks were escapable, the dogs still gave up and endured the pain.

For them, the freedom from pain just on the other side of the wall so near and so readily accessible was invisible.

This is termed as learned helplessness. This is "giving up" even when help is available and feeling hopeless.
This is a very powerful insight and it is not new. (The experiment was carried out in 1965). The feeling of control plays a vital role in exercising the choice. Having a choice is one thing, but being able to see possibility of a positive outcome is another.

In the markets, where the prices fluctuate out of no understandable reasons, as mentioned in the beginning, many investors feel great amount of anxiety. How do we see that in light of Dr. Seligman's experiment? Is it possible to exercise choice? Or are we just plain simple vulnerable?

The answer to this question lies in the serenity prayer:

God grant me the serenity to accept things I cannot change, courage to change the things I can, and wisdom to know the difference

Let us understand why we invest in the first place. We invest for some purpose for some, the purpose would be to meet some large lump sum financial requirements what the financial advisors would call the family's financial goals, or in some cases, the purpose would be to create wealth for oneself or for others. Whatever the purpose, the same must be central to the investment plan.

Towards this objective, we build our investment portfolios. However, the money must be invested somewhere. And that is where the worries start. We forget the serenity prayer and try to control the uncontrollable.

Many a times, investors try to predict the future movement of the price of their investments. Often, investors expect their advisors to be able to predict. Expertise is very different from ability to forecast.
It is here that the experiment mentioned earlier helps us. Repeated failure in trying to forecast and the inability to see the logic behind short-term price movements results into conditioning the brain such that we start forming certain beliefs.

Examples of some such beliefs are:

• Nobody can make money in the markets

• The market prices are manipulated

• The market is a casino

All these are conclusions that are not going to help anyone.

Let us look at this point from a different perspective that of control. Any investment plan has two sides: the investor's personal situation and the investments and markets. Between these two, the investor has a better control over one's own situation and hardly any over the investments and the markets.

What is a good financial plan? It should take care of the basic need, i.e. getting the required amount of money at the time of the requirement. In such a case, the basic principles one can start with could be:

1. The loss on account of a default which could arise out of inability or mala fide intentions should be avoided as much as possible

2. At any point one needs money, one should not be vulnerable to the price fluctuations

3. Investment growth lagging the rise in goal value another situation that must be taken care of

The first is the easiest diversify your investments across different companies and industries. You may also diversify across geographies. What is proper diversification? The basic principal behind diversification is that the same must be done across "diverse" investments.  "Diverse" or "unrelated" is a very important word out here. It is actually the essence of diversification.

The second is a little more difficult. It can be managed by planning the finances in such a manner that at the time of the goal, there is sufficient money in investment avenues, which are not subject to price fluctuations. Such options are bank deposits, liquid mutual funds or cash in bank savings account.

The third can be countered by investing money in assets that has the potential to grow at a rate higher than inflation. However, let us visit out Math class.

Way back in secondary school, we were taught the equation of compound interest, which is reproduced below:

A = P * (1 + r) ^ n, where
A = amount accumulated or to be accumulated. In our context, it is the goal value
P = amount invested or to be invested. This could be one time investment or a periodic regular investment
r = rate of return on investment, and
n = the time period for which the money would remain invested

The goal to be achieved is A. For that, there are three variables on the right hand side. If one is able to reach the target amount through increasing the time horizon or the amount invested, one need not seek high rate of return on investment.

However, one must keep in mind that the goal value is subject to inflation and hence the goal value would keep rising as the time passes. In this context, for long term investment plans, one must factor inflation in. without considering the impact of inflation, there is a very high probability of regret in the later years by then, it would be too late to take corrective action.

To summarise, an investor must consider the risks of investments, viz., risk of default, risk of volatility and risk of inflation while planning. If a portfolio is constructed with these principles, the investor would have better control over the situation and would lead to one taking better and correct actions when required. Focusing on things beyond one's control is a sure-shot recipe for disaster.

Remember the old proverb: "You can't direct the wind, but you can adjust the sails". Similarly, "you can't direct the markets, but you can adjust your own cash flows."

The author is proprietor of Karmayog Knowledge Academy.

Jim Cramer's 6 Stocks in 60 Seconds: VMW PCLN EW SEAS AOL FB

Top 10 Insurance Stocks To Invest In Right Now

Check out Jim Cramer's latest trading recommendations on "Action Alerts Plus".

(Updates from 10:46 a.m. ET with closing information.)

NEW YORK (TheStreet) -- Here's what Jim Cramer had to say on CNBC's "Squawk on the Street" Thursday.

Citigroup upgraded VMware (VMW) to buy from hold. Cramer agreed saying it's an exciting company and "a very good stock." VMW rose 1% to $99.33.

Priceline.com (PCLN) is one of Cramer's favorite stocks. "This is how people get great bargains," he explained. It's "part of the new frugality." PCLN rose 1% to $1,184.65. Cramer said Edward Lifesciences (EW) is "worth a great deal" after it found a way to implement its heart valve devices without breaking open the patient's chest cavity. It was also awarded $392 million from Medtronic (MDT) due to patent infringements. EW was 1.1% higher at $72.67. Wells Fargo had a positive note on SeaWorld Entertainment (SEAS). Cramer called it "nutty" because the positive comments stem from the Blackfish documentary failing to be nominated for an Oscar. Blackfish portrayed SeaWorld in a very negative manner. SEAS jumped 8.4% to $33.59. Shares of AOL (AOL) are higher on Thursday after it announced Hale Global would take over the operations of its Patch local news sites. This is what investors were looking for and "it's a strong delivery" by AOL, Cramer said. AOL soared 11.2% to close at $52.54. Raymond James was positive on Facebook (FB). Cramer said expectations for the quarter don't seem to be very good, meaning the company could surprise to the upside. FB closed nearly 1% lower at $57.19. To sign up for Jim Cramer's free Booyah! newsletter, with all of his latest articles and videos, please click here. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell

Stock quotes in this article: VMW, PCLN, EW, MDT, SEAS, AOL, FB 

Lousy Jobs Report Reveals an Inconvenient Truth

After several consecutive months of job gains near or above 200,000, the streak came to an abrupt halt with the December jobs report - reminding everyone how fragile our economy still is.

Payroll growth last month slowed to the slowest pace since January 2011. Employers added a skimpy 74,000 jobs in December, Friday's Labor Department report revealed.

That was well below even the most cautious expectations.

Surveys showed economists expected gains of 197,000 to 205,000, with the unemployment rate remaining at 7%. Many analysts raised projections after Wednesday's report from private payroll processing firm ADP showed businesses added 238,000 jobs in December, the most in 13 months.

The lackluster job creation wasn't the only "surprise" in the December jobs report. The unemployment rate unexpectedly fell to 6.7% from 7%, marking the lowest level since October 2008.

Digging into the reasons behind the drop shows just how troubling this situation is. That's because the decline was due to some 347,000 discouraged Americans simply dropping out of the work force.

"Despite the good headline news (the dip in the unemployment rate), the U.S. economy is still experiencing problems stemming from the 2008 mortgage crisis," Steven Pressman, Professor of Economics at Monmouth University in Long Branch, NJ, told Money Morning. "A good part of the unemployment rate decline was due to people giving up and not looking for work. These people don't get counted as unemployed because they're not seeking work. The decline in the employment population ratio to 62.8%, the lowest rate since 1978, reinforces this. A number like this can only be regarded as disturbing."

Disturbing indeed. The number of people not in the workforce swelled by 525,000 in December to 91.808 million. That's a huge exodus of people leaving the employment arena. And the figure dwarfs the meager number of jobs created.

More Disturbing December Jobs Report Details

Other labor market indicators highlighted in the December report are also bothersome:

The average workweek dipped to 34.4 hours from 34.5 hours, a sign of weakness in the overall economy (employers give existing workers more hours before adding new employees). Average hourly earnings rose a paltry two cents to $24.17. Federal, state, and local government headcount fell by 13,000 jobs in December after rising 15,000 in November. Employment in healthcare and social assistance decreased by 6,000. That compares with monthly gains of 17,000 in 2013 and 27,000 in 2012. Moreover, it marked the first decline since July 2003. Construction employment fell 16,000, the first decline since May and a sharp reversal from 2013's monthly average of a gain of 10,000. Declines were also seen in the transportation, information technology, warehousing, and entertainment sectors. The scant job gains were peppered across the lower-paying categories of retail, fast food, and general merchandising. This increasing trend highlights a troubling shift. According to a 2013 Center for College Affordability and Productivity report, the number of college grads taking unskilled jobs has ballooned since 2006. The United States now has more college graduates working in retail than soldiers in the U.S. Army. The wider measure of joblessness, the underemployment rate - which includes part-time employees who prefer full-time jobs, those who have given up looking for work, and the unemployed - remained stubbornly elevated at 13.1% in December. The latest numbers mean the U.S. economy gained an average 182,000 jobs a month last year, less than 2012's average. For all of 2013, employers added 2.18 million jobs, a tad fewer than 2012's total of 2.19 million. Weak December Jobs Report to Prompt Fed to Pause

December's anemic jobs growth will play into the Federal Reserve's decision on how to unwind its bond-buying program, recently reduced to $75 billion per month.

"In terms of policy implications, the Federal Reserve is going to have to think twice about further tapering," Pressman said. "They are going to have to think twice about their 6.5% unemployment rate target for thinking about the end of tapering. We are nearly at this point now, but all other numbers point to the fact that the labor market is still much too weak."

In December, the central bank tried - and failed - to make its intentions clear: "If the incoming data broadly support the Committee's outlook for employment and inflation, we will likely reduce the pace of securities purchases in further measured steps at future meeting. Of course, continued progress is by no means certain. Consequently, future adjustments to the pace of asset purchases will be deliberate and dependent on incoming information."

So much for future guidance.

We will get more, or less, news at the Fed's Jan. 28-29 meeting.

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Related Articles:

Reuters:
Jobs Report: Economy Added 74,000 Jobs in December Bloomberg:
Payrolls Rise Less Than Forecast: U.S. Jobless Rate at 6.7% The New York Times:
U.S. Economy Adds Only 74,000 Jobs in December

Ask an Expert: Empower your employees

Q: I was wondering if you had any tips on how our business could be more entrepreneurial? We have been around for a long time, have about 25 employees, and so we are well past that creative, startup phase. -- Trisha

A: When you empower employees to think and act entrepreneurially, it is called "intrapreneurship." It might be an employee who comes up with a great idea or a staffer who heads a project that he or she came up with. Either way, it's internal entrepreneurship, or intrapreneurship. Intrapreneurship is win-win: It gets staff motivated and involved, and does so for the benefit of your business.

According to Gifford Pinchot, who first made the term intrapreneurship popular in his 1985 book, Intrapreneuring, "Look back at any great business or invention at just about any big company and you can find that intrapreneurs created it."

EDMUNDS: Try placing trust in your staff

When businesses set up an intrapreneurial environment, an environment that encourages risk-taking and innovation, the business benefits in very tangible ways. For starters, they will likely see a rise in the reliability, happiness, diligence, and productivity of their employees. Businesses have also found that encouraging intrapreneurship helps to attract and retain top talent. Also, when employees can act creatively and explore their best ideas, they experience higher levels of job satisfaction. Ultimately then, intrapreneurship increases employee retention rates, boosts productivity, and fosters an exceptional culture.

Richard Branson says that when Virgin began its mobile phone division, they were new to the niche, and so to get up to speed quickly, they hired top managers from rival companies and gave them the freedom to set up internal ventures of their own. This intrapreneurial process resulted in innovative thinking and a very profitable new business. In Entrepreneur Magazine, Branson writes, "What if CEO stood for 'chief enabling officer'? What if that CEO's primary role were to nurture a bree! d of intrapreneurs who would grow into tomorrow's entrepreneurs?"

Steve Jobs once said this: "Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it."

So it would behoove the small business owner to take a page out of the book of these pros, "get it," and become more intrapreneurial. Here are a few ways to do so:

1. Give them resources and encourage them: Employees need to know that you value this idea of intrapreneurship enough to support it with more than just talk. Give folks the time and resources necessary to flush out and launch their best ideas.

2. Make failure an option. If you want employees to take risks, you have to encourage risk taking, and that means making it OK for them to make mistakes and fail. Because it is only when failure is an option that employees will be willing to risk their reputation on an idea.

3. Have fun. Anything that can be done in the spirit of fun can reap big rewards. Creative thinking workshops or classes can get employees' juices flowing.

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4. Recognize them: Even if it is something as simple as giving a prize for the best idea in a suggestion box, employees should see that their ideas are valued and being acted upon.

5. Reward them financially: Nothing talks like money. Employees who have a financial stake in the business are more conscientious, harder working, and happier. They will also be even more passionate about the project that they have launched and more motivated to ensure it is successful.

If you want your people to act entrepreneurially, then reward them accordingly.

Today's tip: Google gives not only engineers, but also all employees, 20 percent free time to work on projects of t! heir own ! choosing that can benefit the company.

Here is how the process works: Intrapreneurs at Google are encouraged to discuss their ideas and get creative input from coworkers. Then, after refinement by the crowd, there is a formal review process. A project proposal and timeline is submitted and the intrapreneur must describe how he or she plans to go about evaluating the success of the project. Once an outstanding project has been selected, the project is monitored, analyzed, implemented.

Gmail, AdSense, and Orkut were all started by Intraprenurial Google employees.

Steve Strauss is a lawyer specializing in small business and entrepreneurship. His column appears Mondays. E-mail Steve at: sstrauss@mrallbiz.com. An archive of his columns is here. His website is TheSelfEmployed.

BlackBerry CEO to Wall Street: You're Doing It Wrong

We already knew the folks at BlackBerry (NASDAQ: BBRY  ) had plenty to prove at the company's annual meeting Tuesday, thanks largely to its posting a dismal earnings report two weeks ago that resulted in a one-day drop of more than 27%. 

To its credit, the struggling smartphone maker did let investors know the surprise miss primarily happened thanks to foreign currency restrictions in Venezuela, which negatively affected both its GAAP and adjusted earnings to the tune of $0.10 per share.

All told, not including the Venezuela issue, BlackBerry also highlighted the fact that its adjusted earnings per share would have otherwise come in at $0.03, or roughly in line with the company's previous vague outlook of "approaching breakeven results."

Unfortunately, however, just 2.7 million of the 6.8 million total smartphone units shipped were equipped with the company's BB10 operating system, or far below consensus analyst estimates of 3 million to 4 million BB10 handsets.

Adjusting our expectations... downward
Of course, the difficulty in predicting BlackBerry's numbers is also a big reason I warned investors last month not to get too excited over an upgrade from Societe Generale, which temporarily sent the stock up more than 6% after the firm said it believed BlackBerry would potentially sell as many as 5 million BB10 units during the quarter.

Going back to Tuesday's shareholder meeting, though, this is also why we shouldn't be particularly surprised that BlackBerry CEO Thorsten Heins told investors the business has become "difficult to forecast" with regard to many of the typical smartphone-related metrics analysts have grown accustomed to using with more dominant smartphone players such as Apple (NASDAQ: AAPL  ) and Samsung.

More specifically, Heins went on to elaborate:

With little visibility in these items, expectations in areas that the company could not guide were significantly higher than the company could have achieved. While many will judge our short-term success on unit sales in a single quarter, we are not a device-only company, [and] creating value for shareholders does not involve being everything to everyone.

In short, Heins effectively told the market: "You're doing it wrong."

The thing is, this offers little consolation for BlackBerry shareholders who note that 71% of the company's revenue came from hardware last quarter, and who rightly covet some form of transparency while the company is smack-dab in the middle of its self-described "three-stage plan" to transform itself.

But remember, though Heins rightly asserts BlackBerry isn't a device-only company, remember its competition isn't, either.

Sure, the Apple crew did sell 37.4 million iPhones and 19.5 million iPads last quarter alone, but they also pulled in more than $4.1 billion in sales from their iTunes, software, and services segment last quarter as well. In the end, all that hardware and supplementary digital goods helped drive a quarterly net profit of $9.5 billion for Apple last quarter.

The plan
But while selling hardware to build out a solid supplementary services biz works well for Apple, BlackBerry still insists it can create shareholder value without achieving immediate growth in those all-important BB10 smartphone sales.

Getting back to the aforementioned three-phase plan, then, the first phase (according to Heins) has already been completed and involved launching the BlackBerry 10 operating system and restructuring the business and workforce Remember, that latter restructuring included 5,000 layoffs last fiscal year in an effort to reduce costs.

The second phase, which Heins claims the company is "just starting now," involves a plan to "build and invest in the future." More specifically, that entails growing the company's enterprise services, BlackBerry Messenger platform, and launching additional BB10-driven devices. What's more, without clarifying further, Heins says this stage will also involve a focused pursuit of "vertical specific opportunities."

Finally, the third phase includes driving profits from the results of the first two phases, which will be a tall order considering the intense competition BlackBerry finds itself facing. 

Foolish takeaway
For the time being, however, remember BlackBerry did manage to generate cash from operations of $630 million last quarter, and it still held cash and investments of $3.1 billion at the end of June.

That said, BlackBerry also forecast continued operating losses during its fiscal second quarter, which is why Heins was left pleading with investors at the meeting to maintain their positive long-term outlook for the business.

In the end, it's unsettling to me that no one -- not even BlackBerry's own management team -- knows exactly how to gauge the long-term effectiveness of BlackBerry's turnaround efforts. Until BlackBerry can manage to provide some level of tangible, predictable progress, the stock remains too risky a bet for my taste.

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Why EWZ Is Poised to Bounce Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, the iShares MSCI Brazil Index Fund (NYSE: EWZ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at EWZ, and see what CAPS investors are saying about the ETF right now.

EWZ facts

Inception	July 2000
Total Assets	$5.8 billion
Investment Approach	Seeks investment results that correspond to the price and yield performance of the MSCI Brazil 25/50 Index. A capping methodology is applied that limits the weight of any single component to a maximum of 25% of the MSCI Brazil 25/50 Index.
Expense Ratio	0.6%
Dividend Yield	3.1%
1-Year / 3-Year / 5-Year Returns	(17.2%) / (9.7%) / (9.3%)
5 Best High Tech Stocks To Own For 2014 Alternatives	Market Vectors Brazil Small-Cap  SPDR S&P Emerging Latin America

Sources: Morningstar and Motley Fool CAPS.

On CAPS, 98% of the 2,074 members who have rated EWZ believe the ETF will outperform the S&P 500 going forward.

Just last month, one of those bulls, fellow Fool Matthew Argersinger (TMFMattyA), tapped EWZ as a particularly attractive bargain opportunity:

Emerging markets have sharply underperformed over the last two years, and Brazil is no exception. The Brazilian stock market is down something like 21% YTD. Here's betting on a turnaround and that the World Cup (2014) and Olympics (2016) will play a major role in reviving Brazil's economy.  

Owning exceptional ETFs is a surefire way to secure your financial future. Of course, despite a strong four-star rating, EWZ may not be your top choice.

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Cisco Catches Up to the Market -- That's Just for Starters

The rhythm of daily stock market gains is almost becoming monotonous. Today, U.S. stocks recorded their ninth "up" day in 10 sessions (each of which produced a record (nominal) high in the process), as the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) rose 0.5% and 0.4%, respectively.

Today's gains didn't impress option traders, however, as the VIX Index (VOLATILITYINDICES: ^VIX  ) , Wall Street's fear gauge, rose slightly, to close at 12.81. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)

Cisco gets some love -- finally
After the market closed on Wednesday, the world's largest networking equipment manufacturer and Dow component Cisco Systems (NASDAQ: CSCO  ) reported results for its fiscal third quarter ended April 27. Investors liked what they heard and sent the stock up more than 7% in the after-hours session, which was enough to push the shares' year-to-date performance past that of the S&P 500:

CSCO data by YCharts.

Let's start with a caveat: The after-hours session attracts few participants and is illiquid -- therefore, prices may not reflect the broad market's reception of the new information the following day. However, a glance at Cisco's fundamentals and its valuation suggest these after-hours gains are easily sustainable; in fact, I think this report could be the catalyst for a further rerating of the shares.

What did investors like about the report? Excluding unusual items (which include stock-based compensation -- a routine practice at technology companies), Cisco earned $0.51 per share in the quarter, two cents over the consensus estimate. Meanwhile, revenues of $12.22 billion were also above analysts' expectations of $12.18 billion.

Considering that Cisco peers Juniper Networks and IBM put up weak numbers recently, Cisco is providing investors with evidence that their shift from "being a communications company, a networking company, to more of an IT company" (in the words of CEO John Chambers) was a smart strategic choice.

With shares sporting a 3.2% dividend yield and trading at less than 10.5 times the estimate of next 12 months' earnings per share (based on the $21.21 regular session closing price), it's hardly absurd to think the after-hours price gains will hold and that the shares will go on to outperform the market by a healthy margin.

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Can Facebook Grow Fast Enough?

On Wednesday, Facebook (NASDAQ: FB  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. 

Facebook has earned the scorn of many investors who are still sitting on losses of 30% or more since its initial public offering nearly a year ago. Yet the social-media giant has taken plenty of steps forward in its attempt to turn its popularity into cold hard cash. Let's take an early look at what's been happening with Facebook over the past quarter and what we're likely to see in its report.

Stats on Facebook

Analyst EPS Estimate	$0.13
Change From Year-Ago EPS	18%
Revenue Estimate	$1.44 billion
Change From Year-Ago Revenue	36%
Earnings Beats in Past 4 Quarters	2*

Source: Yahoo! Finance. *Out of the three quarters since Facebook went public.

Will Facebook start making some serious money this quarter?
Over the past few months, analysts have pulled back on their views about Facebook's earnings. They've cut their first-quarter earnings estimates by $0.01 per share, but slashed $0.09 per share from their full-year 2013 calls. The stock has also shown that nervousness, falling 13% since late January.

Although Facebook got its start from the PC world, the most important opportunity for the company going forward will come from mobile. With 680 million monthly mobile users, Facebook is in prime position to get its share of money spent on mobile advertising, which reached $4 billion in 2012 and is expected to jump to $7 billion in 2013.

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But some worry that Facebook is finally reaching the full extent of its growth. Its Facebook Home app launch earlier this month for Android devices promised more complete integration of Facebook with mobile devices, yet reviews have been mixed, and the number of downloads of the app has been less than hoped. Given the importance that the company has placed on expanding its mobile presence, it's essential that Facebook get its mobile strategy right in order to keep growing at its current pace.

Still, Facebook is popular enough to have other companies doing its promotional work for it. Netflix (NASDAQ: NFLX  ) announced last month that it will make it possible for its U.S. users to share what they're watching automatically through Facebook. Given that Netflix Social required a special amendment to federal law, it's clear that Netflix thought it was worth lobbying to get the exemption, demonstrating how important Facebook has become for corporate marketing and promotion generally.

In Facebook's quarterly report, watch to make sure that the social-media company can continue to post impressive revenue growth. At this point, profits have to take a backseat as the company tries to grab as much of the mobile market as it can. Moreover, until it can demonstrate revenue from sources other than advertising, Facebook will have a tough time providing the long-term growth necessary to justify its current valuation.

After the world's most hyped IPO turned out to be a dud, many investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.

Click here to add Facebook to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

5 Winners and Losers of the Week in Business

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David Paul Morris/Bloomberg From sluggish PC sales to Facebook regaining an important advertiser to a department store chain finally dismissing its inept CEO, let's go over the wonders and blunders of business this week. The PC -- Remember when analysts felt that Microsoft's (MSFT) Windows 8 would breathe new life into the moribund desktop and laptop businesses? Well, it seems to be sucking whatever life was still in the box makers. Industry tracker IDC is reporting that PC shipments plummeted 13.9 percent worldwide during the first quarter. More and more consumers are finding that they can get by with smartphones and tablets, and that's bad news for PC makers. It's also bad news for Microsoft, which is the leader in PC operating systems, but not a player when it comes to the mobile operating system space. Facebook (FB) -- General Motors (GM) dissed Facebook as a premium marketing platform last May, but now it's back with a mobile advertising campaign for a new Chevy car. Having GM back as an advertiser is a big deal. GM embarrassed Facebook by publicly announcing that it was abandoning the social networking website in the days leading up to the poorly received Facebook IPO. Did GM's departure raise doubts about the viability of advertising on social networking websites? Well, GM is back. Facebook will naturally enjoy the ad revenue, but what it really gains here is the validation that it was lacking when GM peeled out last year. J.C. Penney (JCP) -- The Ron Johnson era is finally over at J.C. Penney. Investors were initially pleased with the announcement that the struggling retailer was dismissing its helmsman, but the stock headed lower when it was revealed that former CEO Mike Ullman would be stepping in as interim CEO. Who were J.C. Penney investors expecting to step up? Did they want someone who rose up the ranks at a "cheap chic" darling before launching the wildly successful Apple Store concept that's the toast of the sale per square foot mall equation? I hope not. Going dynamic didn't do J.C. Penney any favors last time out. Better luck next time, J.C. Penney. Just know that fickle retail shoppers don't give chains too many chances. Netflix (NFLX) -- Netflix CEO Reed Hastings didn't waste any time in taking advantage of a new SEC ruling that allows companies to disclose important facts through Facebook, Twitter, and other public social outlets. "Over the last three months, you all watched over 4 billion hours on Netflix," Hastings revealed in a Facebook status update on Thursday. If Hastings posting about service usage on Facebook rings a bell it's because he did the same thing when Netflix surpassed a billion hours of member streaming in a single month nearly a year ago. Netflix is now averaging more than 1.3 billion hours of served content a month. It's Hastings' way of letting folks know that the platform continues to grow in popularity. Google (GOOG) -- Folks living in Austin won't just have next year's installment of the annual South by Southwest festival to look forward to. Google has tapped the trendy Texan city as the next market to get the company's bar-raising Google Fiber service. Google Fiber initially rolled out in Kansas City, offering customers online access at speeds that are 100 times faster than conventional broadband connectivity. Google Fiber also offers a high-def TV service. The dual service will set Austin residents back $120 a month, but frugal Texans may want to consider a free monthly plan that Google offers at significantly slower speeds for a one-time installation fee of $300. Google doesn't want to be your next cable provider. It just wants to make sure that cable companies that offer Internet access don't make connectivity too expensive or burdensome. Google will lead by example, and that's smart.

The Reason Why Chipotle Continues to Crush McDonald's

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NEW YORK (TheStreet) --

CMG data by YCharts

That's a telling chart. Shares of Chipotle Mexican Grill (CMG) just crushing McDonald's (MCD) throughout 2013.

We can all speculate as to why McDonald's struggles while Chipotle continues to not only rip higher, but enter new spaces such as Asian cuisine and the recently-unwrapped pizzeria experiment. Where McDonald's divests -- it rid itself of Chipotle in 2006 (granted, MCD more than quadrupled its original investment) -- Chipotle grows and expands, but never looses sight of its bread and butter. TheStreet's Brian Sozzi might have hit gold in an exclusive interview he conducted with CMG co-CEO Monty Moran for our friends and lovers at Men's Health. In the Men's Health piece, Sozzi notes: Within 15 minutes of my talking to Monty it clicked: the energy, passion, focus, and teamwork are Chipotles ingredients for success, collectively they are the cement that is poured at each of its new restaurant locations. As the interview (complete with three things you didn't know about company culture at Chipotle) shows, CMG management just runs a different ship -- internally, at corporate and in its stores -- than MCD. The way it treats its employees, at all levels, and inspires them to invest themselves in the work they do probably best explains why Chipotle continues to hammer McDonald's in the sector and on the stock market. Read more HERE in what is really an excellent and telling piece by Sozzi. Follow @rocco_thestreet --Written by Rocco Pendola in Santa Monica, Calif.

Stock quotes in this article: CMG, MCD 

Yahoo: More Room to Run?

Yahoo!  (NASDAQ: YHOO  )  has done very well in 2013, with shares at 52-week highs. The company has made stellar progress in acquiring valuable technological assets, and has seen an increase in user traffic to its various online portals. The company's decision to hold onto a larger part of Alibaba will increase the company's value when the e-commerce giant enters the public market in a much-anticipated IPO. 

Rising traffic and user base
Yahoo! launched a number of new initiatives, including a redesigned logo to jump-start its goal to drive traffic and increase user engagement. The company's strides are paying off, as the number of monthly active users on Yahoo! during the third quarter was 800 million, the company's highest level ever. Yahoo!'s mobile user traffic stood at 340 million in Q2, which later surged to 390 million at the end of the last quarter.

In the U.S., Yahoo! sites had a monthly user traffic base of roughly 196 million for the month of October, slightly ahead of Google's (NASDAQ: GOOG  ) 194 million, according to comScore. The company developed more personalization for Yahoo! users, which has likely been a solid positive for the increasing number of visitors to various Yahoo! sites. Yahoo! is adding more premium content through partnerships with various media companies like ABC and NBC, which should translate into higher revenue from video ads. 

However, when it comes to search, Google still has a huge lead over Yahoo! and Microsoft's Bing. In November, Google's search market share in the U.S. stood at 66.7%, whereas the market share of Microsoft and Yahoo! stood at 18.1% and 11.2%, respectively, according to comScore. Google has a gigantic lead over its competitors, and it's likely to remain that way, but Yahoo! has a lot of room for improvement in the search engine business. 

Yahoo! showing signs of improvement
The company's surging traffic levels and increasing number of mobile users hasn't translated into higher revenue yet, but is expected to do so in the near future. In 3Q 2013, Yahoo!'s top-line revenue declined 5% year-over-year to $1.14 billion. Yahoo!'s display revenue in the last quarter stood at $470 million, which is a 7% year-over-year decline. The number of ads shown on various Yahoo! properties increased only 1%, but the pricing on display ads decreased 7%. 

While this may be perceived as a negative, Yahoo!'s CEO stated in the most recent earnings call that the company is trying to gain a broader audience first, and only then will it focus on monetizing those users. In the search business, revenue for 3Q 2013 stood at $435 million, an 8% year-over-year decrease. However, paid clicks increased 21%, but price per click declined 4%. Yahoo!'s lead competitor in the search engine market, Google, is also strongly growing paid clicks, but at a lower price. 

Going forward, a larger and more engaged audience on various Yahoo properties should trend higher. The company's Tumblr asset is seeing steady growth in user traffic, especially on mobile devices. The acquisition hasn't reaped benefits yet, but is expected to be a revenue-generating asset in the future. Yahoo!'s management expects Tumblr to be accretive to EBITDA starting in 2014, after it gains more users. 

Alibaba IPO will bring in a lot of cash
In 3Q 2013, Yahoo! amended its agreement with Alibaba on the number of shares Yahoo! is required to sell in an IPO. Yahoo! was previously required to sell a maximum of 261.5 million shares from its total holdings of 523.6 million shares, but the parties agreed to reduce that amount to 208 million shares. This altered understanding will reap incremental benefits for Yahoo! shareholders because of Alibaba's explosive revenue and profitability growth. An Alibaba IPO will bring in a lot more cash for Yahoo! because the company would be required to sell a large portion of its stake in Alibaba.

Yahoo!'s diluted EPS last quarter stood at $0.28 and can grow in the future if the company continues to buy back shares at a healthy pace. Yahoo!'s share repurchase plan has been fruitful in 3Q 2013. The company bought back 59 million shares at an average price of $28.53, utilizing $1.69 billion of funds. 

Alibaba's valuation in the public markets is likely to be very high in an IPO. The Chinese e-commerce giant grew revenue 61% year-over-year to $1.74 billion, and its net income grew 159% year-over-year to $707 million. With more Chinese consumers shopping online, the value of Alibaba can only head north. Yahoo! will be a major beneficiary of this growth in the Chinese e-commerce sector.

Going forward
Yahoo! is very likely to transform this larger and more engaged user base into meaningful revenue growth. Yahoo!'s ability to develop and grow mobile users is a strong positive because it will translate into mobile ad revenue down the road. As more consumers adopt mobile devices, more advertising opportunities will emerge. As a result, Yahoo!'s stock price should move higher, driven by increases in organic revenue, the surging value of Alibaba, and continuing share repurchases.

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