How To Navigate A Fixed-Income Bear Market

Despite the recent brush with default, the credit risk of U.S. Treasury securities is extremely low, but be aware that Treasuries are not void of volatility.

The chart below shows the max drawdowns for a variety of fixed income indices during 2013.  Maximum drawdown is calculated as the percentage loss that an index or investment incurs from its peak net asset value to its lowest value.  The right column details the 3-year annualized performance for each index.

The recent volatility hit many investors like a ton of bricks.  The bond bull market that began in 1981 had lulled many fixed income investors into believing annual returns would always be high and downside risk would always be low.  Even industry professionals are being caught off guard and scrambling for solutions not only for their fixed income clients but also for their bond exposure within their clients' asset allocation models.  Also, the "buy-and-hold" fixed income investors seem to be scratching their heads wondering how their yields will keep up with prevailing interest rates as they ratchet higher.  Let's take a quick look at the various types of risk inherent in the fixed income markets, before we proceed further with some recommendations to help navigate this type of interest rate cycle.

Along with credit risk, bonds also face other risks.  Market risk,  or interest rate risk, is simply the risk of selling bonds prior to maturity at a price lower than they were initially purchased–or of locking in low yields and not benefiting from rising interest rates.  Event risk is the risk that bonds will drop in value due to unforeseen circumstances such as a tsunami, earthquake, war or global financial crisis.  Inflation risk is the risk that the purchasing power of your initial investment is worth less when it is sold.  Foreign exchange risk is essentially the currency risk of owning International bond ETFs that are invested in sovereign or foreign currencies.

I mention these risks because the best way to navigate a rising U.S. interest rate environment is to own a variety of low correlated fixed income instruments.  Each of these investments carry risks that are above and beyond the typical Treasury bond portfolio.  Although there are additional risks, I believe looking outside of traditional fixed income asset classes is essential to weathering a rising interest rate environment.  The chart below looks at a variety of bond asset classes and their correlations to one another.

Owning different fixed income asset classes can possibly smooth out the ride.  For instance, corporate bonds correlate to global fixed income 22% of the time.  This means there are times when global fixed income is going up while U.S. corporates are falling, and vice versa.

My firm currently owns the SPDR Barclay's International Treasury Bond ETF (BWX), both as a currency as well as a yield play, because the underlying bonds are denominated in local currencies, not U.S. dollars.  Investors should only own this particular ETF when the dollar is stable or falling against the basket of currencies that make up the ETF.

The other international ETF that we have the ability to rotate into is the PowerShares Emerging Markets (PCY).  This is another currency and yield play, and there are added risks (foreign exchange risk, country specific risk, credit risk) that need to be considered, but emerging market debt exhibits a low correlation to other fixed income asset classes and can be a valuable component to smooth out returns during a rising U.S. interest rate cycle.  The yield is nearly 5%.

Will Detroit's Bankruptcy Kill This Key Market?

Just over a week ago, the city of Detroit became the largest municipality ever to file a Chapter 9 bankruptcy proceeding. Yet even though markets haven't collapsed in response, investors are increasingly wondering whether Detroit's bankruptcy will end up curtailing or even destroying the ability of every city and state in America to get financing in the municipal-bond market to pay for essential projects.

A delayed reaction?
Despite big news headlines and considerable debate about the potential impact on city residents as well as current and former municipal employees, the impact on the markets was relatively muted. The Dow Jones Industrials (DJINDICES: ^DJI  ) have traded in a very tight range ever since the announcement, with several days featuring moves of less than 10 points showing the tug-of-war between bulls and bears.

Even in the municipal bond market, where you'd expect to find the most chaos, prices remained calm. The iShares S&P National AMT-Free Muni Bond ETF (NYSEMKT: MUB  ) dropped by half a percent the day following Detroit's filing, but it was down only slightly this week, paralleling movement in the Treasury-bond market tied more to general interest rate levels than to specific risk related to municipal creditworthiness.

But now that markets have had time to react, a number of different opinions are surfacing about how important Detroit's bankruptcy is:

Investment manager BlackRock said early this week that its analysts "anticipate the impact of the event will be much smaller than its size might indicate," calling Detroit "an idiosyncratic situation" and saying that therefore its analysts "do not anticipate a widespread systemic effect." UBS noted that "precedents that do exist would appear to favor holders of [general-obligation municipal] bonds backed by an unlimited property tax" in its argument that the bankruptcy shouldn't create big problems, also noting that muni-bond insurance companies cover almost 90% of Detroit's debt. Citigroup notes that "the magnitude of Detroit's economic and financial problems dwarfs those of any other large local government in the U.S. by a wide amount" in arguing that muni-bond yields aren't likely to rise too far. Taking the other side of the argument, muni-bond specialist Nuveen Asset Management believes that "municipal investors should now view all Michigan general-obligation bonds as having no greater standing than any other form of municipal obligations," reversing the general understanding that general-obligation bonds backed by broad powers to tax are inherently more secure than bonds with more limited sources of revenue backing them. Indeed, Michigan-specific muni-bond funds took much more serious hits over the week than the broad muni-bond market, with BlackRock MuniYield Michigan (NYSE: MYM  ) falling almost 5% since last Thursday and Nuveen Michigan Quality Income (NYSE: NUM  ) posting about a 4% loss. Analyst Meredith Whitney went a step further, predicting a wave of municipal bankruptcies resulting from Detroit's action. Yet after having cried wolf in late 2010 and having proven to be wrong in her expected 12-month timeline for massive defaults, Whitney has had her credibility questioned by many experts in the muni-bond arena.

Amid all this uncertainty, investors have been remarkably calm. Money flowed out of muni-bond funds this week, but only at a modest pace of $1.23 billion -- a slower pace than it has seen in recent weeks as part of the broader bond-market fallout from the Federal Reserve's discussions of QE tapering.

Is a slow-motion crash coming?
But even if the muni-bond market hasn't crashed and burned quickly, it has taken some damage. Moody's noted that only one out of every six of its muni-bond rating changes in the second quarter were upgrades, with major downgrades including general-obligation and sales tax bonds for the state of Illinois and Detroit's general obligation and water-and-sewer bonds. Moreover, depending on what happens to Detroit bondholders, long-held beliefs about credit quality and default risk of muni bonds might well end up turned on their heads.

In the long run, though, Detroit's bankruptcy might actually have a beneficial impact on the broader muni-bond market. By highlighting issues that will become increasingly common among state and local governments, including outsized pension and health-care benefits, government entities might have the incentive to tackle problems before they reach bankruptcy-level proportion. That would be good news not only for bondholders but for millions of city residents across the country.

Some believe that municipal bankruptcies could lead to higher taxes for city and state residents, adding to the burden that the federal government has already put on Americans' backs. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "How You Can Fight Back Against Higher Taxes," the Motley Fool's tax experts run through what to watch out for in doing your tax planning this year. With its concrete advice on how to cut taxes for decades to come, you won't want to miss out. Click here to get your copy today -- it's absolutely free.

Something Worth Watching at Healthcare Services Group

There's no foolproof way to know the future for Healthcare Services Group (Nasdaq: HCSG  ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can, at times, suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like Healthcare Services Group do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.

Is Healthcare Services Group sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I've plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. Healthcare Services Group's latest average DSO stands at 50.3 days, and the end-of-quarter figure is 55.1 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does Healthcare Services Group look like it might miss its numbers in the next quarter or two?

Investors should watch the top line carefully during the next quarter or two. For the last fully reported fiscal quarter, Healthcare Services Group's year-over-year revenue grew 2.4%, and its AR grew 30.1%. That's a yellow flag. End-of-quarter DSO increased 27.0% over the prior-year quarter. It was up 22.6% versus the prior quarter. That demands a good explanation. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

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Add Healthcare Services Group to My Watchlist.

10 Best Oil Stocks To Own For 2014

The top dog for oil exploration and production in the US at the moment just might be the Permian Basin in the western part of Texas, suggests Tyler Laundon in the 100% Letter.

The Permian lies just northwest of the Eagle Ford and is home to a number of shale intervals, including the Cline, Spraberry, and Wolfcamp. These stacked formations are gaining notoriety as they appear to hold far more oil than any previous estimate.

Diamondback Energy (FANG) is a relatively new small-cap pure play on the Permian Basin, given that the company just went public in October of 2012.

The company is smallish with a market cap of $1.8 billion. It has a nice acreage position approaching 65,000 acres (including recent acquisitions, which I'll soon discuss), almost all of which it operates.

It's a pure play Permian oil stock. It's also a fairly pure oil investment. The company's production split is 75% oil, 14% natural gas liquids (NGLs) and 11% natural gas. On a revenue basis, 90% of revenues come from oil, while 6% and 4% come from NGLs and natural gas, respectively.

10 Best Oil Stocks To Own For 2014: EXCO Resources NL(XCO)

EXCO Resources, Inc., an independent oil and natural gas company, engages in the exploration, exploitation, development, and production of onshore North American oil and natural gas properties with a focus on shale resource plays. The company holds interests in various projects located in East Texas, North Louisiana, Appalachia, and the Permian Basin in west Texas. As of December 31, 2010, it had proved reserves of approximately 1.5 trillion cubic feet equivalent; and operated 7,276 wells. The company was founded in 1955 and is based in Dallas, Texas.

Advisors' Opinion:

• [By Eric Volkman]

  EXCO Resources (NYSE: XCO  ) is about to draw another shareholder payback out of the ground. The company has declared a dividend of $0.05 per share for its Q1. That nickel will be paid on June 28 to stockholders of record as of June 14. The amount matches the company's previous distribution, which was paid in late March. Before that, EXCO Resources had handed out $0.04 per share since September 2010.

• [By Arjun Sreekumar]

  EXCO Resources (NYSE: XCO  ) has also seen meaningful improvements�in drilling days, reporting that it drilled its most recent wells in about 34 days, down from 45-60 days a few years ago. These and other efficiency gains helped the Dallas-based company reduce its well costs by about 20% from the end of 2011, with current costs in its core DeSoto area down to about $7.8 million-$8 million.

10 Best Oil Stocks To Own For 2014: Cameron International Corp (CAM)

Cameron International Corporation (Cameron), incorporated on November 10, 1994, provides flow equipment products, systems and services to worldwide oil, gas and process industries. Cameron operates in three business segments: Drilling and Production Systems (DPS), Valves & Measurement (V&M) and Process & Compression Systems (PCS). The DPS segment includes businesses, which provides systems and equipment used to control pressures and direct flows of oil and gas wells. The V&M segment includes businesses, which provides valves and measurement systems used to control, direct and measure the flow of oil and gas as they are moved from individual wellheads through flow lines, gathering lines and transmission systems to refineries, petrochemical plants and industrial centers for processing. The PCS segment includes businesses, which provides standard and custom-engineered process packages for separation and treatment of impurities within oil and gas and compression equipment and aftermarket parts and services to the oil, gas and process industries. During the year ended December 31, 2011, it acquired LeTourneau Technologies, Inc. (LeTourneau) from Joy Global Inc. During 2011, it acquired Vescon Equipamentos Industrias Ltda. During 2011, it acquired 51% interest in Newmans Valves. In September 2012, TTS Group ASA sold its drilling equipment business to the Company. Effective August 5, 2013, Cameron International Corp acquired a 75% interest in Douglas Chero SpA, from Consilium SGR SpA.

Drilling & Production Systems Segment

Cameron�� products are employed in a range of operating environments, including basic onshore fields, complex onshore and offshore environments, deepwater subsea applications and ultra-high temperature geothermal operations. The products within this segment include surface and subsea production systems, blowout preventers (BOPs), drilling and production control systems, block valves, gate valves, actuators, chokes, wellheads, manifolds, drilling risers, top drive! s, mud pumps, other rig products and aftermarket parts and services. In addition, the DPS segment designs and manufactures structural components for land and offshore drilling rigs. The segment�� businesses also manufacture elastomers, which are used in pressure and flow control equipment and other petroleum industry applications, as well as in the petroleum, petrochemical, rubber molding and plastics industries. The businesses within this segment market their products directly to end-users through a worldwide network of sales and marketing employees, supported by agents in some international locations. Customers include oil and gas majors, national oil companies, independent producers, engineering and construction companies, drilling contractors, rental companies and geothermal energy producers. The businesses included in this segment are Drilling Systems, Surface Systems, Subsea Systems and Flow Control.

Drilling Systems is a global supplier of integrated drilling systems for onshore and offshore applications. Drilling equipment designed and manufactured includes ram and annular BOPs, control systems, drilling risers, drilling valves, choke and kill manifolds, diverter systems, top drives, draw works, mud pumps, other rig products and aftermarket parts and services. The products are marketed under the Cameron, Guiberson, H&H CUSTOM, H&H, Melco, LeTourneau, Lewco, OEM and Townsend brand names. Surface Systems is a global market in supplying surface production equipment, from conventional to high-pressure, high temperature (HPHT) wellheads, production systems and controls, block valves, gate valves, mudline systems, dry completion systems and aftermarket parts and services. The products are marketed under the Cameron, Camrod, IC, McEvoy, Precision, SBS, Tundra, Willis and WKM brand names. Cameron, which has a global base of installed equipment and an aftermarket presence in hydrocarbon-producing region worldwide, is the provider of surface production equipment. Surface Systems added new s! ales and ! aftermarket facilities in the Marcellus, Eagle Ford and Haynesville shale regions.

Subsea Systems is a provider of subsea wellheads, production systems and controls, manifolds and aftermarket parts and services to customers worldwide, from basic subsea tree orders to integrated solutions, as well as installation and aftermarket support. These products are marketed under the Cameron, Mars, McEvoy and Willis brand names. Flow Control provides chokes, actuators, gears, valve accessories and automation solutions to other Cameron businesses, as well as to other industry manufacturers and directly to end users under such brand names as Cameron, Dynatorque, Ledeen, Maxtorque, Test and Willis. Flow Control has expanded its subsea chemical injection metering valve (CIMV) product line, introducing a high-flow CIMV.

Valves & Measurement Segment

Cameron�� products include gate valves, ball valves, butterfly valves, Orbit valves, double block & bleed valves, plug valves, globe valves, check valves, actuators, chokes and aftermarket parts and services, as well as measurement products such as totalizers, turbine meters, flow computers, chart recorders, ultrasonic flow meters and sampling systems. This equipment and the related services are marketed through a worldwide network of combined sales and marketing employees, as well as distributors and agents in selected international locations. Customers include oil and gas majors, independent producers, engineering and construction companies, pipeline operators, drilling contractors and major chemical, petrochemical and refining companies. The businesses included in this segment are Distributed Valves, Engineered Valves, Process Valves, Measurement Systems and Aftermarket Services.

Distributed Valves provides a range of valves used in the exploration, production and transportation of oil and gas, with products sold through a network of wholesalers and distributors, primarily in North America and to upstream markets in A! sia-Pacif! ic and the Middle East. These valves are marketed under the brand names Cooper, Demco, Navco, Newco, Nutron, OIC, Techno, Texstream, Thornhill Craver, Wheatley and WKM. Engineered Valves provides a range of customized ball, gate and check valves serving the oil and gas production, pipeline, subsea and liquefied natural gas (LNG) markets. Products are marketed under the brand names Cameron, Entech, Grove, Ring-O, TK and Tom Wheatley.

Process Valves provides valves under the brand names of General Valve, Orbit, TBV and WKM for use in critical service applications that are often subject to extreme temperature conditions, particularly in refinery, power generation, including nuclear, chemical, petrochemical, gas processing and liquid storage terminal markets, including liquefied natural gas (LNG). Measurement Systems designs, manufactures and distributes measurement products, systems and solutions to the global oil and gas, process and power industries. The Company�� main product brand names include Barton, Caldon, Clif Mock, Jiskoot, Linco, Nuflo and PAAI. Aftermarket Services provides preventative maintenance, original equipment manufacturer (OEM) spare parts, repair, field service, asset management and remanufactured products for valves and actuators.

Process & Compression Systems Segment

Integrally geared centrifugal compressors are used by customers worldwide in a range of industries, including air separation, petrochemical, chemical and process gas. Products include oil and gas separation equipment, heaters, dehydration and desalting units, gas conditioning units, membrane separation systems, water processing systems, integral engine-compressors, separable reciprocating compressors, two and four-stroke cycle gas engines, turbochargers, integrally-geared centrifugal compressors, compressor systems and controls. Aftermarket services include spare parts, technical services, repairs, overhauls and upgrades. The businesses included in this segment are Process System! s, Recipr! ocating Compression and Centrifugal Compression.

The process systems businesses provide custom-engineered process packages to oil and gas majors, national oil companies, independent operators and engineering, procurement and construction companies worldwide for separation and treatment of oil, gas, water and solids. Products offered include separators, heaters, dehydration and desalting units, gas conditioning units, membrane separation systems, water processing systems and aftermarket parts and services. PCS markets its process systems products under the Cameron, Consept, Cynara, Hydromation, KCC, Metrol, Mozley, NATCO, Petreco, Porta-test, Unicel, Vortoil and Wemco brand names.

Reciprocating Compression equipment is used throughout the energy industry by gas transmission companies, compression leasing companies, oil and gas producers and independent power producers. Reciprocating Compression products and services are marketed under the Ajax, Cooper-Bessemer, CSI, Enterprise, Superior, Texcentric and TSI brand names. Ajax integral engine-compressors, which combine the engine and compressor on a single drive shaft, are used for gas re-injection and storage, as well as on smaller gathering and transmission lines. Superior-brand separable compressors are used for natural gas applications, including production, storage, withdrawal, processing and transmission, as well as petrochemical processing. These high-speed separable compressor units can be matched with either natural gas engine drivers or electric motors. Reciprocating Compression also provides global support for its products and maintains sales and service offices in key international locations. During 2011, approximately 60% of the Reciprocating Compression revenues were generated by sales of aftermarket parts and services in support of the Company�� worldwide installed base of compression equipment. Customers for Reciprocating Compression products include oil and gas majors, national oil companies, petrochemical and re! fining co! mpanies, midstream natural gas companies, independent power producers and compressed natural gas distribution companies.

Centrifugal Compression manufactures and supplies integrally geared centrifugal compressors and provides aftermarket services to customers worldwide. Centrifugal air compressors, used in manufacturing processes (plant air), are sold under the Turbo-Air. Engineered compressors are used in the process air and gas industries and are identified by the MSG. The process and plant air centrifugal compressors deliver oil-free compressed air and other gases to customers, thus preventing oil contamination of the finished products. Centrifugal Compression also provides installation and maintenance services, parts, repairs, overhauls and upgrades to its worldwide customers for plant air and process gas compressors. It also provides aftermarket service and repairs on all equipment it produces through a worldwide network of distributors, service centers and field service technicians utilizing an extensive inventory of parts marketed under the Joy brand name. Centrifugal Compression customers include oil and gas majors, national oil companies, air separation companies, independent power producers, petrochemical and refining companies, midstream natural gas companies and durable goods manufacturers.

The Company competes with Aker Solutions, Balon Corporation, Circor International, Inc., Dover Corporation, Dril-Quip, Inc., Emerson Process Management, FlowServ Corp., FMC Technologies, Inc., GE Oil & Gas Group, Stream-Flo Industries Ltd., National Oilwell Varco Inc., Zy-Tech Global Industries company, Flotek Industries, Inc., Pibiviese, Robbins & Myers Fluid Management Group, SPX Corporation�� Flow Technology Segment, Tyco International Ltd., Weatherford, Ltd., Ariel Corporation, Compressor Engineering Corporation, Demag, Dresser-Rand Company, FS-Elliott Company LLC, Endyn Energy Dynamics, Hoerbiger Group and IR Air Solutions.

Advisors' Opinion:

• [By Dan Caplinger]

  Still, Schlumberger has plenty of ammunition of its own to bolster its growth. The company recently closed on its OneSubsea joint venture with Cameron International (NYSE: CAM  ) to take even greater advantage of opportunities in subsurface production. With Cameron's design, manufacturing, and installation experience, Schlumberger hopes to bolster its own expertise in completing subsea wells and providing reliable equipment and give clients an integrated solution for their sea-drilling needs.

• [By David Smith]

  A promising partnership
  Total outlays for subsea facilities were slightly more than $25 billion in 2011. That number is expected to rocket to about $130 billion by 2020. Among several companies that will benefit from this nearly five-fold growth are Schlumberger (NYSE: SLB  ) and Cameron International (NYSE: CAM  ) .

• [By Monica Gerson]

  United Continental Holdings (NYSE: UAL) is estimated to post its Q3 earnings at $1.54 per share on revenue of $10.26 billion. Cameron International (NYSE: CAM) is projected to report its Q3 earnings at $0.83 per share on revenue of $2.59 billion.

• [By Dan Caplinger]

  Another issue that Varco has to face is the specter of increasing competition. Cameron International (NYSE: CAM  ) has arisen as a big player in the drilling and production systems space, with a particular emphasis on subsea applications like blowout preventers. With Cameron sporting a recent partnership with Schlumberger (NYSE: SLB  ) , the combination will have both the expertise and the financial resources to challenge Varco in that niche. More broadly, up-and-coming Forum Energy (NYSE: FET  ) has sought to emulate Varco's broad-based services menu, offering remotely operated vehicles for deepwater inspection and construction as well as pipe and cementing materials and a range of subsea systems and equipment. Forum has posted solid results in its brief history, taking steps to continue its fast growth trajectory.

Top Stocks To Invest In Right Now: Contango Oil & Gas Co (MCF)

Contango Oil & Gas Company (Contango) is an independent natural gas and oil company. The Company�� core business is to explore, develop, produce and acquire natural gas and oil properties onshore and offshore in the Gulf of Mexico in water-depths of less than 300 feet. Contango Operators, Inc. (COI), its wholly owned subsidiary, acts as operator on its properties.

Offshore Gulf of Mexico Activities

Contango, through its wholly-owned subsidiary, COI and its partially owned affiliate, Republic Exploration LLC (REX), conducts exploration activities in the Gulf of Mexico. COI drills, and operates its wells in the Gulf of Mexico, as well as attends lease sales and acquires leasehold acreage. As of August 24, 2012, the Company's offshore production was approximately 83.5 million cubic feet equivalent per day, net to Contango, which consists of seven federal and five state of Louisiana wells in the shallow waters of the Gulf of Mexico. These 12 operated wells produce through the four platforms: Eugene Island 24 Platform, Eugene Island 11 Platform, Ship Shoal 263 Platform, Vermilion 170 Platform and Other Activities.

This third-party owned and operated production platform at Eugene Island 24 was designed with a capacity of 100 million cubic feet per day and 3,000 barrels of oil per day. This platform services production from the Company�� Dutch #1, #2 and #3 federal wells. From this platform, the gas flows through an American Midstream pipeline into a third-party owned and operated on-shore processing facility at Burns Point, Louisiana, and the condensate flows through an ExxonMobil pipeline to on-shore markets and multiple refineries. As of August 24, 2012, it was producing approximately 22.5 million cubic feet equivalent per day, net to Contango, from this platform. The Company finished laying six inches auxiliary flowlines from the Dutch #1, #2, and #3 wells to its Eugene Island 11 Platform and is in the process of redirecting production from the Eugene Island 24! Platform to the Eugene Island 11 Platform.

The Company�� Company-owned and operated platform at Eugene Island 11 was designed with a capacity of 500 million cubic feet equivalent per day and 6,000 barrels of oil per day. These platforms service production from the Company�� five Mary Rose wells, which are all located in state of Louisiana waters, as well as its Dutch #4 and Dutch #5 wells, which are both located in federal waters. From these platforms, it can flow its gas to an American Midstream pipeline through its eight inches pipeline and from there to a third-party owned and operated on-shore processing facility at Burns Point, Louisiana. It can flow its condensate through an ExxonMobil pipeline to on-shore markets and multiple refineries.

The Company�� gas and condensate can flow to its Eugene Island 63 auxiliary platform through its 20 inches pipeline, which has been designed with a capacity of 330 million cubic feet equivalent per day and 6,000 barrels of oil per day, and from there to third-party owned and operated on-shore processing facilities near Patterson, Louisiana, through an ANR pipeline. As of August 24, 2012, it was producing approximately 44.6 million cubic feet equivalent per day, net to Contango, from this platform.

The Company�� owned and operated platform at Ship Shoal 263 was designed with a capacity of 40 million cubic feet equivalent per day and 5,000 barrels of oil per day. This platform services natural gas and condensate production from our Nautilus well, which flows through the Transcontinental Gas Pipeline to onshore processing plants. As of August 24, 2012, it was producing approximately 3.0 million cubic feet equivalent per day, net to Contango, from this platform. As of June 30, 2012, the Company owed a 100% working interest and 80% net revenue interest in this well and platform.

The Company�� owned and operated platform at Vermilion 170 was designed with a capacity of 60 million cubic feet equivalent per ! day and 2! ,000 barrels of oil per day. This platform services natural gas and condensate production from its Swimmy well, which flows through the Sea Robin Pipeline to onshore processing plants. As of August 24, 2012, it was producing approximately 13.4 million cubic feet equivalent per day, net to Contango, from this platform.

On July 10, 2012, the Company spud its South Timbalier 75 prospect (Fang) with the Spartan 303 rig. It has a 100% working interest in this wildcat exploration prospect. On July 3, 2012, the Company spud its Ship Shoal 134 prospect (Eagle) with the Hercules 205 rig. The Company purchased the deep mineral rights on Ship Shoal 134 from an independent third-party. It has a 100% working interest in this wildcat exploration prospect. On December 21, 2011, the Company purchased an additional 3.66% working interest (2.67% net revenue interest) in Mary Rose #5 (previously Eloise North). The Company has a 47.05% working interest (38.1% net revenue interest) in Dutch #5.

Offshore Properties

During the fiscal year ended June 30, 2012 (fiscal 2012), State Lease 19396 expired and was returned to the state of Louisiana. As of August 24, 2012, the interests owned by Contango through its affiliated entities in the Gulf of Mexico, which were capable of producing natural gas or oil included Eugene Island 10 #D-1, Eugene Island 10 #E-1, Eugene Island 10 #F-1, Eugene Island 10 #G-1, Eugene Island 10 #I-1, S-L 18640 #1, S-L 19266 #1, S-L 19266 #2, S-L 18860 #1, S-L 19266 #3 and S-L 19261, Ship Shoal 263, Vermilion 170 and West Delta 36. As of August 24, 2012, interests owned by Contango through its related entities in leases in the Gulf of Mexico included Eugene Island 11, East Breaks 369, South Timbalier 97, Ship Shoal 121, Ship Shoal 122, Brazos Area 543, Ship Shoal 134 and South Timbalier 75.

Onshore Exploration and Properties

As of August 24, 2012, the Company had invested in Alta Energy Canada Partnership (Alta Energy) to purchase over! 60,000 a! cres in the Kaybob Duvernay. Contango has a 2% interest in Alta Energy and a 5% interest in the Kaybob Duvernay project. On April 9, 2012, the Company announced that through its wholly owned subsidiary, Contaro Company, it had entered into a Limited Liability Company Agreement (the LLC Agreement) to form Exaro Energy III LLC (Exaro). The Company owns approximately a 45% interest in Exaro. Exaro has entered into an Earning and Development Agreement (the EDA Agreement) with Encana Oil & Gas (USA) Inc. (Encana) to provide funding to continue the development drilling program in a defined area of Encana�� Jonah field asset located in Sublette County, Wyoming.

As of June 30, 2012, the Exaro-Encana venture had three rigs drilling, has completed five wells and achieved first production. As of August 24, 2012, the Company had invested to lease approximately 25,000 acres in the Tuscaloosa Marine Shale (TMS), a shale play in central Louisiana and Mississippi.

Advisors' Opinion:

• [By Peter Krauth]

  But the dynamic is suddenly changing. This is a pricing game—a global one. You see, while North Americans currently enjoy natural gas at close to $3.40 per million cubic feet (Mcf), Europeans are paying three times as much, between $10 and $11 per Mcf.

10 Best Oil Stocks To Own For 2014: Frank s International NV (FI)

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Advisors' Opinion:

• [By Namitha Jagadeesh]

  Herro�� fund has beaten 96 percent of its peers in the last five years, data compiled by Bloomberg show. He owns shares in Daimler AG (DAI), the Stuttgart, Germany-based maker of luxury cars, and Fiat Industrial SpA (FI), the maker of commercial and agriculture vehicles spun off from Fiat SpA in 2011.

10 Best Oil Stocks To Own For 2014: Whiting Petroleum Corporation(WLL)

Whiting Petroleum Corporation engages in the acquisition, development, exploitation, exploration, and production of oil and gas primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast, and Michigan regions of the United States. As of December 31, 2010, its estimated proved reserves were 304.9 million barrels equivalent of oil; and had interests in 9,698 gross productive wells covering approximately 1,115,000 gross developed acres. The company sells its oil and gas to end users, marketers, and other purchasers. Whiting Petroleum Corporation was founded in 1983 and is Denver, Colorado.

Advisors' Opinion:

• [By Arjun Sreekumar]

  Pad drilling methods have also allowed operators to use fewer rigs to drill the same number of wells. For instance, Whiting Petroleum (NYSE: WLL  ) , another major Bakken operator, reported a substantial decline in drilling expenses over the past year because of a successful transition toward multi-pad drilling, allowing the company to drill the same number of wells with fewer rigs.

• [By Monica Gerson]

  Whiting Petroleum (NYSE: WLL) is projected to post its Q3 earnings at $1.06 per share on revenue of $678.69 million.

  Skechers USA (NYSE: SKX) is expected to post its Q3 earnings at $0.61 per share on revenue of $518.22 million.

• [By Lee Jackson]

  Whiting Petroleum Corp. (NYSE: WLL) really is stepping up to the plate on spending this year. In addition to being one of the top stocks held by legendary energy investor T. Boone Pickens, it is expected to spend almost $2.4 billion this year to expand production. The consensus price target for the stock is $62. A move to the target would be a 20% gain for shareholders.

• [By Lee Jackson]

  Whiting Petroleum Corp. (NYSE: WLL) just acquired more than 17,000 net acres of land in the oil-rich Bakken Shale for $260 million. Net oil and gas production from the properties is estimated to average 2,420 barrels of oil equivalent (BOE) per day last month. Whiting estimates proved reserves at 17.1 million BOE with 85% of reserves being oil. The UBS price objective for the stock is $55, and the consensus stands at $62.

10 Best Oil Stocks To Own For 2014: Imperial Oil Limited(IMO)

Imperial Oil Limited engages in the exploration, production, and sale of crude oil and natural gas in Canada. The company operates through three segments: Upstream, Downstream, and Chemical. The Upstream segment engages in the exploration and production of conventional crude oil, natural gas, synthetic oil, and bitumen primarily in the Western Provinces, the Canada Lands, and the Atlantic Offshore. Its primary conventional oil producing asset includes the Norman Wells oil field in the Northwest Territories. The Downstream segment engages in the transportation and refining of crude oil, as well as blending, distribution, and marketing of refined products. It owns and operates crude oil, and natural gas liquids and products pipelines in Alberta, Manitoba, and Ontario. The Chemical segment engages in the manufacture and marketing of various petrochemicals, including ethylene, benzene, aromatic and aliphatic solvents, plasticizer intermediates, and polyethylene resin. As of De cember 31, 2010, Imperial Oil Limited had 1,204 million oil-equivalent barrels of proved undeveloped reserves; maintained a nation-wide distribution system, including 24 primary terminals, to handle bulk and packaged petroleum products moving from refineries to market by pipeline, tanker, rail, and road transport; and sold petroleum products through 1,850 Esso retail service stations, of which approximately 510 were company owned or leased. The company was founded in 1880 and is headquartered in Calgary, Canada. Imperial Oil Limited operates as a subsidiary of Exxon Mobil Corporation.

Advisors' Opinion:

• [By Stephan Dube]

  Cold Lake's most notable producers:

  Husky Energy (HUSK.PK), see article here.Pengrowth Energy Corporation (PGH), see article here.Southern Pacific Resource (STPJF.PK), see article here.Canadian Natural Resources (CNQ), see article here.Devon Energy (DVN), see article here.Imperial Oil (IMO), see article here.Baytex, see article here.Bonavista Energy (BNPUF.PK), see article here.

  Athabasca's most notable producers:

• [By Arjun Sreekumar]

  Cost overruns and abandoned projects
  As a result of these factors, cost overruns have become quite common in Alberta. For instance, Imperial Oil (NYSEMKT: IMO  ) said it exceeded its cost estimates for the first phase of its Kearl bitumen mining facility by about C$2 billion.�And some companies have even decided to abandon expensive projects altogether.

10 Best Oil Stocks To Own For 2014: Marathon Oil Corporation(MRO)

Marathon Oil Corporation, through its subsidiaries, operates as an international energy company with operations in the United States, Canada, Africa, the Middle East, and Europe. It operates through three segments: Exploration and Production, Oil Sands Mining, and Integrated Gas. The Exploration and Production segment explores for, produces, and markets liquid hydrocarbons and natural gas. The Oil Sands Mining segment mines, extracts, and transports bitumen from oil sands deposits in Alberta, Canada; and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil. The Integrated Gas segment markets and transports products manufactured from natural gas, such as liquified natural gas and methanol. The company was formerly known as USX Corporation and changed its name to Marathon Oil Corporation in July 2001. Marathon Oil Corporation was founded in 1887 and is based in Houston, Texas.

Advisors' Opinion:

• [By Jon C. Ogg]

  Marathon Oil Corp. (NYSE: MRO) was upgraded to Outperform from Market Perform by Raymond James.

  Illumina Inc. (NASDAQ: ILMN) was reiterated as Buy but that price target was raised to $90 from $83 at BofA/Merrill Lynch.

• [By Holly LaFon]

  John Hussman just released his fourth-quarter buys and sells, according to GuruFocus��Real Time Picks. His three biggest new buys are: Vertex Pharmaceuticals Inc. (VRTX), Procter & Gamble Co. (PG) and Marathon Oil Corp. (MRO).

• [By Tyler Crowe and Aimee Duffy]

  For companies that have oil sands assets, it hasn't been a good year so far. Marathon Oil (NYSE: MRO  ) just announced that the company couldn't get any takers for a 25% interest in its oil sands project. Not that it keeps Marathon from trying again, but it will be difficult. In the past year, three major oil sands exploration companies have either shelved expansion projects or have completely pulled out of the region.�

• [By Sofia Horta e Costa]

  Hays Plc (HAS) climbed 2.2 percent after the recruitment company said quarterly fees increased in its European markets. WH Smith Plc (SMWH) jumped the most in six months after raising its final dividend and saying it plans to repurchase an additional 50 million pounds ($80 million) of shares. Melrose Industries Plc (MRO) added 1.8 percent after KKR & Co. said it will pay about $1 billion for two of its U.S. industrial-products companies.

10 Best Oil Stocks To Own For 2014: Shell Refining Company (SHELL)

Shell Refining Company (Federation of Malaya) Berhad is principally engaged in refining and manufacturing of petroleum products. The Company operates primarily in Malaysia. Its operations also include the gas to liquids (GTL) plant of its kind in Bintulu, Sarawak, and a refinery in Port Dickson, Negeri Sembilan. Its upstream operations focus on the development and extraction of crude oil and natural gas offshore Sarawak and Sabah. In downstream its main activity is in refining, supply, trading and shipping of crude oil and petroleum products through the sales and marketing of transportation fuels, lubricants, specialty products and technical services. The Company is also a partner in two joint ventures that convert natural gas to liquefied natural gas. Royal Dutch Shell plc is its holding company.

10 Best Oil Stocks To Own For 2014: Fleetcor Technologies Inc (FLT)

FleetCor Technologies, Inc. (FleetCor) is an independent global provider of specialized payment products and services to businesses, commercial fleets, oil companies, petroleum marketers and government entities in countries throughout North America, Latin America and Europe. During the year ended December 31, 2011, the Company processed more than 215 million transactions on its networks and third-party networks. The Company operates in two segments: North American and International segments. The Company provides its payment products and services in a variety of combinations to create payment solutions for its customers and partners. In August 2011, the Company acquired Mexican prepaid fuel card and food voucher business based in Mexico City, Mexico. On December 13, 2011, the Company acquired Allstar Business Solutions Limited, a fleet card company based in the United Kingdom. In July 2012, the Company acquired a Russian fuel card company. In July 2012, the Company acquired CTF Technologies, Inc.

The Company uses third-party networks to deliver its payment programs and services. In order to deliver its payment programs and services and process transactions, it owns and operates closed-loop networks through which it electronically connects to merchants and captures, analyzes and reports information. The Company also provides a range of services, such as issuing and processing. The Company markets its payment products directly to a range of commercial fleet customers, including vehicle fleets of all sizes and government fleets. Among these customers, it provides its products and services to small and medium commercial fleets. The Company also manages commercial fleet card programs for oil companies, such as British Petroleum (BP) (including its subsidiary Arco), Chevron and Citgo, and over 800 petroleum marketers.

The Company sells a range of fleet and lodging payment programs directly and indirectly through partners, such as oil companies and petroleum marketers. It provides it! s customers with various card products that function like a charge card to purchase fuel, lodging and related products and services at participating locations. The Company supports these cards with issuing, processing and information services that enable it to manage card accounts, facilitate the routing, authorization, clearing and settlement of transactions. The Company provides these services in a variety of outsourced solutions ranging from an end-to-end solution (consisting issuing, processing and network services) to limited back office processing services.

In addition, the Company offers a telematics solution in Europe that combines global positioning, satellite tracking and other wireless technology to allow fleet operators to monitor the capacity utilization and movement of their vehicles and drivers. The Company offers prepaid fuel and food vouchers and cards in Mexico that may be used as a form of payment in restaurants, grocery stores and gas stations. Approximately 10.4% of its revenue during the year ended December 31, 2011 came from its lodging and telematics products.

During 2011, the Company owns and operates eight closed-loop networks in North America and internationally. Fuelman network is the Company�� primary fleet card network in the United States. Corporate Lodging Consultants network (CLC) is the Company�� lodging network in the United States and Canada. The CLC Lodging network covers more than 17,700 hotels across the United States and Canada. Commercial Fueling Network (CFN) is the Company�� members only unattended fueling location network in the United States and Canada. Keyfuels network is the Company�� primary fleet card network in the United Kingdom.

CCS network is the Company�� primary fleet card network in the Czech Republic and Slovakia. Petrol Plus Region (PPR) network is the Company�� primary fleet card network in Russia, Poland, Ukraine, Belarus, Lithuania, Estonia and Latvia. Mexican network is the Company�� fuel! and food! card and voucher network in Mexico. Allstar network is the Company�� fleet card network in the United Kingdom. In the United States, the Company issues corporate cards that utilize the MasterCard payment network, which includes 176,000 fuel sites and 398,000 maintenance locations across the country. The networks of locations owned by the Company�� oil and petroleum marketer partners in both North America and internationally are utilized to support the card programs of these partners.

UNION TANK Eckstein GmbH & Co. KG (UTA) operates a network of over 46,000 fleet card-accepting locations across 38 countries throughout Europe, including more than 31,000 fueling sites. DKV operates a network of over 45,000 fleet card-accepting locations across 36 countries throughout Europe, including more than 30,500 fueling sites. In Mexico, the Company issues fuel cards and food cards that utilize the Carnet payment network, which includes approximately 8,700 fueling sites and 78,890 food locations across the country.

The Company competes with Wright Express Corporation, Comdata Corporation, U.S. Bank Voyager Fleet Systems Inc., Edenred and Sodexo, Inc.

Advisors' Opinion:

• [By Seth Jayson]

  Calling all cash flows
  When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on FleetCor Technologies (NYSE: FLT  ) , whose recent revenue and earnings are plotted below.

• [By Rich Smith]

  Moving quickly to establish synergies on its Australian purchase of Fleet Card from General Electric (NYSE: GE  ) last month, Norcross, Ga.-based FleetCor (NYSE: FLT  ) is buying another fuel card-issuing and payment-processing business right next door.

10 Best Oil Stocks To Own For 2014: Noble Corp (NE)

Noble Corporation is an offshore drilling contractor for the oil and gas industry. The Company performs contract drilling services with its fleet of 79 mobile offshore drilling units and one floating production storage and offloading unit (FPSO) located globally. As of December 31, 2011, its fleet consisted of 14 semisubmersibles, 14 drillships, 49 jackups and two submersibles. Its fleet includes 11 units under construction, which include five ultra-deepwater drillships, and six jackup rigs. As of February 15, 2012, approximately 84% of its fleet was located outside the United States in areas, which included Mexico, Brazil, the North Sea, the Mediterranean, West Africa, the Middle East, India and the Asian Pacific. During the year ended December 31, 2011, it completed construction on the Noble Bully I, a drillship, owned through a joint venture with a subsidiary of Royal Dutch Shell plc; completed construction on the Noble Bully II, a drillship, and it completed construction of Globetrotter-class drillship. As of February 15, 2012, it had 10 rigs under contract in Mexico with Pemex Exploracion y Produccion (Pemex).

During 2011, the Company conducted offshore contract drilling operations, which accounted for over 98% of its operating revenues. It conducts its contract drilling operations in the United States Gulf of Mexico, Mexico, Brazil, the North Sea, the Mediterranean, West Africa, the Middle East, India and the Asian Pacific. During 2011, revenues from Shell and its affiliates accounted for approximately 24% of its total operating revenues. During 2011, revenues from Petroleo Brasileiro S.A. (Petrobras) accounted for approximately 18% and 19% of its total operating revenues. Revenues from Pemex accounted for approximately 15%, 20% and 23% of its total operating revenues.

Semisubmersibles

Semisubmersibles are floating platforms which, by means of a water ballasting system, can be submerged to a predetermined depth so that a substantial portion of the hull is b! elow the water surface during drilling operations. As of December 31, 2011, the semisubmersible fleet consisted of 14 units, including five Noble EVA-4000 semisubmersibles; three Friede & Goldman 9500 Enhanced Pacesetter semisubmersibles; two Pentagone 85 semisubmersibles; two Bingo 9000 design unit submersibles; one Aker H-3 Twin Hull S1289 Column semisubmersible, and one Offshore Co. SCP III Mark 2 semisubmersible.

Drillships

The Company�� drillships are self-propelled vessels. These units maintain their position over the well through the use of either a fixed mooring system or a computer controlled dynamic positioning system. Its drillships are capable of drilling in water depths from 1,000 to 12,000 feet. The maximum drilling depth of its drillships ranges from 20,000 feet to 40,000 feet. As of December 31, 2011, the drillship fleet consisted of 14 units, including four drillships under construction with Hyundai Heavy Industries Co. Ltd. (HHI); three Gusto Engineering Pelican Class drillships; two Bully-class drillships to be operated by it through a 50% joint venture with a subsidiary of Shell; one dynamically positioned Globetrotter-class drillship that left the shipyard during the fourth quarter of 2011; one Globetrotter-class drillship under construction; one moored Sonat Discoverer Class drillship capable of drilling in Arctic environments; one NAM Nedlloyd-C drillship, and one moored conversion class drillship.

Jackups

As of December 31, 2011, the Company had 49 jackups in its fleet, including six jackups under construction. The rig hull includes the drilling rig, jacking system, crew quarters, loading and unloading facilities, storage areas for bulk and liquid materials, helicopter landing deck and other related equipment. All of its jackups are independent leg and cantilevered. Its jackups are capable of drilling to a maximum depth of 30,000 feet in water depths up to 400 feet.

Submersibles

The Company has two su! bmersible! s in the fleet, which are cold-stacked. Submersibles are mobile drilling platforms, which are towed to the drill site and submerged to drilling position by flooding the lower hull until it rests on the sea floor, with the upper deck above the water surface. Its submersibles are capable of drilling to a depth of 25,000 feet in water depths up to 70 feet.

Advisors' Opinion:

• [By Double Dividend Stocks]

  London-based Ensco plc, (ESV), provides offshore contract drilling services to the oil and gas industry worldwide, and operates a drilling rig fleet of approximately 74 rigs, including 9 drill ships, 13 dynamically positioned semisubmersible rigs, 6 moored semisubmersible rigs, and 46 jackup rigs. ESV currently has the world's second largest offshore rig fleet, behind only Transocean, which has 95 rigs, and just ahead of Noble, (NE), which has 73 rigs. Ensco has the newest fleet of Ultradeepwater rigs, with 3, and, has 4 more on order, which are already contracted.

• [By Shauna O'Brien]

  On Tuesday, UBS reported that it has raised its estimates on offshore drilling contractor Noble Corporation (NE).

  The firm has increased 2014 estimates on NE due to its five new jackup contracts. UBS currently has a $41 price target on NE. This price target suggests a 4% increase from the stock’s current price of $39.35.

  Noble Corporation shares were mostly flat during pre-market trading Tuesday. The stock is up 13% YTD.

• [By Lauren Pollock]

  Offshore driller Noble Corp.(NE) disclosed a plan to split the company into two separate firms, potentially moving to file an initial public offering for a business that would own the company’s older rigs. Noble has been mulling a plan to shed some assets for a few years and even conceded the process to evaluate such a move was taking longer than expected.

Discover Financial Services (DFS) Profit Drops, Misses Expectations

Top 5 Canadian Companies To Watch In Right Now

NEW YORK (TheStreet) -- Discover Financial Services (DFS) reported third-quarter earnings of $1.20 on revenue of $2.06 billion, just shy of Thomson Reuters-recorded expectations of $1.21 a share on $2.07 billion in revenue. In the year-ago quarter, the direct banker and payment services operator posted earnings of $1.24 a share.

Total loans saw a 5% quarterly improvement to $62.7 billion. Credit card loans accounted for $50.4 billion of the total, up 4% on the year-ago quarter.

"Discover's card loan growth continues to exceed industry growth while charge-offs achieved new record lows," said Chairman and CEO David Nelms.

However, an increased provision for loan losses of $333 million dragged on profitability. Discover increased its reserves by $197 million over the year-ago quarter, mainly on lower expectations certain debts would be recovered. In extended trading, shares shed 1.9% to $52.73, contributing to the 0.39% loss realized throughout Monday. TheStreet Ratings team rates Discover Financial Services INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation: "We rate Discover Financial Services (DFS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated." You can view the full analysis from the report here: DFS Ratings Report Written by Keris Alison Lahiff.

Did Del Frisco's Restaurant Group Squander Its Latest Sales Increase?

Margins matter. The more Del Frisco's Restaurant Group (Nasdaq: DFRG  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Del Frisco's Restaurant Group's competitive position could be.

Here's the current margin snapshot for Del Frisco's Restaurant Group over the trailing 12 months: Gross margin is 25.8%, while operating margin is 11.7% and net margin is 5.2%.

Unfortunately, a look at the most recent numbers doesn't tell us much about where Del Frisco's Restaurant Group has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for Del Frisco's Restaurant Group over the past few years.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. Here's how the stats break down:

Over the past five years, gross margin peaked at 27.1% and averaged 26.1%. Operating margin peaked at 15.2% and averaged 13.2%. Net margin peaked at 5.9% and averaged 5.0%. TTM gross margin is 25.8%, 30 basis points worse than the five-year average. TTM operating margin is 11.7%, 150 basis points worse than the five-year average. TTM net margin is 5.2%, 20 basis points better than the five-year average.

With recent TTM operating margins below historical averages, Del Frisco's Restaurant Group has some work to do.

Does Del Frisco's Restaurant Group have what it takes to execute internationally? Take a look at some American restaurant concepts that are generating profits in all over the globe in, "3 American Companies Set to Dominate the World." It's free for a limited time. Click here for instant access to this free report.

Add Del Frisco's Restaurant Group to My Watchlist.

Lululemon's Stock Troubles

The following video is from Tuesday's Investor Beat, in which host Chris Hill and analysts Jason Moser and Charly Travers dissect the hardest-hitting investing stories of the day.

lululemon athletica's first-quarter earnings came in better than expected. With same-store sales rising 7% for the quarter, the popular maker of yoga-wear appeared to have put its recent troubles in the rearview mirror. But shares plunged today on the news that CEO Christine Day is resigning. In her five years at the top, Lululemon has grown steadily, and shares of the stock have risen more than 400%. In the lead story from today's Investor Beat, Charly and Jason discuss whether the next CEO will fare as well or if increased competition means the troubles are only beginning for Lululemon. That story, plus a breakdown of four stocks that made major moves on Tuesday's market, and two stocks that our analysts are going to be watching closely in the week to come.

Lululemon has the potential to grow its sales by 10 times if it can penetrate its other markets as it has in Canada, but the competitive landscape is starting to increase. Can Lululemon fight off larger retailers and ultimately deliver huge profits for savvy investors? The Motley Fool answers these questions and more in its most in-depth Lululemon research available. Thousands have already claimed their own premium ticker coverage; gain instant access to your own by clicking here now.

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3 Companies You Wish You Could Own

We all love to find a nice reliable company to sink some hard-earned cash into, but sometimes the cards don't fall in our favor. Every now and then, I come across a great company only to discover that I simply can't invest, as the company is privately held. Think of this as window-shopping: You know you can't buy any, but you might get some good ideas. Here are three companies that I'd happily invest in -- if only I could.

The higher end of fashion
Yesterday, a neighbor of mine and I were talking fashion, and he mentioned that the shirt he was wearing was from J. Crew. I couldn't remember who mine was made by, but he nailed it without hesitation. "Banana Republic," he said. "You can tell because the stitching on the sleeves is a bit off." First of all -- ouch. Second, he was right. I was wearing a shirt from the Gap (NYSE: GPS  ) brand.

Banana Republic is Gap's current problem child. The company had flat comparable sales last quarter, and net sales were up just 4%. Out on the hard streets of The Mall, Banana's biggest competition comes from J. Crew, which has experienced a resurgence in the last few years. While the company is privately held, it still reports some financial information each quarter.

In the company's last fiscal year, comparable company sales increased 13%, with revenue increasing 20%. The company's margins expanded all the way down the income statement, and EBITDA jumped 27%. On top of the fantastic financials, J. Crew's fantastic brand is represented in its 240 retail locations, with another 100 or so outlets. If J Crew came back on the market, I'd be first in line to pick it up.

Just kidding -- this is the higher end of fashion
If you don't fancy yourself a buyer of $300 sweaters, maybe you could be tempted by one of Tory Burch's $425 cardigans. Burch is a New York-based fashion designer in the same league as Michael Kors (NYSE: KORS  ) . Her designs have shown up on the shoulders of celebrities across the globe, just like Kors'.

While J. Crew is a more mature company, Burch is just gearing up, much as Kors was a year and a half ago. Bloomberg has estimated that Burch's company may now be worth over $3 billion. Considering that Kors is now valued at over $12 billion, there's a long way for Burch to run.

In addition to its normal line of fashion, Burch has recently entered into an agreement with Fossil (NASDAQ: FOSL  ) for the sale of Burch-branded watches. Fossil is the maker behind Kors timepieces, and the company has said that the high-end designers are both big drivers of future growth. Basically, I see Burch as a way to re-create the magic of Kors -- and that hasn't been a bad thing.

The delicious end of -- well, food
The final company that I'd dive into given a chance is the Five Guys hamburger chain. When CEO Jerry Murrell came by the Motley Fool office last year, I was instantly sold. Not only is the company a purveyor of quality burgers, it's also run in the classic American manner. Murrell is a fan of doing a few things very well, and he's resisted taking on extra menu items.

5 Best China Stocks For 2014

Unlike J. Crew and Tory Burch, the reason I want in on Five Guys is for the beautiful simplicity of the business. Murrell now oversees a business that should generate over $1 billion in revenue in 2013. While the company is still far short of McDonald's (NYSE: MCD  ) $6.6 billion, Five Guys seems to be managing a feat that McDonald's has failed at over the last few quarters: growth.

McDonald's comparable sales fell 1% last quarter, and another 0.6% in April. Analysts see Five Guys taking business from McDonald's and other large chains, as customers opt for quality over price. That's a move I'm happy to make as an investor as well. As soon as this quality business hits the market, I'm ordering a full meal.

...And a fashion icon you can invest in today
Michael Kors is one of today's hottest high-end fashion brands, and that's translated into one of the best-performing stocks in retail -- since its debut on the market in late 2011, the share price has more than doubled. But with all that growth, has the stock finally become too expensive, or is there still room left to run? The Motley Fool's premium report on Michael Kors gives investors all the information they need to make the right decision. We cover the key must-watch areas, opportunities, and threats to the company that investors need to know. To claim your copy, simply click here now for instant access.

Why Verizon's Investment Grade Credit Rating May Be Challenged

By Brian Nelson, CFA

On Thursday, Verizon (VZ) reported better than expected top- and bottom-line performance in its third quarter, which showed impressive subscriber additions and healthy iPhone 5 sales. We continue to evaluate Verizon for addition to the portfolio of our Dividend Growth Newsletter, though we note its pursuit of Verizon Wireless has complicated matters quite a bit (given the outsize debt load it will take on). We'd like to see how the financials shake-out post-transaction, as there are quite a few moving parts that will negatively impact the firm's Valuentum Dividend Cushion score (and potentially challenge its investment-grade rating).

Verizon added 1.1 million net retail wireless connections and 927,000 net retail postpaid connections in the period, leading to quarter-end marks of 101.2 million total retail connections and 95.2 million total retail postpaid connections. Wireless service revenue advanced 8.4%, and the company's wireless operating and EBITDA margins were wonderful, coming in at 22.8% and 51.1% in the period, respectively. The firm noted that Apple's (AAPL) iPhone accounted for 51% of activations in the period (up from 43% in the second quarter and 46% in the year-ago period), suggesting the smartphone maker is picking up share in the US market. The firm's wireline business saw a 1% drop in total revenue, though segment EBITDA did nudge higher from the same quarter last year. All-in, Verizon's consolidated revenue advanced 4.4%, driving adjusted earnings per share to $0.77, roughly a 20% increase compared with adjusted earnings per share of $0.64 in the prior-year period.

5 Best Biotech Stocks To Buy For 2014

Valuentum's Take

(click to enlarge)

Image Source: Verizon

Verizon cash-flow metrics are absolutely phenomenal (at present) - one ! of the reasons that turned our heads with respect to the firm's dividend growth promise. However, Verizon will be taking on a massive amount of debt to fund its acquisition of 45% interest in Verizon Wireless. Though the firm anticipates a steady de-leveraging and return to pre-transaction credit ratings, $117 billion in pro forma debt is NOT small potatoes.

(click to enlarge)

Image Source: Verizon

For example, after the transaction is completed, Verizon's debt/EBITDA (a common leverage metric used in credit analysis) will triple to roughly 3x from just over 1x. Any slip up in EBITDA that may happen as a result of execution or the occurrence of a cyclical trough more severe than "normal" could see the firm's investment-grade credit rating pulled by the rating agencies.

For example, the first column on the left (debt/EBITDA) reveals that companies at the bottom rung of investment grade (BAA) have average debt/EBITDA ratios of about 2.4. Those at the top rung of non-investment grade (junk, or a rating of Ba or below) have average debt/EBITDA ratios of 3.3. Though there are many other factors that go into rating credits, at a pro forma debt/EBITDA mark of 3x, Verizon is walking a fine line.

(click to enlarge)

Image Source (pdf)

All things considered, we liked Verizon's third-quarter performance, but we're still on the sidelines with respect to adding it to the portfolio of our Dividend Growth Newsletter. If all doesn't go perfectly at Verizon, its investment-grade credit rating may be challenged at the trough of the economic cycle. We don't want to be holders of its equity if that happens.

Source: Why Verizon's Investment Grade Credit Rating May Be Challenged

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: APPL is included in our Best Ideas portfolio.

Top 5 Penny Stocks To Watch Right Now

If you're a regular reader of StreetAuthority, you know I love getting -- and reinvesting -- dividend paychecks. Simply put, my goal is to earn a paycheck every day of the month by owning a basket of solid income securities -- and then grow the size of those paychecks by harnessing the power of compounding through dividend reinvestment.

So far, the results have been very rewarding. From an initial $200,000 investment, I'm earning nearly $16,000 in dividends a year (or more than $1,300 a month) using this strategy. And that doesn't even include a penny from the healthy capital gains I've made from most of my holdings.

 

But as I said, you may have already heard this before. My goal today is to show you how to get the most out of your income investments using a simple yet effective three-part strategy.

Top 5 Penny Stocks To Watch Right Now: Skechers U.S.A. Inc.(SKX)

Skechers U.S.A., Inc. engages in the design, development, marketing, and distribution of footwear for men, women, and children in the United States and internationally. The company offers various products comprising casuals, such as boots, shoes, and sandals for men, as well as slip-ons, lug outsole and fashion boots, and casual sandals for women; dress casuals; relaxed fit for men; sandals; and casual fusion under the Skechers USA brand name. It also provides a line of sport footwear for men and women, including men?s lifestyle athletic footwear, lightweight women?s sneakers, and sport sandals under the Skechers Sport brand name. In addition, the company offers men?s and women?s casuals, field boots, hikers, and athletic shoes under the Skechers Work brand name; and a range of infants, toddlers, boys, and girls? boots, shoes, and sneakers under the Skechers Kids brand name. Further, its product line includes Skechers Active products, such as casual everyday and sport fusi on sneakers for females; Tone-ups and Tone-ups Fitness products comprising casual and athletic-inspired sandals for women, as well as sneakers; Shape-ups toning footwear for men and women; and Skechers Resistance Runner technical shoes for runners. Skechers U.S.A. markets its products through department and specialty stores, athletic and independent retailers, and boutiques, catalog and Internet retailers, as well as through own e-commerce Website and retail stores. As of February 15, 2011, it operated 105 concept stores, 99 factory outlet stores, and 40 warehouse outlet stores in the United States, as well as 28 concept stores and 16 factory outlets internationally. The company was founded in 1992 and is headquartered in Manhattan Beach, California.

Advisors' Opinion:

• [By Dan Moskowitz]

  Skechers (NYSE: SKX  ) has is up 65% year-to-date, outperforming Brown Shoe (NYSE: BWS  ) , Wolverine World Wide (NYSE: WWW  ) , Deckers Outdoor (NASDAQ: DECK  ) , and Nike (NYSE: NKE  ) , which have appreciated 26%, 39%, 62%, and 43%, respectively. Skechers' upside move is justifiable based on the company's recent performance. At the same time, this doesn't mean Skechers will offer the best long-term investment opportunity in this group.

• [By Tansy Trading]

  Let's move on to our case. We have been closely following Skechers (SKX) for 3 years. We initially got interested in September 2010 as we thought the decline in share price from 40 to 25 on the early demise of the toning shoe craze was overdone. It was actually seriously underdone when we got on board and we took some losses as the stock fell from 25 to 20, and we closed the position. We then dabbled in owning the stock as it bounced around in the mid-teens for nearly 18 months as the company liquidated hundreds of millions of dollars of very low demand toning shoes causing them to report losses in 2011 and 2012. The rapid growth of toning shoes and rapid demise significantly disrupted their business for 2 years.

Top 5 Penny Stocks To Watch Right Now: Sparton Corporation(SPA)

Sparton Corporation, together with its subsidiaries, offers electronic manufacturing services primarily for medical device, defense and security systems, and electronic manufacturing services industries worldwide. The company?s Medical segment engages in the contract development, design, production, and distribution of medical related electromechanical devices for the medical OEM and ET customers primarily in the vitro diagnostic and therapeutic device areas. Its EMS segment involves in the contract manufacturing, assembly, design, preproduction, prototyping, and/or box building assemblies, such as flight control systems and fuel control systems for the aerospace, medical diagnostics systems, security systems, detection systems, lighting, and defense. The company?s DSS segment engages in the design, development, and production of electromechanical equipment, such as sonobuoys, an anti-submarine warfare device used by the United States Navy and foreign governments; and perf orms an engineering development function for the United States military and prime defense contractors on advanced technologies for defense products, and replacement of current systems. It also offers non-sonobuoy related manufacturing and services. Sparton Corporation was founded in 1900 and is headquartered in Schaumburg, Illinois.

Advisors' Opinion:

• [By Seth Jayson]

  Calling all cash flows
  When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Sparton (NYSE: SPA  ) , whose recent revenue and earnings are plotted below.

10 Best Performing Stocks To Watch Right Now: Cash America International Inc.(CSH)

Cash America International, Inc. provides specialty financial services to individuals primarily in the United States and Mexico. The company operates in three segments: Pawn Lending, Cash Advance, and Check Cashing. The Pawn Lending segment offers pawn loans through its pawn lending locations, which operate under the names Cash America Pawn and SuperPawn in the United States, and Prenda Facil in Mexico. This segment also sells previously-owned merchandise acquired from customers who do not redeem their pawned goods, as well as sells items purchased from third-parties or customers. The Cash Advance segment offers unsecured cash advances in selected lending locations that are operated under the names Cash America Payday Advance and Cashland in the United States; and short-term cash advances over the Internet under the names CashNetUSA in the United States, QuickQuid in the United Kingdom, and DollarsDirect in the Canada and Australia. This segment also involves in arranging loans for customers with independent third-party lenders through a credit services organization program; providing marketing and loan processing services for a third-party bank issued line of credit on certain stored-value debit cards that the bank issues; and purchasing a participation interest in certain line of credit receivables originated by the bank. The Check Cashing segment provides check cashing and other financial services, such as stored-value cards, money orders, and money transfers. This segment operates its check cashing locations under the Mr.Payroll name. As of December 31, 2009, it operated 676 pawn lending locations, including 667 company-owned units and 9 unconsolidated franchised units; 246 cash advance locations; and 120 unconsolidated franchised and 6 consolidated company-owned check cashing locations. The company was founded in 1984 and is headquartered in Fort Worth, Texas.

Advisors' Opinion:

• [By Ben Levisohn]

  Upgrades had a big impact on stocks today. Wendy’s (WEN), for instance, gained 4.5% to $8.62 after being upgraded to Buy at Argus, while Cash America (CSH) advanced 3.7% to $44.32 after being upgraded to Market Outperform from Market Perform at JMP Securities. Walgreen (WAG) proved the big winner in the S&P 500 after�Goldman Sachs called the stock a Conviction Buy.

• [By Jon C. Ogg]

  Cash America International Inc. (NYSE: CSH) was raised to Neutral from Underperform and its price target was increased to $40 from $38 by Sterne Agee.

• [By John Udovich]

  Despite�a slow global economy and continued high unemployment in many countries, small cap payday or pawn stocks Cash Store Financial Services Inc (NYSE: CSFS), DFC Global Corp (NASDAQ: DLLR) and Cash America International, Inc (NYSE: CSH) have not exactly been performing well since the start of the year. In fact, these three stocks are the worst performers in the payday or pawn loan sector, down 38.5%, down 14.4% and up 4.6%, respectively, since the start of the year.

Top 5 Penny Stocks To Watch Right Now: Harvard Bioscience Inc.(HBIO)

Harvard Bioscience, Inc. develops, manufactures, and markets apparatus and scientific instruments used in life science research in pharmaceutical and biotechnology companies, universities, and government laboratories in the United States and internationally. The company?s products target ADMET testing, and molecular biology and liquid handling application areas. Its ADMET testing products comprise absorption diffusion chambers that measure the absorption of a drug into the bloodstream; well equilibrium dialysis plates for serum protein binding assays; organ testing systems; infusion pumps for infusing liquids; behavioral products used in neuroscience, cardiology, psychological, and respiratory studies to evaluate the effects of situational stimuli, drugs, and nutritional infusions on motor and sensory, activity, and learning and test behavior; cell injection systems; ventilators; and electroporation products. The company also distributes various devices, instruments, and c onsumable items used in experiments involving cells, tissues, organs, and animals in the fields of proteomics, physiology, pharmacology, neuroscience, cell biology, molecular biology, and toxicology. It sells its ADMET testing products under the Harvard Apparatus, BTX, KD Scientific, Hugo Sachs Elektronik, Panlab, and Warner Instruments brands names. Its molecular biology and liquid handling products include molecular biology spectrophotometers, DNA/RNA/protein calculators, multi-well plate readers, amino acid analysis systems, liquid dispensers, gel electrophoresis systems, and consumables primarily consisting of pipettes, pipette tips, autoradiography films, gloves, thermal cycler accessories, and reagents. The company sells its products to researchers through catalogs, its Website, and distributors, as well as directly in the United States, the United Kingdom, Germany, France, Spain, and Canada. Harvard Bioscience, Inc. was founded in 1901 and is headquartered in Hollisto n, Massachusetts.

Top 5 Penny Stocks To Watch Right Now: MGP Ingredients Inc.(MGPI)

MGP Ingredients, Inc. produces ingredients and distillery products in the United States. It processes wheat flour and corn into various products through an integrated production process. The company operates in three business segments: Ingredient Solutions, Distillery Products, and Other. The Ingredient Solutions segment products consist of specialty proteins, specialty starches, vital wheat gluten, commodity wheat starch, and mill by-products. The Distillery Products segment offers food grade alcohol; fuel grade alcohol, commonly known as ethanol; and distiller?s feed and carbon dioxide, which are co-products of the company?s distillery operations. The Other segment products comprise resins, and plant-based polymers and composites. MGP Ingredients, Inc. sells its products directly or through distributors to the manufacturers and processors of finished goods. The company was founded in 1941 and is headquartered in Atchison, Kansas.

Feeling Squeezed? New Seats Put More Passengers on Same Planes

John Mone/APSouthwest Airlines aircraft technicians install newer, skinnier seats on a 737 at the carrier's headquarters in Dallas. It's not your imagination. There really is a tighter squeeze on many planes these days. The big U.S. airlines are taking out old, bulky seats in favor of so-called slimline models that take up less space from front to back, allowing for five or six more seats on each plane. The changes, covering some of the most common planes flown on domestic and international routes, give the airlines two of their favorite things: More paying passengers, and a smaller fuel bill because the seats are slightly lighter. It's part of a trend among the airlines to view seats as money-makers, not just pieces of furniture. Add a few inches of legroom and airlines can charge more for tickets. Take away a few inches and they can fit more seats on the plane. Some passengers seem to mind the tighter squeeze more than others. The new seats generally have thinner padding. And new layouts on some planes have made the aisles slightly narrower, meaning the dreaded beverage cart bump to the shoulder happens more often. And this is all going on in coach at a time when airlines are spending heavily to add better premium seats in the front of the plane. Whether the new seats are really closer together depends on how you measure. By the usual measure, called "pitch," the new ones are generally an inch closer together from front to back as measured at the armrest. Airlines say you won't notice. And the new seats are designed to minimize this problem. The seats going onto Southwest's 737s have thinner seatback magazine pockets. Passengers on Alaska Airlines (ALK) will find slightly smaller tray tables. United's new seats put the magazine pocket above the tray table, getting it away from passengers' knees. And seat-makers saved some space with lighter-weight frames and padding. This allows airlines to claim that passengers have as much above-the-knee "personal space" as they did before, even if the seats are slightly closer together below the knee. New seats going into United Airlines' (UAL) Airbus A320s are an inch closer together from front to back. The new seats Southwest (LUV) has put on nearly its entire fleet are 31 inches apart, about an inch less than before. In both cases, the airlines were able to add an extra row of six seats to each plane. Southwest went from 137 seats to 143. Both airlines say the new seats are just as comfortable. United's says the new seats make each A320 1,200 pounds lighter. Southwest says the weight savings is cutting about $10 million a year in fuel spending. In addition, the extra seats allow Southwest to expand flying capacity 4 percent without adding any planes, says spokesman Brad Hawkins, while also collecting more revenue from the additional passengers. At 6-foot-3, Mike Lindsey of Lake Elsinore, Calif., doesn't have another inch to give back to the airlines. He has flown on Southwest several times since it installed the new seats. "You can't stretch out because of the reduced legroom," he says. "It's very uncomfortable on anything longer than an hour." Southwest flier Joe Strader now takes his billfold out of his pocket before he sits down on a flight because of the thinner cushions. Like Lindsey, he felt that he sat lower on the new seats. "The back of the seat in front of you is a little higher and makes you feel like you're sitting down in a hole," said Strader, who lives near Nashville. Hawkins said that the seat frames are the same height but the thinner cushions might make them seem lower. Strader did notice one good aspect: When the middle seat is empty and you want to put up the armrest and stretch out, the new seats are more comfortable, he says. Then there are passengers like Ryan Merrill. He says he didn't really notice any difference in the new seats. "I'm used to being packed in like a sardine, I just assume that's never going to change," he says. International passengers are feeling crowded, too. As recently as 2010, most airlines buying Boeing's big 777 opted for nine seats across. Now it's 10 across on 70 percent of newly built 777s, Boeing (BA) says. American's newest 777s are set up 10-across in coach, with slightly narrower seats than on its older 777s. The extra seat has generally meant skinnier aisles, and more bumps from the beverage cart for those at the end of the row. That's the biggest complaint from travelers, says Mark Koschwitz of SeatExpert.com. "We used to recommend the aisle seats, because you could stretch out more," he says. He tells passengers who want to sleep "to bring a jacket and prop up against the window." Boeing's new 787 could also be a tighter squeeze in coach. The plane was originally expected to have eight seats across but United Airlines, the only U.S. carrier currently flying it, went with nine across. Those seats are just 17.3 inches wide. So, passengers will have a skinnier seat for United's 12-hour flight from Houston to Lagos on a 787 than on its one-hour flight from Denver to Omaha on a different plane. Delta Air Lines (DAL) has already added slimline seats to about one-third of its fleet. "Increasing density is a priority for us from the perspective of maximizing revenue, but the slimline seats are great because they allow us to do that without sacrificing customers' comfort," said Michael Henny, Delta's director of customer experience. Seats from as recently as five years ago weighed almost 29 pounds, said Mark Hiller, CEO of Recaro Aircraft Seating. Its lightest seat now weighs 20. The weight savings comes from things like using plastic armrests instead of metal with a plastic cover, or on some seats replacing the metal pan that holds a passenger's posterior with mesh netting. Also, the new seats have fewer parts, reducing weight and costs. Airplane seats from 30 years ago looked like your grandmother's BarcaLounger, said Jami Counter, senior director at SeatGuru.com, which tracks airline seats and amenities. "All that foam cushion and padding probably didn't add all that much comfort. All that's been taken out," he said. "You haven't really lost all that much if the airline does it right." Some Ford Trimotors built in the 1920s had wicker seats. Vern Alg has flown in one. Alg, a former senior manager for aircraft interiors at Continental who is now a consultant for the Aircraft Interiors Expo, said his first airline flew DC-3s built in the 1940s. Their seats "were cumbersome, they were heavy," he says. "They were very, very comfortable [but] they required a great distance between the seats to achieve that comfort." Today's closer-together coach seats are responding to a customer demand for cheap fares despite higher fuel prices, he said. Alaska Airlines is replacing every seat in its fleet by the end of next year. The new seats will have one thing that passengers asked for: power outlets. Those outlets are especially important as more people bring their own hand-held devices onto the plane. The airline is spending several million dollars to install both 110-volt and USB power at every coach seat, said Alaska marketing vice president Joe Sprague. That might give travelers an extra reason to fly on Alaska, which is locked in intensive competition with Virgin America for customers in California. The seat "is where our customers spend the greatest amount of time with us," Sprague said. In the wake of a number of high-profile cruise ship disasters, the cruise industry announced this week that it had approved a passengers' bill of rights. The document, which the industry says will be legally binding, mainly concerns passengers' rights in instances where a ship has become disabled. It resembles a similar bill of rights for airline passengers that the Department of Transportation drew up in 2011. Those rules concerned procedures for dealing with lengthy tarmac delays, lost baggage, and similar issues. That got us thinking: If cruise ship passengers and air travelers have their own bills of rights, why shouldn't shoppers? Sure, visitors to retail stores typically don't encounter situations as maddening as being stranded on a floating hotel where the bathrooms don't work, or trapped in a cramped coach-class seat while their flight sits on a tarmac for hours. But the shopping experience is still riddled with frustrations, and less-savvy shoppers are often taken advantage of by dodgy pricing, pushy salespeople and inconsistent policies.

Looming U.S. Debt Default Threatens 401(k) Plans

By Hal M. Bundrick

NEW YORK (MainStreet) � The debt deadlock in Washington, D.C. may take a significant toll on American retirement plans. If the debt ceiling is not raised and the U.S. defaults on its outstanding payables, 401(k) plans could suffer losses in the trillions of dollars, according to the American Society of Pension Professionals & Actuaries (ASPPA).

"As if the uncertainty of this all too familiar crisis weren't enough for America's workers and retirees, the real tragedy is in allowing their retirement security to become another casualty of political failures by Congress and the Administration," said Brian Graff, the ASPPA's executive director and CEO.

Comparing the current economic threat with the impact of the similar debt crisis in 2011, the study found employer sponsored retirement plans could suffer losses of 20% or more as a result of a U.S. default. "These losses could deplete pension assets, creating adverse conditions for retirement savings," the ASPPA said in a statement released with the study. "Each financial shock absorbed by private pension investment affects the retirement decisions and financial security of plan participants. Delays in resolving the budget impasse and failing to address the debt ceiling will, without question, significantly slow economic growth and erode private pension assets." According to the study, the debt ceiling debate of 2011 "seriously disrupted the economy, shrank total private pension assets and slowed the nation's economic recovery." The organization's research indicates that during the months following the 2011 debt ceiling negotiations, along with the resulting downgrade of the U.S. credit rating, private pension assets declined an estimated 26% over their projected growth trajectory. The losses reflect the cumulative effect of the market valuation decline and the loss in earnings associated with that decline. The ASPPA says retirement savings totaled $20.9 trillion as of the end of the second quarter 2013, with nearly $11.1 trillion in employer-sponsored defined contribution plans and individual retirement arrangements. The study estimates retirement savings could experience losses exceeding $2.4 trillion, an amount exceeding 20%. "Based on past experience, this current impasse predicts significant disruption to financial markets and yet another significant risk to retirement security," the ASPPA says. These losses would be on top of the pain retirement plans have already suffered during the recent economic recession, when private pension assets lost approximately $1.7 trillion -- nearly 30% in value -- according to the Urban Institute. "ASPPA strongly encourages Congress and the White House to keep working Americans' retirement plans in mind and act quickly to resolve the debt ceiling debate," the organization says. "Extending the conflict could unnecessarily risk America's retirement security." --Written by Hal M. Bundrick for MainStreet