GBP/USD Drops on Contracting Manufacturing Sector


British Manufacturing PMI dipped into contraction zone, by scoring only 49.1 points in July, lower than last month’s 51.3 points and lower than 51.1 that was expected. GBP/USD is retreating from resistance as this is a very worrying sign.

Pound/dollar traded at 1.6455 before the release, clearly capped by the 1.6470 resistance line. It now trades at 1.64, with a lot of room for falls until the next cushion.

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Is This Automaker a Value Stock?

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As a value-oriented investor, I wouldn't ordinarily suggest looking into a stock that currently trades 465% higher than its price two years ago -- especially an automaker. However, as the past several years highlighted, Ford (NYSE: F  ) is no ordinary company. While its Detroit brethren crumbled in the jaws of the Great Recession, Ford managed to weather the storm and capitalize on its rivals' weaknesses. But given its relative strengths -- and its own weaknesses -- does Ford's stock appear cheap enough to make it worth researching further?

The positives
Pricing: On the surface, Ford looks flat-out cheap. It trades at 9.1 times its past 12 months' EPS and 6.38 times its cash flow. These figures seem insanely low, considering the S&P 500 currently trades at 16.3 times its past 12 months' earnings. On the other hand, rivals GM (NYSE: GM  ) and Honda (NYSE: HMC  ) also trade at a relatively low 8.0 and 11.5 times their respective earnings. And on the high end, Toyota (NYSE: TM  ) , still reeling from the Japanese disaster, sells at 20.1 times earnings.

However, price makes up only one aspect of the value equation. You also have to understand what you get for the price you pay.

Management: Ford has one of the most able and adept corporate leaders at the helm. CEO Alan Mulally received wide praise for his management during the recent recession. The chief executive since 2006, he accurately foresaw the coming economic calamity. Before the credit markets virtually froze, Mulally borrowed nearly $24 billion against Ford's assets, using that fresh capital to maintain operations as rivals clung to taxpayer-funded life support. For his insight and leadership, Mulally received broad recognition as one of the best CEOs in American manufacturing today.

Relative strength versus competitors: This ties largely in with Mulally's bold actions. Ford continued to plow money into its development efforts throughout the recession and allowed the business to continue largely as normal. Its superior products have also allowed it to position itself perfectly for any upticks in auto purchases. And since product development in the automotive industry requires several years from start to finish, Ford's current and more up-to-date product offerings represent the fruit of management's actions years ago.

Weaknesses
Industry economics
: Historically speaking, investing in the auto industry was a tough way to make a buck. Brand loyalty usually isn't a must for most car buyers, so automakers have to offer their customers the best overall value mix between price and features to maintain or grow their market share. A race-to-the-bottom kind of mentality can emerge as a result, in which producers offer their products at such steep discounts that their profit margins become paper-thin.

Automakers also have to deal with union obligations that can make producing cars quite expensive. While Ford secured some pretty impressive concessions out of the UAW in 2009, the autoworkers' union has historically proved a challenging counterpart for the Big 3.

And finally, the industry faces sensitivity to commodity prices. The combination of high input prices and weak pricing power has typically led to low profit margins. Companies in this industry compensated by leveraging themselves to the hilt. However, given the lessons of the past several years, that might be one trend that's become a thing of the past.

Oh, and did I mention it's a highly cyclical industry?

Bottom line
Given the overall challenges Ford faces, I still regard it as a pass. I like the company a lot on a relative scale, but there's not a lot of consolation in being the best of the worst.  Agree or disagree? Feel free to leave your thoughts in the comments box below.

In need of more investing ideas? The Motley Fool recently compiled a report for its readers, "5 Stocks The Motley Fool Owns -- And You Should Too," containing some of the Fool's best stock ideas. Best of all, it's absolutely free to our readers. Access your free copy now.

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Source: http://feeds.fool.com/~r/usmf/foolwatch/~3/eD4494EtsMU/is-this-automaker-a-value-stock.aspx

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Hopeful and Scared: Working Through Mixed Back-to-School Emotions

By Dr. Meg Meeker

Is summer getting shorter, or is it just me? June flies into August and as soon as smoke from the Fourth of July fireworks leaves our nostrils, we are back at Staples tossing binders and pencil cases into our carts. Here we are again.

Each new school year brings a wide range of emotions. We are hopeful that this year, our daughter will meet classmates who won?t make fun of her. Our son will do better in math. Our teenager will make the varsity soccer team. We are hopeful, but we are scared. What if this year is worse than last year? Some of us march into September holding our breath. But we don?t need to. There are a few things we can do to help get the year moving in the right direction for ourselves and our kids.

Be Proactive, Not Fearful

First, we can decide to parent proactively, not fearfully. So many decisions we make for our kids stem from fear rather than strength. We manipulate schedules to make sure our daughter has the ?right? first grade teacher, scared that if she gets the ?wrong? one, her year will be miserable. Who says? We make our 16-year-old hit the gym every morning in the summer so that he?ll have a leg up when he tries out for varsity soccer. We can?t see him get cut from the team again.

I suggest that rather than push and prod our young ones into places we feel they should be, we give them breathing room. We mustn?t be afraid for our kids, that they?ll get the wrong teacher or not make the team. Some of these are important life-defining moments. More importantly, we must teach them that they are tough enough to handle what life gives them.

Help Them Develop A Positive Attitude

Second, we can help them develop a positive attitude toward school. If your son loves language but hates science, go to the library and get him a Spanish version of a book series he enjoys, and ask him questions about it. Read books together and casually chat about them. If your daughter hates sports but likes math, ask her if she would like to be in a math club or start one. Don?t make her play basketball, but ask her to go on walks or bike rides in the evenings with you. In other words, be enthusiastic about her strengths and downplay the things that bore her. When parents playfully (not competitively) invest themselves in their child?s interests, kids respond.

Put Them To Sleep

Finally, nothing helps foster a positive attitude more than adequate rest. Like clockwork, parents haul exhausted first graders and teens into my office starting in November. Many worry about leukemia, brain tumors or mono. These maladies are far rarer than simple lack of sleep. Don?t let this happen to your child. Before school starts, rein in bedtime and help his body establish a healthy sleep rhythm. Healthy hormone regulation depends on adequate sleep. Most kids fight sleep, so you need to help.

Great education begins at home. Kids adopt attitudes from their loved ones?especially parents. If we talk to them as though they can handle the curveballs that life brings, live with positive, grateful attitudes, and establish calm routines at home, life goes well. These are small changes for us, but they bring enormous changes in our kids.

Parenting is never complete, but the great news is you never have to go at it alone! Make a commitment right now to gain valuable wisdom from others this year. Meg Meeker?s books are some of Dave?s absolute favorites, and he recommends them all the time to The Dave Ramsey Show listeners.

Pediatrician, wife, mother and best-selling author of six books, Dr. Meg Meeker is one of the country?s leading experts on parenting, teens and children?s health.

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Source: http://www.daveramsey.com/article/hopeful-and-scared-working-through-mixed-back-to-school-emotions/lifeandmoney_kidsandmoney

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How Does salesforce.com Keep Its Edge Over Larger Rivals?

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Few fields move as rapidly as technology. Businesses creating outsized profits and returns for shareholders quickly get a bull's-eye painted on their back as they become targets of other companies looking to disrupt their products by selling cheaper alternatives that still prove "good enough." Not only that, but even if a company continues to dominate its particular field, other changes in technology can shift spending away from their products. Think about how Microsoft (Nasdaq: MSFT  ) still dominates PCs but feels pressure from the sales shift toward mobile devices such as smartphones and tablets.

With that in mind, today we're looking at how salesforce.com (NYSE: CRM  ) innovates.

Technology companies can innovate either through acquisitions or by spending more money on research and development. We'll compare salesforce.com's spending in these areas with that of its closest peers and assess whether the company is investing enough in its future.

Research and development
Over the past five years, salesforce.com has spent an average of 10% of revenues on R&D. The following table below summarizes how salesforce.com's R&D expenditure relative to revenues compares with some of the company's closest peers.

Company

2006

2007

2008

2009

2010

LTM

salesforce.com

9.0%

8.5%

9.2%

10.1%

11.3%

11.9%

Oracle (Nasdaq: ORCL  )

13.0%

12.2%

12.2%

11.9%

12.1%

12.7%

IBM (NYSE: IBM  )

6.7%

6.2%

6.1%

6.1%

6.0%

5.9%

Microsoft

14.9%

13.9%

13.5%

15.4%

13.9%

12.9%

Source: Capital IQ, a division of Standard & Poor's. LTM = last 12 months. Dates above are calendar years; yearly total is for company fiscal years closing in that period.

Over the past five years, salesforce.com's R&D expense has increased to be inline -- as a percentage of sales -- with key rivals Oracle and Microsoft. That's partially due to the company's expansion of its focus into new areas, and it's also the result of a deferred revenue model that leaves reported GAAP revenue lower than the real level of sales growth at the company.

However, while salesforce.com was innovative in its initial push of creating cloud-based customer-relationship software, the key to analyzing the company's continued growth against rival Oracle isn't in the R&D line. Instead, investors should be looking at sales and marketing expenses. The ability to successfully market its services to new cloud-computing adopters is where the vast amount of salesforce.com's resources are centralized.

Line Item

2006

2007

2008

2009

2010

Revenues

                 $497.1

                 $748.7

              $1,076.8

         $1,305.6

         $1,657.1

R&D

                   $44.6

                   $63.8

                   $99.5

            $131.9

            $187.9

Sales & Marketing

                $252.9

                $376.5

                $534.4

           $605.2

           $792.0

Source: Capital IQ, a division of Standard & Poor's. LTM = last 12 months. Dates above are calendar years; yearly total is for company fiscal years closing in that period. All figures in millions.

Nearly 50% of all revenue at salesforce.com goes directly to marketing its services and finding new clients. Compare that with Oracle, which spends a significantly lower 18% on sales and marketing.

That's not to say salesforce.com is doing anything wrong by spending such a large amount on sales and marketing. Qlik Technologies (Nasdaq: QLIK  ) and NetSuite (NYSE: N  ) , other cloud-centric companies looking to disrupt traditional IP powers, spend 54% and 48% of revenues on sales and marketing, respectively.

However, this does illustrate that while innovation is important in driving salesforce.com into new revenue opportunities aside from its core customer relationship offerings, having a sales team that's adept at evangelizing the company's solution to a world leery of giving up its IT infrastructure and embracing a cloud-computing future is salesforce.com's most important point of execution.

Acquisitions 
In technology, some of the best companies have turned growth through acquisitions into an art. IBM has adeptly spun off capital-heavy businesses such as the hard-drive and PC segments, while it focused on acquiring additional services and software expertise that have transformed its business model.

On the opposite end of the spectrum, Hewlett-Packard is often criticized for underinvesting in R&D, to the point that it has to overpay on acquisitions to catch up with its competitors.

Investors should remember, most of all, that companies are valued by the cash flow they can bring in for their shareholders over time. If companies need to continue making purchases in perpetuity to keep growing, that amounts to a reduction in cash flows, and investors should treat acquisition spending as a continuing outflow against cash flow.

Let's take a look at salesforce.com's free cash flow over the past five years against cash spent on acquisitions.

anImage

Source: Capital IQ, a division of Standard & Poor's. LTM = last 12 months. Dates above are calendar years; yearly total is for company fiscal years closing in that period.

In its earlier years, salesforce.com wasn't particularly acquisitive, as the company organically created new products and services through internal R&D. However, recently the company has joined other tech titans in the hunt for smaller buyouts. In late March, the company announced a $326 million acquisition of social-media monitoring company Radian6. That buy followed closely on the heels of a $212 million purchase of Heroku, a company that created a cloud-based application platform that hosts more than 105,000 social and mobile applications.

The size of these buys shows the commitment salesforce.com is putting behind being the leader in the
"social enterprise area." The company's progress in this up-and-coming field was highlighted when it signed an agreement to create a private social network for Toyota based on its Chatter platform.

Final thoughts
If you're looking to stay updated on salesforce.com, or any other companies mentioned here, make sure to add them to our free watchlist service, My Watchlist. It's free, and it helps you constantly stay updated on the news and analysis for your favorite companies.

Eric Bleeker owns shares of no companies listed above. You can follow him on Twitter to see all of his technology and market commentary. The Motley Fool owns shares of Intel, Oracle, IBM, Microsoft, and Qlik Technologies and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel, salesforce.com, Qlik Technologies, and Microsoft, creating a covered collar position in Microsoft, creating a diagonal call position in Intel, and shorting salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insightsmakes us better investors. The Motley Fool has a disclosure policy.

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Source: http://feeds.fool.com/~r/usmf/foolwatch/~3/s90QN1scrPE/how-does-salesforcecom-keep-its-edge-over-larger-r.aspx

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Toyota Supply Chain Recovery Drives Stock Up To $94

In spite of the challenges, Toyota managed to increase its vehicle sales in Q1 in international markets by 8% year-over-year. We have a price estimate of near $94 for Toyota stock, which is about 15% ahead of the current market price.

Source: http://blogs.forbes.com/greatspeculations/2011/07/29/toyota-supply-chain-recovery-drives-stock-up-to-94/

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