LPL Names Ex-SEC Enforcer Head of Legal, Government Relations

LPL Financial announced Thursday that David Bergers, former deputy director of the SEC’s enforcement division, has been appointed LPL’s new managing director for Legal and Government Relations and General Counsel for LPL Financial Holdings.

Bergers (right), who will join LPL on Aug. 5, will report to LPL Financial Chairman and CEO Mark Casady. Bergers replaces longtime LPL Financial legal chief Stephanie Brown, who after 24 years at LPL Financial will be joining the Boston office of Markun, Zusman, Freniere & Compton.

Bergers, who will also be a member of the firm’s management and risk oversight committees, comes to LPL Financial after 13 years with the SEC, most recently as acting deputy director of the enforcement division in Washington. He was director of the SEC's Boston regional office from 2006 to 2013.

"We are fortunate to have someone of David's caliber and expertise in regulatory and other matters joining LPL Financial to head our legal and government relations functions. His perspective and experience will strengthen the capabilities of an extremely talented team,” noted Casady, in a statement. “He also has significant management experience, having most recently helped oversee a team of 1,300 people and successfully transformed both the enforcement and examination programs at the SEC.”

Bergers previously practiced at law firms in Philadelphia and Boston, and served as a vice president and assistant general counsel of a regional broker-dealer, as well as primary counsel to an affiliated investment adviser. He obtained his bachelor's degree in 1989 from Eastern Nazarene College, and earned his law degree in 1992 at Yale Law School.

"I am honored to lead LPL Financial's legal and government relations team, and I look forward to working together with LPL's employees, advisors and institutions as they serve investors in a rapidly-changing industry," said Bergers, in the same statement.

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Check out LPL’s RIA Platform Hits $50B in Assets on AdvisorOne.

Is This The Turn For Check Point?

Waiting for the right time to jump into Check Point Software (Nasdaq:CHKP) was a trying exercise as the company's product revenue growth continued to grind lower and then turn negative. And now with the shares up almost one-quarter over the last three months, it looks like Wall Street has already moved on the recovery trade. The one solace for investors who've missed the move (myself included) is that even with exceptionally conservative assumptions, Check Point still does not look like an expensive stock and this company virtually mints money.

Results Still Weak, But Are They Turning?
At the risk of being accused of trying to spin Check Point's results in a positive light, I think this is a case where soft-looking results are actually starting to look better.

Revenue was up 4% this quarter and slightly ahead of expectations (less than 1%). More interesting to me is that the revenue was up 5% sequentially. Likewise in product revenue – year-on-year, Check Point saw another decline (-2%), but revenue grew 13% on a sequential basis.

SEE: 5 Earnings Season Investing Tips

Margin and profit performance was likewise somewhat lackluster, and without the same sequential improvements. Gross margin was basically flat on a year-on-year basis, and down slightly sequentially, while operating income rose 2% from last year and fell 3% sequentially.

Will The Trade-Down Ease Off?
One of the challenges that Check Point has been dealing with, in addition to the generally unappetizing IT spending environment, is that its systems are arguably too good for the company's own good. In many cases, customers have stuck with Check Point products, but taken advantage of the constant improvements to upgrade the performance relative to their existing system, but at a lower price (in other words, the "feature-adjusted" price is now lower).

Hopefully Check Point is largely past that cycle. At the same time, the company has introduced two new attractive appliance lines (the 600 and 1100) that should help perk up revenue later this year, the former (the 600) offering an interesting potential challenge to Fortinet (Nasdaq:FTNT) in the smaller business space. Elsewhere, the company is turning more of its attention to threat emulation (where it will challenge Palo Alto Networks (Nasdaq:PANW) and mobile information protection. Of course, Palo Alto isn't going to take this lying down, and major rivals like Cisco (Nasdaq:CSCO) and smaller contenders like Fortinet and Sourcefire (Nasdaq:FIRE) aren't going to ease up either.

Will The Market Allow For Continued Success?
I do still see some threats to the Check Point story. For starters, I would expect that the weak IT environment has clients/customers increasingly pitting companies against each other in the attempt to force one to cave on price to get the deal. Longer term, I wonder if the trend towards consolidating data centers and shifting more business towards PaaS vendors like Amazon (Nasdaq:AMZN) is going to undermine market growth – although Check Point could actually benefit from that, as they would seem to be better-suited to meet the higher demands of a larger, consolidated data center.

SEE: A Primer On Investing In The Tech Industry

I'm also still concerned with margins and cash flow generation. You just don't see companies regularly convert 60% of revenue to cash flow, and I don't expect Check Point to be able to keep it up. Consider the 600 appliance, for instance. I just don't see how the SMB market will support 50%-plus operating margins, so Check Point is going to have to think about how much margin it is willing to trade for better growth.

The Bottom Line
For as long as I've followed Check Point (and thought the stock was undervalued), missing the roughly 25% move over the past quarter has been aggravating and frustrating. That said, I think this "meet and maintain" quarter will represent the bottom of the cycle, and I believe the company should start reporting better growth in the coming quarter. It won't be the sort of growth that has investors confusing this company with Palo Alto, but any growth will help at this point.

Even very conservative assumptions suggest these shares are still cheap. If I project 5% revenue growth and less than 2% free cash flow growth (assuming a big reduction in margins/free cash flow margin), the resulting fair value is still more than $61. Moreover, with Check Point having so much cash on hand that management could take Scrooge McDuck-style swims through it, the opportunity to add growth through acquisition or continue on with substantial buybacks should help underpin the shares.

Are You Expecting This from Goodyear Tire & Rubber?

Goodyear Tire & Rubber (Nasdaq: GT  ) is expected to report Q2 earnings on July 30. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Goodyear Tire & Rubber's revenues will shrink -5.1% and EPS will wither -14.0%.

The average estimate for revenue is $4.88 billion. On the bottom line, the average EPS estimate is $0.49.

Revenue details
Last quarter, Goodyear Tire & Rubber reported revenue of $4.85 billion. GAAP reported sales were 12% lower than the prior-year quarter's $5.53 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Last quarter, non-GAAP EPS came in at $0.45. GAAP EPS were $0.10 for Q1 versus -$0.05 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Recent performance
For the preceding quarter, gross margin was 18.9%, 210 basis points better than the prior-year quarter. Operating margin was 5.6%, 80 basis points better than the prior-year quarter. Net margin was 0.7%, 80 basis points better than the prior-year quarter.

Looking ahead

The full year's average estimate for revenue is $20.27 billion. The average EPS estimate is $2.13.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 494 members out of 594 rating the stock outperform, and 100 members rating it underperform. Among 139 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 119 give Goodyear Tire & Rubber a green thumbs-up, and 20 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Goodyear Tire & Rubber is outperform, with an average price target of $16.21.

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Twitter's IPO In Pictures

Updated from 5:09 p.m. EST to provide revenue information in the fifth paragraph.

NEW YORK (TheStreet) -- After dominating headlines for weeks, Twitter (TWTR) went public with a bang, near doubling mere minutes after its float. In one of the most highly-anticipated IPOs of 2013, demand was high and investors desperate for a piece of coveted stock.

The San Francisco-based company priced its offering at $26 per share late Wednesday. Similar to its initial IPO offering, Twitter used its own social networking platform to reveal its final pricing. Goldman Sachs (GS) was the lead underwriter for the offering with Morgan Stanley (MS), JPMorgan (JPM) and Bank of America (BAC) as co-underwriters.

The $26 per share offer was upwardly revised from the company's previous range of $23 and $25 a share and significantly higher than early estimates of $17 to $20. After closing its first trading day 74.7% higher at $44.90, the social network's total market cap is in excess of $24 billion. At its initial $26 pricing, the company was valued at more than $18 billion. Twitter reported $422 million in revenue through the first nine months of 2013, an increase of 120% from year-ago levels. About 70% of the company's advertising revenue comes from mobile, an excellent sign given it is primarily thought of as a mobile-first experience.

Why the Dow Is Soaring

Blue-chip stocks sprinted out of the gate today. At its peak this morning, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) had shot higher by more than 200 points after separate reports showed that housing prices continue to head in the right direction. However, the markets have since cooled down. With roughly an hour left in the trading session, the blue-chip index is up by a still impressive 110 points, or 0.72%.

Shortly before the markets opened this morning, traders learned that U.S. home prices rose in the month of March by 10.9% compared to the same month last year. This was the largest year-over-year gain in seven years. According to the Case-Shiller home price index that surveys the nation's largest metropolitan areas, home values increased in all 20 of the cities examined.

These gains can be credited to a number of trends. First, the inventory of houses for sale remains depressed. Second, mortgage rates remain near their last year's historic lows. And finally, as a Wall Street Journal story observed this morning, speculators looking to flip houses have made their presence increasingly apparent over the last few months. In California, for example, more than 5% of all homes sold in the state were bought and then resold within six months.

Regardless of the impetus for the rise, there can be little doubt about its importance to the underlying economy. For consumers, rising home values mend personal balance sheets weighed down by underwater mortgages; according to real estate website Zillow, in the first quarter of this year, a full 25.4% of home owners owed more on their homes than they are presently worth. For banks, it means fewer delinquencies (which are expensive to service) and more underwriting activity as buyers and sellers regain confidence in the market. And for homebuilders, it means an increase in the demand for new houses.

The latter was on display last week when Toll Brothers (NYSE: TOL  ) reported earnings for its fiscal second quarter ended April 30. Aside from the fact that the nation's largest luxury homebuilder notched higher revenue and net income, the most tangible evidence of progress was in the number of units sold or put under contract. Compared with last year, the company saw its net signed-contract count increase by 36%. And over the same time period, the price of each contract advanced from $631,000 to $678,000.

Given today's news, it should be no surprise that shares of banks and other companies in the home improvement business are headed higher. In terms of Dow stocks, for instance, both JPMorgan Chase (NYSE: JPM  ) and Bank of America (NYSE: BAC  ) are watching their shares ascend. While neither of these lenders has the same level of exposure to the mortgage market as Wells Fargo, which completely dominates the field, both are nevertheless reliant on origination fees to fuel their respective bottom lines. In addition, both have massive quantities of home loans on their balance sheets and in service portfolios that they manage for third-party investors. Consequently, any improvement in home values translates directly into better collateral and lower service-related expenses.

Also up this afternoon are shares of Home Depot (NYSE: HD  ) . The nation's largest home-improvement retailer has seen its stock soar over the last 12 months by 67%, making it the second-best-performing stock on the Dow over that time period next to Bank of America. And in its most recent quarter, it notched a 7.4% increase in year-over-year sales and 22.1% growth in diluted earnings per share. The latter figures could well continue on this path so long as the housing market doesn't falter.

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Vodafone Group Increases Dividend By 7% to Yield 5.1%

LONDON -- Vodafone  (LSE: VOD  ) (NASDAQ: VOD  )  released its final results this morning, and announced that the group's revenue saw a decline of 4.2% on a reported basis to 44.4 billion pounds, while EBITDA fell 3.1% to 13.3 billion pounds.

This was mainly caused by the continued turbulent conditions in Southern Europe, which has seen the company cut prices there in an attempt to keep its customers and as such revenue for the region fell 16.7% on a reported basis.

However, group adjusted operating profit rose 9.3% to 12 billion pounds, which was above previous guidance, and adjusted earnings per share increased 5% at 15.65 pence, following success elsewhere in the business.

Vodafone Red, the company's "new strategic approach to pricing and our customer proposition," was launched in 14 countries, and had 4.1 million customers as of May 12, 2013, with "very positive initial results".

Vodafone's cash cow and joint-venture with Verizon Communications, Verizon Wireless, saw service revenue up 8.1%, which led to the British-based company's share of profits up 30.5% to 6.4 billion pounds.

While there was no update on the talks between the two telecoms giants about a potential buyout of Vodafone's stake or a potential merger, this morning's results did confirm that the 2.1 billion pound dividend due to be received from Wireless will be reinvested into Vodafone's business.

The group was able to lift its total ordinary dividends per share by 7% today for a final figure of 10.19 pence and thus, with the shares up marginally in early trade to 197.93 pence, it brings Vodafone onto a current yield of 5.1%.

Group chief executive Vittorio Colao commented:

Thanks to further strong progress this year in our key areas of strategic focus -data, enterprise and emerging markets-and an excellent performance from VZW, we have achieved good growth in adjusted operating profit and adjusted earnings per share. However, we have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment. 

With the announcement of today's 7% increase, the ordinary dividend per share has grown over 22% in the last three years. The Board remains focused on balancing ongoing shareholder remuneration with the long-term investment needs of the business, and going forward aims at least to maintain the ordinary dividend per share at current levels.

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Is Macquarie Infrastructure's Cash Flow Just For Show?

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

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 Macquarie Infrastructure (NYSE: MIC  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Macquarie Infrastructure generated $178.6 million cash while it booked net income of $13.3 million. That means it turned 17.3% of its revenue into FCF. That sounds pretty impressive.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Macquarie Infrastructure look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 55.4% of operating cash flow coming from questionable sources, Macquarie Infrastructure investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 21.2% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 18.0% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

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We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add Macquarie Infrastructure to My Watchlist.

Alcoa Sets Tone for Earnings Season

Alcoa's (NYSE: AA  ) earnings report has long stood as the unofficial kickoff signal of each earnings season, typically setting a tone by which subsequent releases are measured. While this quarter appears to have followed the expected pattern, there are some who have begun to question the relevance of Alcoa as a member of the Dow Jones Industrial Average. The Dow has started 2013 in impressive fashion, while Alcoa has languished.

In the video below, Fool.com contributor Doug Ehrman discusses Alcoa's numbers, the tone they bring to earnings season, and the company's place in the market, and in the Dow, as a bellwether.

Materials industries are traditionally known for their high barriers to entry, and the aluminum industry is no exception. Controlling about 15% of global production in this highly consolidated industry, Alcoa is in prime position to take advantage of growth that some expect will lead to total industry revenue approaching $160 billion by 2017. Based on this prospect and several other company-specific factors, Alcoa is certainly worth a closer look. For a Foolish investment perspective on this global giant simply click here now to get started.

Good Times To Continue For General Electric

On June 21, 2014, Alstom SA's board approved General Electric's (GE) bid to buy Alstom's gas and steam turbine-making operations for $17 billion. This article looks at the positives for GE from the deal and the other critical factors that make GE a good long-term investment.

The Deal And Its Positive Implications

The board of Alstom SA unanimously approved GE's $17 billion offer to buy Alstom's energy business. As a first positive, the transaction enhances GE's position as one of the most competitive infrastructure company. Alstom will bring complementary technology and global capability for GE, which will yield positive results in the long-term.

The transaction will result in an incremental EPS of $0.08 to $0.10 for GE by 2016 and this underscores the attractiveness of the deal. Further, on an immediate term, the deal is expected to have an incremental EPS impact of $0.04 to $0.06 on for GE.

The acquisition will also provide a cost synergies opportunity and GE expects cost synergies of $1.2 billion in the fifth year starting with cost synergies of $300 million in the first year.

In terms of capacity and revenue visibility, the acquired business has an installed base in excess of 350GW along with a $38 billion order backlog. Considering the acquired company's LTM revenue of $20 billion, the current order backlog gives a revenue visibility of 2 years.

Further, with 85% of the revenues outside North America and approximately 80% of the revenue from outside Western Europe, the acquisition provides emerging market footprint for GE. Therefore, the incremental EPS growth from the acquisition is likely to be robust over the long-term.

Strong Revenue Visibility And Financial Position

As of 2013, GE had an order backlog of $244 billion, which is 2.4 times the company's FY13 revenue. A robust order backlog ensures that the company's earnings remain stable in the foreseeable future.

GE is also well placed fundamentally with a strong cash position of $89 billion as of FY13. GE also generated an operating cash flow of $28.5 billion for FY13 and a robust cash inflow allows GE to create shareholder value through dividends and share repurchase, besides going for organic and inorganic growth.

For the period 2010-2013, GE has returned $26 billion to shareholders through dividends, $19 billion through share repurchase and has invested $23 billion in attractive merger and acquisition opportunities. This gives a sense of the strong shareholder value creation initiatives by the company.

In February 2013, GE authorized a share repurchase program of $35 billion through 2015. The company already made share repurchase worth $10 billion in 2013. With $25 billion still remaining under the share repurchase program, the EPS is likely to get a strong boost over the next two years.

In terms of dividend declared, GE's dividend payout has increased from a low of $0.46 per share in 2010 to $0.79 per share in 2013. At a current market price of $27, this translates into a good dividend yield of 3.3%. The dividend payout is likely to increase in the future considering the organic and inorganic growth expected.

Growth In The Oil & Gas Segment

GE has been exhibiting steady revenue trend across all segments of its business. However, I am very bullish on the company's oil & gas business segment.

The business segment revenue has increased from $9.6 billion in 2009 to $16.9 billion in 2013. The strong growth (organic and inorganic) is likely to continue for this segment over the next few years. Currently, the oil & gas segment has an order backlog of $19.7 billion, which gives one a one year revenue visibility.

The reason for the bullish outlook on the segment is the growth in the industry coupled with the company's offerings. The company's Oil & Gas segment supplies mission critical equipment for the global oil and gas industry throughout the value chain.

With the US shale boom coupled with an offshore oil & gas boom, the segment is well placed to grow at a robust pace over the next few years and have a significant incremental impact on the company's EPS.

Conclusion

General Electric is well placed in terms of fundamentals and in terms of industry leadership to grow and create shareholder value in the long-term. The company's recent acquisition of Alstom's energy business is another feather in the company's cap. With a strong order backlog and an equally strong cash position, GE will continue to create shareholder value and is a good stock to own for the long-term.

About the author:Faisal HumayunSenior Research Analyst with experience in the field of equity research, credit research, financial modelling and economic research

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529 College Savings Plans Beat Benchmarks on After-Tax Basis

Managers of state-sponsored 529 college savings plans appear to be doing a good job investing assets for plan participants, a new study finds.

Savingforcollege.com compared the historical investment performance of 529 plans with broad market indexes.

In most categories examined in the study, the average 529 plan returns trailed the comparable index returns.

However, the gap between average 529 plan returns and index returns was slight in many categories, and the analysis showed that 529 plans beat the indexes when results were adjusted for the federal income-tax benefits of 529 plans.

Researchers compared investment performance over one-, three-, five- and 10-year periods ending Dec. 31 in each of seven different asset-allocation categories — 100%, 80%, 60%, 40% and 20% equity; 100% fixed income; and 100% short term.

They used the median 529 performance in each category to represent the average, examining as many as 222 separate portfolios per category.

The broad market benchmarks employed for comparison comprised the Russell 3000 Index, the MSCI EAFE Index, Barclays Capital U.S. Aggregate Bond Index and the Citigroup 3-Month U.S. Treasury Bill Index.

Two Examples

The median five-year average annual return for a 529 plan portfolio invested 100% in equities returned 16.98%, compared with 17.56% over the same period for the benchmark, an 80/20 blend of the Russell 3000 Index and the MSCI EAFE Index.

However, when the annualized return of the benchmark was assessed a 15% federal capital-gains tax, it fell to 14.93%, or more than two percentage points below the annualized return of the tax-free 529 plan.

The 529 plan portfolio invested 100% in fixed income had a median five-year average annual return of 4.28%, while the Barclays Capital U.S. Aggregate Index benchmark returned 4.44%.

On an after-tax basis, the benchmark return fell to 2.89%.

“Our study suggests that 529 plan managers have done a good job investing the college savings entrusted to them," Savingforcollege.com founder Joseph Hurley said in a statement.

“It also underscores the importance of keeping fees in 529 plans low, since the benchmark returns assume zero costs.”

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Related on ThinkAdvisor:

The wrong way to pay for financial advice

"Your margin is my opportunity." -- Jeff Bezos

Imagine you're checking out at the grocery store. As the clerk scans your bananas, she asks you to step on the scale. "Two-hundred seventy-five pounds," she reads off. "Your bananas will cost $9.86."

You are confused. What does your weight have to do with the cost of bananas?

"You weigh more than average," the clerk explains. "So it costs us more to provide you with bananas."

But the skinny guy in line behind you just bought the same amount of bananas. He received the same product and the same service as you, but paid half as much.

This infuriates you. How much you weigh shouldn't alter how much you pay for bananas. It's the amount of bananas you actually buy, and the service the grocer offers, that should affect prices. Customers would never put up with grocery prices being based off your weight, which is why no one weighs you when go to the grocery store.

But this is how most of the financial industry operates. The price of almost every service you buy takes your weight -- or your portfolio's weight -- into consideration.

Most financial advisors charge a fee based on a percentage of your investments, called an asset under management (AUM) fee. If you have $500,000, a 1% fee means you'll pay $5,000 a year. One million dollars with the same advisor costs $10,000 a year, and so on. This is standard across the industry. Tens of trillions of dollars are managed based on this arrangement.

But why? It's like charging fat people more for bananas. Clients often receive the same service, the same investments, the same performance, the same brokerage statement, and with the same amount of effort put in by the advisor, but at vastly different prices. Few other industries could get away with this.

AUM fees might make sense for advisors focusing on small-cap or private companies, where managing more money truly becomes a hindrance. But that's a small exception. It is not 10 times harder to buy 5,000 shares of Microso! ft as it is 500 shares, nor is it 10 times as difficult to purchase $5,000,000 in Treasuries as it is $500,000. But advisors will receive 10 times as much in fees.

There are two reasons financial advisors charge AUM fees: It's how the industry has always operated, and you can make a lot of money doing it. Warren Buffett said a few years ago:

Wall Street markets are so big, there's so much money, that taking a small percentage [of assets] results in a huge amount of money per capita in terms of the people that work in it. And they're not inclined to give it up.

But some advisors have given it up. I'm hearing about a growing number of advisors charging a set, flat fee, regardless of the amount of client assets.

"Rather than arbitrarily deriving our compensation from the value of an investor's portfolio, we have built a retainer fee structure around the services that we provide," writes James Osborne of Bason Asset Management. This is the how most CPAs operate. His fee structure is simple: "$4,500 per year, per client relationship."

"Our services do not vary appreciably between clients with larger or smaller portfolios, so our fee structure reflects this," he writes.

Unless your income depends on AUM fees, it is hard to argue with that logic.

Flat fees will likely lead to lower incomes for advisors -- especially large advisors -- while clients keep more of their money. Welcome to capitalism! The traditional advisory business has been a honeypot for decades, where advisors could earn more than brain surgeons while lagging their benchmark. Since stocks tend to grow above the rate of inflation, advisors' income balloons over time through no effort of their own. If an advisor put his clients in the S&P 500 and went to the beach, his annual income would have grown at six times the rate of inflation over the last 30 years, all without lifting a finger. Competition shouldn't allow that to occur. "The average AUM-based established advisory firm is running 50-70% gross ! margins,"! Osborne wrote last week. That's enormous. And as Jeff Bezos says, "Your margin is my opportunity." Flat-fee advisors are coming after that opportunity as fast as they can.

I think one of the biggest trends we'll see over the next decade are financial management fees falling like a rock. They've already dropped in recent years, but there's still enormous fat to cut. Not only will AUM fees be pressured to decline, but the way advisors charge may be upended. The winner is you, the investor.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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Hedge funds hot for oil and Apple

Valero Energy and Talisman Energy, two hedge fund favorites, have moved in opposite directions over the past few months.

NEW YORK (CNNMoney) Investors in oil stocks haven't had much to brag about as of late. Just don't tell that to Wall Street's big money players.

The top 50 hedge funds increased their exposure to the energy industry more than any other sector in the fourth quarter of last year, according to research from FactSet.

Energy bet may not have paid off: The funds plowed over two billion dollars into Whiting Petroleum (WLL), Valero Energy Corporation (VLO, Fortune 500), Talisman Energy (TLM), and Cameron International (CAM, Fortune 500).

While it's unclear when exactly the funds bought the stocks -- or whether they still even own them -- the performance of these companies has been a mixed bag.

Shares of Talisman have fallen about 7% since the first trading day of the fourth quarter, but Valero is up roughly 45% since then.

The Energy Select Sector SPDR ETF (XLE) is up about 5% over that period. But that's lagged the more than 9% gain for the S&P 500.

Also among hedge funds' favorites: Apple (AAPL, Fortune 500).

The tech giant was the recipient of $1.8 billion of hedge fund money in the fourth quarter. Icahn Associates, Coatue Management and Citadel Advisors each invested $500 million in Apple.

Following Icahn into Apple? Activist investor Carl Icahn of Icahn associates bought another $1 billion in Apple shares this year. But he recently dropped his proposal for Apple to return more cash to shareholders with a $150 billion stock buyback after CEO Tim Cook said the company was already repurchasing a sizable chunk of Apple's stock.

Shares of Apple have rallied over 11% since the start of the fourth quarter

Another tech darling for some hedge funds was Twitter (TWTR), which went public last November. However, ownership was concentrated mainly in two funds, Lansdowne Partners, and Gilder, Gagnon, Howe & Co. The stock is still up sharply from its IPO price, but it has pulled back in recent weeks following its first earnings report.

The top hedge funds were also hot on railroad company Union Pacific (UNP, Fortune 500) and cell phone tower owner Crown Castle International (CCI). The funds plowed $1.1 billion into Crown Castle, which made news in the quarter when it bought the rights to towers owned by AT&T (T, F! ortune 500) for $4.8 billion.

Dumping Netflix and Comcast. Oops? Which stocks did hedge funds hate on in the fourth quarter?

Carl Icahn sold half of his position in Netflix (NFLX) in October, a decision he may now regret. Shares of the video subscription service have soared over 35% since the start of the fourth quarter.

But don't cry for Icahn. He turned a handsome 460% profit on the sale.

Comcast (CMCSA, Fortune 500)was also a stock that several hedge funds sold. Shares have fallen a bit in recent weeks after the cable company announced its planned acquisition of Time Warner Cable (TWC, Fortune 500). But the stock is still up 15% since the beginning of the fourth quarter. So hedge funds may have bailed on Comcast too soon.

UBS Turns Profits Around, Beats Estimates

UBS said early Tuesday that its fourth-quarter profit rose to 917 million Swiss francs ($1.02 billion), beating analysts’ estimates with a strong turnaround from a loss of 1.9 billion francs a year ago, when it was fined for trying to rig global interest rates. It benefitted from a tax gain of 470 million Swiss francs.

As a result, UBS said it may boost its 2013 dividend to 25 centimes a share from 15 centimes, about 30% of the bank’s full-year net income of 3.17 billion francs. UBS also expanded its 2013 bonus pool, which included deferred pay, by 28% to 3.2 billion Swiss francs.

News for UBS’ wealth management operations in the Americas (WMA) was also upbeat. The group’s sales were $1.85 billion, up 5% from the earlier quarter and 9% from a year ago.

“In 2013, WMA delivered on our goals of $1 billion in adjusted pretax profit and $1 million in annualized revenue per financial advisor while invested assets rose to $970 billion—all record levels of performance,” said UBS Group CEO Sergio P. Ermotti, in a statement. “Coupled with our 14th consecutive quarter of positive net new money, WMA's results are further proof that our strategy is working.”

UBS says that its advisors had an average assets of $136 million and average production of roughly $1.04 million, up 5% from $994,000 in 3Q’13 and up 8% from $967,000 in 4Q’12. The full-year 2013 average production level was $1.001 milion.

The group’s advisor headcount stood at 7,137, the same as in 3Q’13 and up 1% from 7,059 in 4Q12.

In comparison, Morgan Stanley (MS) says it has 16,456 advisors with average client assets of $116 million, and average annualized revenues per advisor of $905,000.

Bank of America's (BAC) traditional Merrill advisor force stands at 13,771, and these reps had yearly production of $1.005 million in 2013. They produced average fees and commissions of $1.039 million in Q4’13 vs. $1 million in Q3’13.

The UBS unit attracted $4.9 billion in net new money in the quarter (excluding interest and dividends), up from $2.1 billion in Q3 but down from $8.8 billion in Q4’12. Including interest and dividends, NNM was $14.3 billion vs. $7.5 billion last quarter and $16.7 billion a year ago.

“We're pleased with the progress this business has made in recent years," said UBS Group CFO Tom Naratil in a statement, "and with invested assets of $1 trillion, pretax profits of a billion and FA productivity around $1 million, we're also excited about its future.”

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Check out ThinkAdvisor's Q4 Earnings Calendar for the Finance Sector.

IPO prices: What you see isn't what you get

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com.

Q: How can the opening price of an IPO be higher than the offering price?

A: The price you pay for an initial public offering can vary greatly based on when you buy.

The shares of an IPO are first sold to the initial investors by the company or the shareholders selling in the deal. The IPO's so-called offering price is that price shares are initially sold at to the first outside investors. The first outside investors in an IPO are usually mutual funds and pension plans.

TRACK YOUR STOCKS: Get real-time quotes with our free Portfolio Tracker

Typically, the day after the shares are sold to the initial investors, these investors are free to sell on the public exchanges. Big mutual funds, for instance, can sell some or all of their shares to the public. Once those shares trade, the price can rise or fall. If the underwriters set the offering price very close to what the shares would fetch on the open market, the shares trade very close to their offering price when trading starts.

But when a deal is more popular with the public than the underwriter anticipated, or the offering price is set too low, demand from the public for the shares can overwhelm the supply on the open market. When that happens, the price of the IPO can soar the moment the shares open, or start trading, on the exchange.

Last year, the average IPO rose 17% on the first day, says Renaissance Capital.

Unloved bull market rally has room to run

The U.S. stock market's steady and almost uninterrupted advance over the past year has left many investors wondering if a major decline is now inevitable. We are aware of a number of technical, or pattern-recognition, analysts who are calling for such a decline. Others, with a more fundamental approach, have pronounced the market to be “overvalued” at current levels. Finally, the sluggish economic growth over the past several years and the ongoing, less-than- hopeful news reports confronting people every day in the popular media have given many an uncomfortable, cautious feeling about the market.

We want to address some of the issues investors are struggling with as the U.S. market approaches its fifth consecutive year of positive returns but first we want to point out that in managing our equity income, all cap equity and value portfolios, we spend the vast majority of our time looking at sectors and companies with a view toward populating the portfolio with a diversified list of stocks, each of which has — by our analysis — an attractive combination of valuation and growth characteristics. That is, we are not trying to “time” the overall market or spend an inordinate amount of time on “top-down,” macroeconomic analysis. Nor are we well-trained students of technical or pattern- recognition analysis. In our experience, those approaches fail about as often as they succeed.

We believe we can do better with our “bottom-up,” stock-by-stock approach to investment. Having said that, we do have some observations about the overall state of the U.S. equity market. We disagree with the notion that U.S. stocks are overvalued at current levels. There is no denying that stock prices have advanced a lot from the depths that were reached in March 2009. But we must not lose sight of the fact that corporate earnings, one of the key underpinnings of stock values, have advanced right along with prices. In 2009, S&P 500 earnings came in at $57; this year,! we expect earnings of around $107: nearly doubling in four years. It is true that stock-price increases have outpaced earnings, rising from around 660 on the S&P 500 at the bottom in 2009 to more than 1,800 currently. So stocks are valued more highly today than in March 2009 but we hardly believe the current level of the market represents significant “overvaluation” on the basis of earnings. The measure has just made it back to the long-term median P/E but remains many multiple points below the bull-market peaks of the late 1990s.

It is also important to remember that during the time when that long-term P/E ratio of around 15 was being established, the average high-quality bond yield was nearly 7%. Today, the yield on the 10-year U.S. Treasury bond, for example, is less than 3%. That comparison becomes more meaningful if one thinks of the price/earnings ratio as a yield or, if you will, an “earnings yield.” Invert the P/E to create an earnings/price ratio: the yield one would receive if one owned the entire market and could take the whole market's earnings as a return on investment. A P/E of 15 becomes an earnings yield of 6.7% (1 divided by 15). Using this measure, it is possible to compare stocks and bonds by considering their respective yields over time.

The gap between bonds' yields and stocks' earning yields is known as the “equity-risk premium,” or ERP. Because of the riskier nature of equities vs. bonds, the earnings yield on stocks is usually higher than the yield on bonds, hence the name. As with the simple P/E measure, the ERP can fluctuate over time. It is a meaningful measure, in our view, of the relative attractiveness of equities compared to bonds.

The ERP is down from the 5%-plus level reached a few years ago but it remains elevated compared to historical experience. To us, this indicator — like the absolute level of P/E ratios — shows that stocks remain attractive. In this case, they are attractive compared to recent history and to fixed-income alternatives.

We believe the U.S. equity market represents good value at current level, notwithstanding the price appreciation of the past few years, but there are two points we should mention:

Valuation measures are a function of the underlying components. In this case, earnings and interest rates. If one has strong conviction that interest rates are going much higher and/or earnings are on the verge of collapse, none of the preceding valuation analysis should be persuasive. It is our base case, however, that — lookin! g at the U.S. economy and likely actions of the Federal Reserve — earnings can continue to grow and interest rates will stay close to current levels over the next couple of years.

It has been our view since the U.S. recession ended nearly five years ago that slower-than-average growth was to be expected. That is the almost-immutable lesson of history: In the aftermath of a severe financial crisis precipitated by over-leverage and widespread credit defaults, economic growth is slower than average as the excesses of the prior cycle are corrected. After those type of events, economic growth has averaged around 2% rather than the 3%-4% or higher that has been the experience after more typical, inventory- or Federal Reserve-induced recessions. The bright spot, however, in an otherwise-mediocre economic recovery has been the corporate sector.

Balance sheets, cash on hand, profit margins and the level of profits have never been better. Corporate profits have recovered and now exceed pre-recession levels. And it is corporate profits that are a principal underpinning of stock prices.

As we move further away from the crisis and as the proximate cause of the crisis (i.e., collapsing home prices) continue to recover, we believe it is likely that some acceleration in economic growth next year is possible. Employment continues to grow moderately, resulting in income growth. Income growth, in turn, leads to growing sales and production, which leads to more employment growth. That is a “virtuous” economic cycle that provides a positive backdrop for equity investing. If this acceleration in gross domestic product (GDP) growth does come to pass, we believe it is worthwhile to ponder this question: If companies could bring profits back to all-time highs with growth at 2%, where would profits be with growth at 3% rather than 2%? We don't have an exact number in mind but it seems clear to us that the answer is: “Higher.”

As for interest rates, we believe the appointment of Janet Yell! en as cha! ir of the U.S. Federal Reserve ensures a continuation of current policies at least through next year … and probably longer. Short-term rates will be held at zero-bound level. The Fed at some point will moderate its long-term asset purchases (i.e., the taper) but the magnitude of overall purchases still will be large. As the economy recovers, it would not surprise us to see the yield on 10-year Treasuries gravitate toward the growth of nominal GDP: maybe around 3%.

We don't believe that would do much damage to the valuation argument. Moreover, the outlook for profit growth would be improved in such an environment, likely offsetting any valuation headwinds brought on by slightly higher bond yields.

Valuation is not a timing tool. In our view, an attractively valued market improves the chances of investment success but is no guarantee against short-term fluctuations and drawdowns. The current market has risen for a long time without much of a correction. We can state without fear of contradiction that the market will have a meaningful correction at some point; however, the “when” and “from what level” are the key, but unknowable, issues.

We would make the general observation, based on our time in the investment business, that this is the most unloved bull market we ever have seen. There are many underinvested and underperforming investors today who would like nothing better than a market pullback to enable them to do what they should have done several years ago: invest in equities. There is an old saying that the market will do whatever it takes to frustrate the maximum number of people. Right now, the most frustrating thing the market can do — and has been doing — is to keep going up and not let the underinvested have an easy entry point.

Ed Cowart, CFA, is a managing director and portfolio co-manager at Eagle Asset Management Like what you've read?

Mortgage Rates Fall to Lowest Level in 4 Months

Jonathan Alcorn/Bloomberg via Getty Images WASHINGTON -- Average U.S. rates on fixed mortgages dropped this week to their lowest levels in four months, a positive sign for the housing recovery. Mortgage buyer Freddie Mac says the average rate on the 30-year loan fell to 4.13 percent. That's down from 4.28 percent. The average on the 15-year fixed loan declined to 3.24 percent from 3.33 percent. Both averages are the lowest since June 20. Mortgage rates have been falling since September, when the Federal Reserve held off slowing its $85-billion-a-month in bond purchases. The bond buys are intended to keep longer-term interest rates low, including mortgage rates. And a slowdown in hiring in September makes it more likely that the Fed will continue its stimulus into next year. Mortgage rates tend to follow the yield on the 10-year Treasury note. The 10-year note traded at 2.50 percent Wednesday, down sharply from 2.61 percent last Thursday.

Investors flee U.S. stocks at fastest pace since 2008

Bloomberg News

Domestic stock funds last week suffered their worst week since before the financial crisis as investors' fears over the Federal Reserve's plan to cut its asset- purchasing program spread to stocks.

More than $14 billion was pulled out of U.S. stock funds this week, the most in a single week since June 2008, according to Bank of America Merrill Lynch.

“The retail public still doesn't trust this rally,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates Inc. “They think you need a feel-good environment to get a secular rally but the reality is when it's a feel-good environment, you're usually late to the game.”

The S&P 500 is down almost 3% since the beginning of August, although it's still up more than 15% year-to-date. The pullback gained steam, ironically, after a report that initial jobless claims had fallen to their lowest level since before the financial crisis. That fit in perfectly with the consensus opinion that the Fed would begin to taper its asset purchases at its September meeting.

The uncertainty surrounding tapering, both how it would work and when it would start, sent the interest rate of the 10-year U.S. Treasury to 2.89%, its highest level since August 2011.

The rise in interest rates sent bond investors rushing to the exits, pulling out more than $30 billion month-to-date through Aug. 19.

Greg Sarian, managing director at Sarian Group, a private wealth team at HighTower Advisors LLC, started talking to his clients about moving into cash in late July.

“When the market hit new highs in July, we thought it was time to pick the fruit while it's ripe,” he said. “It's been a good year. Clients are much more aware of protecting profits than ever before.”

Strategists agree there may not be a lot of good news coming from the stock market in the short term.

With earnings season over, sequestration starting to take a bite out of economic statistics, a jump in interest rates, and concerns coming from the emerging markets, there's not a lot to drive the market forward anytime soon.

“There is a dearth of catalysts right now,” Mr. Saut said. “The fact of the matter is, the market's internal energy is gone near-term.”

Scott Wren, a senior equity strategist at Wells Fargo Advisors LLC, agrees there's not a lot to get excited about over the next few months.

“We'd argue the gains are in for the year,” he said.

Mr. Saut said this current pullback could run as much as 10% in total, but he doesn't think tapering, if it is announced next month, will cause any kind of bear market.

“I personally think it's going to b! e a non-event,” he said. “Usually, when everyone's asking the same question, it's the wrong question.”

Mr. Wren is also still bullish over the long term. He has a target of 1,850 for the S&P 500 at the end of 2014. It closed at 1,656 on Aug. 22.

With that in mind, he's using this pullback as an opportunity to push clients into stocks.

“We have lots of clients with a lot of cash who have missed a lot of this run,” Mr. Wren said. “We'd love to see the market pull back a little more and then we'll be in there pounding the table.”

[video] Quick Take: BlackBerry's Z30 Price Will Be Key to Success

NEW YORK (TheStreet) -- BlackBerry (BBRY) will release its latest smartphone in October, and TheStreet's Chris Ciaccia told Brittany Umar its chance for success is slim.

Ciaccia said that while BlackBerry, which announced the Z30 launch Wednesday, has had more than its fair share of troubles, its new phone won't change that. The five-inch phone doesn't offer any substantial improvements over Apple's (AAPL) iPhone 5C and 5S, or Samsung's Galaxy S4.

He added that consumers know BlackBerry continues to parade the fact that it's trying to sell itself, so potential smartphone shoppers may avoid its products for fear the company won't be around a few years from now.

Although pricing and a release date were not announced, they could be pivotal to the phone's success, Ciaccia said. He looked at the specifications of the phone, but nothing really jumped out at him. That makes pricing the key factor for consumers. He concluded that if BlackBerry fails to really make the masses say, "wow," then the Z30 will just be another phone in a crowded industry. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell

OBJE Aiming to Expand into Fast-Growing Gamification Industry (OTCBB:OBJE, OTCMKTS:CRWE)

OBJ Enterprises (OBJE)

Today, OBJE remains (0.00%) +0.000 at $.330 with 33,666 shares in play thus far (ref. google finance Delayed: 11:15AM EDT July 5, 2013).

Even as Obscene Interactive, the gaming division of OBJ Enterprises nears the release of its debut games for mobile devices, the company is already working to dramatically expand its market reach. By applying game mechanics to corporate education and mobilization efforts, OBJE plans to expand into a gamification industry predicted to explode from $242 million in 2012 to $2.8 billion in 2016.

Gamification is the process of adding the fun aspects of video games—play, challenge and competition—to real-world business practices, from employee training to online marketing. Thanks to the power of consumer profiling and crowdsourcing, gamification allows companies to collect powerful customer data, solve complex business problems, engage users in education and stay relevant with an increasingly tech-obsessed public—all while providing end users with an enjoyable and addictive gaming experience.

OBJ Enterprises (OBJE) 5 day chart:

Crown Equity Holdings Inc. (CRWE)

Together with their digital network of Websites, Crown Equity Holdings Inc. (OTCMKTS:CRWE) (www.crownequityholdings.com ) offers advertising branding and marketing services as a worldwide online multi-media publisher. The company focuses on the distribution of information for the purpose of bringing together a targeted audience and the advertisers that want to reach them.

Today (July 5), CRWE surged (+61.54%) up +0.0080 at $.021 with 64,000 shares in play thus far (ref. google finance Delayed: 12:17PM EDT July 5, 2013).

CRWE's daily range at ($.021 – $.016) currently at $.021 would be considered a (+1300%) gain above the 52 wk low of $.0015.  The stock is up +600% since the concerning dates of January 15, 2013 – July 5, 2013. +600% is the 6 month high and rightly so.

Recently (June 26), CRWE Files 10-Q. To view click URL http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=9371051

Recently (June 26), CRWE Files 10-K. To view click URL http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=9371048

Crown Equity Holdings Inc. 5 day chart:

BNY Mellon Posts Strong Q2 Earnings, Record Revenue, 10% Rise in AUM

Bank of New York Mellon (BK) announced Wednesday net income to shareholders of $833 million, or $0.71 per common share, on record revenue (GAAP) of $4.009 billion in its second quarter, ended June 30.

Net income, which was up from a loss of $237 million in Q1 of this year and net income $465 million in 2012’s second quarter, was aided by an after-tax gain of $109 million related to the firm’s equity investment in Convergex (CVGX), a global brokerage and trading service, during the quarter.

GAAP revenue rose 11% compared to 2012’s second quarter, and 11% over Q1 of 2013.

In BNY Mellon’s quarterly earnings call on Wednesday, Hassell noted the bank’s “strong revenue growth across all our businesses, without exception,” along with highlighting increased collaboration among different divisions of the company. Specifically, he mentioned a new separately managed account product coming out of Hong Kong, led by John Brett, and noted “we’ve started making private banking loans to Pershing customers,” to which “we’re already seeing a nice level of receptivity.” (Pershing Advisor Solutions’ CEO Mark Tibergien spoke of the private banking loan initiative and other internal collaborations benefiting Pershing customers in a June interview with ThinkAdvisor at the annual Pershing Insite conference.)

Chairman and CEO Gerald Hassell said in a prepared statement that during the second quarter, BNY Mellon “generated nearly $900 million of capital, approximately $500 million of which we used to step up share buybacks by more than 50% and increase our quarterly dividend by 15%.”

During the quarter, BNY repurchased 11.9 million shares of its stock for $330 million, and on July 17 it announced a dividend of $0.15 per common share payable Aug. 6. Assets under management increased 6% over 2012’s second quarter, to $1.43 trillion, and were up slightly from 2013’s first quarter. Assets under custody or administration (ACUA) increased 4% to $26.2 trillion compared to the prior year, but were down slightly from 2013’s first quarter.

Clearing services revenue increased 4% to $321 million in the quarter, which the company attributed to “higher mutual fund fees” and a 21% year-over-year increase in daily average revenue trades (DARTs) to 227,500.

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Check out ThinkAdvisor's 2013 Q2 Earnings Calendar for the Finance Sector.

TD Ameritrade Tops Q2 Earnings Estimates on Strong Revenue

TD Ameritrade (AMTD) said its second-quarter earnings improved close to 20% on Tuesday, beating analysts’ estimates: Net income was $184 million, or $0.33 a share, versus $154 million, or $0.28 a share, a year ago.

Total revenue increased 9% year over year and 7% from the prior quarter to $725 million.

"TD Ameritrade had a strong third quarter in virtually all metrics, as we continue to execute well against our growth strategy while being disciplined on expenses," said President & CEO Fred Tomczyk, in a press release. "We had record interest rate sensitive assets, record net revenues and record market fee-based revenue during the quarter."

Net new client assets for the period were roughly $11 billion, representing an annualized growth rate of 8%. However, client asset flows were higher in the prior quarter, at $13 billion, and slightly lower a year ago, at $10 billion.

Average daily client trades per day hit about 399,000, an activity rate of close to 7%.

Of its total second-quarter revenue, $384 million, or 53%, was asset based.

Commissions and trading fees grew to $321 million, up from $266 million a year ago and $287 million in the prior quarter. Investment product fees increased to $65 million, up 23% from $54 million last year and a jump of nearly 5% from $62 million last quarter.

Client assets now total nearly $524 billion vs. $554 billion a year ago and $517 billion on March 31.

"We are pleased with our performance this quarter," said Bill Gerber, executive vice president and chief financial officer, in a statement. "We benefited from the improved trading environment, and we kept our eyes focused on disciplined expense management and maintaining our strong balance sheet. We have good momentum, and we're well positioned as we look ahead to fiscal 2014."

In additional news, the company announced a new “Veo Integrated” logo that it says makes it easy for registered investment advisors (RIAs) to identify technology providers that have built integrations with TD Ameritrade Institutional’s Veo platform. RIAs in the market that purchase technology can look for the logo on participating technology providers’ marketing materials including Web sites, brochures and videos.

“We reached a significant milestone with 50 vendors now on the platform with which advisors can now integrate,” said Jon Patullo, managing director of technology, TD Ameritrade Institutional.

“In order to participate in the Veo open access initiative, all third-party technology providers must meet a set of stringent security requirements and have the ability to deliver quality service to advisors,” Patullo said. “It’s important that firms eligible to display the ‘Veo Integrated’ logo demonstrate a high standard of care and commitment to RIAs.”

TD Ameritrade Institutional president Tom Nally added that overall advisor adoption of Veo open access integrations is up 104% in 2013. The customized Salesforce CRM app is one of the most widely adopted, with more than 1,000 users.

Nally also noted that iRebal, which he announced at the company’s annual conference in February, would be added to Veo and free for TD advisors, is now in beta and on track for release in August.

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Check out ThinkAdvisor’s 2013 Q2 Earnings Calendar for the Finance Sector.

Warren Buffett and Charlie Munger Q&A Part 2

These notes were taken live as GuruFocus covered the annual shareholder meeting of Berkshire Hathaway (BRK.A)(BRK.B) in Omaha on Saturday.

Question: Ackman questions the legitimacy of Herbalife (HLF). Berkshire Hathaway (BRK.A)(BRK.B) owns Pampered Chef. Has there been any impact on Pampered Chef? It's a multi-level marketing company.

WB: I've never looked at the 10K of Herbalife. The key is whether it's based on selling profits. Pampered Chef is miles away from selling to level A and level B. People get paid based on who they recruit. But people are based on selling to end user. There are thousands of parties a week selling to people who want to use the products. And that should be the distinguishing characteristic.

Charlie: And there's likely more flim flam in selling magic potions than pots and pans.

Question: Berkshire's returns in the last 10 years are based on repeating and extensive deals than in the past when you were a value investor doing extensive analysis. How will your successor achieve the same returns?

Warren: My successor will have more capital and when markets are in distressed fewer people have capital and willingness to commit. My successor will have unusual capital and ability to say yes. Berkshire is the 800-number when there is really panic in markets and people need capital. It's not our main business, but fine. It will happen again. When the Dow Jones drops 1,000 points you find out who's been swimming naked. They will call Berkshire. And Berkshire's reputation does not rest on any single individual.

Charlie: Buffett had success in value investing because competition was less intense. It's ridiculous to think the way he did things in the past he should have stayed in.

Warren: Goldman Sachs, GE, Bank of America are trying.

Charlie: Other people were not getting calls.

Warren: They don't have money and speed.

Question: What are the three keys to influencing people to sell who didn't want to ! sell?

Warren: There was a death at See's and the rest of the family didn't want to run the business, so they put it up for sale. I didn't hear about it until after one person had already fallen through. I didn't persuade them to sell. It traded actively, I bought key pieces and stock. Sanborn was not the most attractive business. I bought stock in the market from Stanton and Case. They were happy to sell. I never met Stanton. I did not convince them to sell their stock. I talked to Betty Peters about avoiding a transaction I thought was dumb.

Question: Over the years you have built Berkshire to be sustainable. I have difficulty explaining to people the long term sustainable advantage of Berkshire. Can you give it in a Peter Lynch two-minute speech?

Charlie: The competitive advantage is it's getting bigger. The golden rule – we treat people like we want to be treated. The long term competitive advantage is we are a good partner to people who need money.

Warren: Years ago a person in 60s said one year to think about selling his business. We had experience buying business years earlier, this person died and he wanted to put to bed what had happened. That one year and that if he sold to a competitor, which is a logical buyer, it would put its people in charge and it would mean it would fire his people, and come in like Atila the Hun. He could sell to a private equity firm and lose control. To me, we're not the most attractive, but we were the only guy left standing. We promised him he could keep doing what he loved, and not worry. The competitive advantage was we had no competitor. And the shareholder base we've developed – we look at them as partners.

Question: I heard Warren's way to conserve energy is to write 20 things he wanted to do, choose five and forget 15. How does that work?

Warren: Not the case. That is more disciplined than I am. Charlie and I live simple lives. We know what we enjoy and we do it pretty much now. Charlie is a real arch! itect now! . I never made lists in my life. Maybe I should start!

Charlie: I can see here, I don't know when it started that marketing psychology that you shouldn't make decisions when you're tired, and if that's true, we live on auto pilot, it's habitual. We don't waste decision-making energy. We use caffeine and sugar.

Warren: When we write our book on nutrition it will be a hit.

Charlie: Warren's style is idea for human cognition.

Question: Buying newspapers doesn't seem to make sense economically to get a higher rate of return on a business that is smaller, and you like big elephants.

Warren: We will get a decent rate of return. Compared to Heinz we have a structural advantage because write offs and after tax return declined to 10% after tax, maybe higher. To date, we meet or beat 10%. Never move the needle. $100 million in pretax earnings would not move the needle but give a decent return. We wouldn't have done it in another business. We promise to give figures annually of investments, but at low price to earnings.

Charlie: It's an exception and you like doing it. That's what I heard you say.

Warren: I wish I had no asked.

Question (Doug Kass): You suggested for the first time when you go, you would move to a more centralized approach to management. In past respect of Henry Singleton, he was 100% rational. Prior to his death Berkshire should you move Berkshire to three companies? Teradyne was harder to manage given its size. Compared to Berkshire, should you split it along business lines?

Buffett: A tiny bit more in terms of small companies. No change of significance Henry Singleton can give views on what he did right and wrong. Breaking up would not give the present result now and in the future.

Charlie: Henry Singleton's geniun was he managed his companies more centralized than us. In the end he wanted to sell tous. He loved you and the business, but we didn't want to issue Berkshire stock.

Warren: He issued ! stock lik! e crazy. GM worked wonderfully if diluted created how ended up.

Charlie: We're more avuncular than Henry Singleton was. I like us better.

Question: Taxes and deficit. What are two things policymakers can focus on to stay competitive.

Warren: Health care costs are 12% of GDP. Rivals 9.5 to 11.5%. There are only 100 cents in a dollar. Give up 8 cents just like raw material. It will be a major problem in US competitiveness. Overall since the crisis it works, but number one is health care costs.

Charlie: Grossly swollen alternatives markets. You can graduate from MIT in derivatives markets. They are crazy markets. I agree on health care but find the other more revolting.

Warren: Charlie is very Old Testament.

Continue reading part 3 here.

Facebook to Launch Graph Search - Analyst Blog

Facebook's (FB) new tool Graph Search that was in beta stage since January will be rolled out as a full-fledged service over the next few weeks. The company recently announced its plans to expand the new search tool to users who use Facebook in U.S. English.

According to Facebook, Graph Search will search for a specific query among contents that are shared by users and are publicly available within the social networking platform.

Moreover, the search results can be customized according to specific time frames, locations or other information that are available on user profiles.

To make it more effective, Facebook is using Microsoft's (MSFT) Bing search engine to deliver additional search results when Graph Search is unable to find relevant answers. The company also said that it is working on a mobile version. However, Facebook did not announce a specific launch date.

Facebook's Graph Search service is expected to increase user engagement; thereby increasing traffic on the site. This will bring in more advertisers to the social networking platform, which will further boost advertisement revenues.

Further, the personalized search service is expected to improve the company's competitive position against Google (GOOG), going forward.

Facebook has significant growth opportunities from increasing online advertising spending compared to traditional formats. According to eMarketer, the U.S. digital video advertising market is expected to grow 41% in 2013 to $4.1 billion from $2.9 billion in 2012.

Moreover, eMarketer predicts that the mobile video market is expected to double this year, touching $518.0 million, which represents a tremendous growth prospect for Facebook. We believe that it needs to focus on rolling out the mobile version of the Graph Search to capitalize on this tremendous growth opportunity.

Although Facebook's mobile monthly active users (MAU's) continue to grow significantly (up 54.0% year-over-year to 751 million at th! e end of first quarter), we believe that increasing competition from Google and LinkedIn (LNKD) remains a major headwind in the near term.

Additionally, increasing investments related to infrastructure development may hurt Facebook's near-term profitability.

Nonetheless, the continued investments should improve the quality, engagement and value of its ads, which will further boost advertiser demand in 2013.

Currently, Facebook has a Zacks Rank #2 (Buy).

Service Sector Growth Jumps in July

Toby Talbot/AP WASHINGTON -- U.S. service firms expanded in July at the fastest pace since February, fueled by a brisker month of sales and a jump in new orders. The increase suggests economic growth could be picking up after a weak first half of the year. The Institute for Supply Management said Monday that its index of service-sector growth rose in July to 56.0, up from 52.2 in June. Any reading above 50 indicates expansion. The survey covers businesses that employ 90 percent of the workforce, such as retail, construction, health care and financial services. A measure of business activity, which includes current sales, rose to 60.4. That's the highest since December and was driven in part by faster home construction. And a gauge of new orders, which indicates sales over the next few months, increased to 57.7 -- a five-month high. Jennifer Lee, senior economist at BMO Capital Markets, noted that 16 of the 18 industries surveyed reported growth in July, "encouraging news for the broader U.S. economy." Paul Dales, senior U.S. economist at Capital Economics, said the July gains in the service sector, along with a solid month of manufacturing growth, suggest the economy is growing at an annual rate of 3 percent in the July-September quarter. That's nearly double the rate in the April-June quarter. One concern is that a measure of employment at service companies fell in July. That echoed last week's government employment report that showed hiring has slowed. Employers added 162,000 jobs last month, the Labor Department said Friday. That's down from 188,000 in June. Nearly all of the hiring took place at service firms. And most new jobs were in low-paying industries -- half were at retail business or restaurants and bars. Growth in the service industry depends largely on consumers, whose spending drives roughly 70 percent of economic activity. On Friday, the government said consumers increased their spending in June at the fastest pace in four month. The economy grew at a tepid 1.7 percent annual rate from April through June. That's up only slightly from the 1.1 percent annual rate in the previous quarter and the third straight month of subpar economic growth. Still, the rise in consumer spending and service activity follows other reports that point to stronger growth. Home sales and prices continue to rise, and Americans' confidence in the economy stayed last month close to a 5½-year high. U.S. factories have begun to rebound after slumping at the start of the year. A separate ISM released last week showed manufacturing activity jumped in July to the highest level in two years, reflecting a surge in new orders, increasing hiring and rising factory output.

3 Stocks Near 52-Week Lows Worth Buying

Just as we examine companies each week that may be rising past their fair value, we can also find companies potentially trading at bargain prices. While many investors would rather have nothing to do with companies tipping the scales at 52-week lows, I think it makes a lot of sense to determine whether the market has overreacted to the downside, just as we often do when the market reacts to the upside.

Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.

A discount in plain view
It may not seem like it, but higher payroll taxes combined with the IRS furloughing its employees in order to save money, and thus delaying tax refunds for millions of Americans, really walloped the retail and grocery sector. Wal-Mart, the world's largest retail chain, reported a same-store sales decline of 1.4% in the first quarter. It blamed everything but the kitchen sink for its disappointing results, including inclement weather and little grocery inflation, but also alluded to higher payroll taxes and delayed tax refunds.

Much of the same can be said about The Pantry (NASDAQ: PTRY  ) , a predominantly Southeastern U.S. convenience store chain that operates under the Kangaroo Express name. Food inflation has been minimal, the weather hasn't been as cooperative, and consumer traffic fell 4.6% in its most recent quarter. But where other investors see weakness, I see an opportunity.

For one thing, food inflation costs are rarely predictable, but they don't normally remain stagnant for long periods of time, either. As food costs inevitably push higher, The Pantry will be able to pass along price hikes to consumers and eke out slightly beefier margins. Even a single basis point is important in the margin-tight grocery business, so look for food inflation increases in the upcoming quarter to aid The Pantry's bottom line.

Taking a page right out of its larger counterparts, The Pantry is also emphasizing unique brands to push product out the door. From its self-branded Kangaroo gasoline to its exclusive Bean Street Coffee, the convenience chain is using unique brands to differentiate itself from its competition and drive higher sales. Although traffic was down last quarter (which I feel is a short-term issue caused by delayed tax refund checks), average sales per customer rose 2.6% -- not bad considering that food inflation is minimal. With the stock at just 11 times forward earnings, I see room for The Pantry to head higher.

You have the wrong idea
Seeing gold and other commodities fall off a cliff has admittedly given a lot of investors plenty of reasons to avoid resource-rich emerging-market countries. Over the past couple of months we've seen numerous emerging-market ETFs drop precipitously, all while the S&P 500 continues its march to new highs. One such ETF that's only bounced modestly off its lows is the Market Vectors Africa Index ETF (NYSEMKT: AFK  ) , which, as you might expect, invests in various African companies.

I freely admit that my first suspicion when I saw the drop over the past couple of weeks was that the ETF owned stock in a large number of mining companies. I mean, it would make sense to see the ETF retreat if metal prices are dropping and miners are shuttering production in the meantime. However, very little of the Market Vectors Africa Index is tied up in mining. Simply put, investors have the wrong idea about this ETF!

In actuality, this ETF is going to give you a porterhouse-size helping of banks and other financial services in Africa. As of June 30, nearly 37% of its holdings were in the financial sector, with another 18% in the necessity energy sector and another 13% in materials. In total, the fund owns 109 different companies that pay out a yield of 3.5% with a net expense ratio of just 0.8% annually. These sectors still have decades of double-digit growth opportunity in Africa, and I don't believe investors are giving them nearly enough credit.

I also would urge investors not to overreact to that fact that 25% of this ETF's investments are tied up in Egypt. Although regime change is often tumultuous, Egypt has the basic infrastructure in place to pick up growth right where it left off under now-deposed Egyptian President Mohamed Morsi. With investments in other more stable regions of Africa making up another good chunk of its remaining investments, I feel the Market Vectors Africa Index ETF could surprise investors moving forward.

Thinking really long-term
Sometimes we need to put on our Warren Buffett goggles and think like Buffett if we hope to find the market's best buy-and-hold opportunities. This week I feel could represent the perfect opportunity to nab shares of medical diagnostics company Quest Diagnostics (NYSE: DGX  ) , which are still relatively close to a 52-week low.

The weakness in diagnostic companies lately can be blamed squarely on reduced government spending domestically and overseas. In addition to deriving revenue from biotechnology companies, Quest works with government agencies and universities that are funded by government money. With the U.S. instituting austerity measures designed to reduce its federal deficit, and much of Europe in a similar situation, diagnostic device makers have struggled to improve their top and bottom lines in recent quarters.

Looking long-term, though, there is an incredible demand for medical diagnostics. The baby boomer population is aging and diagnostic equipment is becoming faster, more accurate, and more affordable, meaning insurance companies are more likely to back diagnostic products now more than ever.

Consolidation in medical diagnostics also gives us visible clues to the sector's potential. For example, Thermo Fisher Scientific agreed in April to buy Life Technologies for a hefty $13.6 billion. In 2012 Life Technologies introduced a new bench-top molecular diagnostic tool that can analyze the human genome in 24 hours or less for just $1,000, proving how far molecular diagnostics has come in just two decades. Diagnostic companies like Life Technologies and Quest Diagnostics speak to a level of personalized medicine that is just starting to bloom and could be the basis of many treatments down the road.

Boasting a yield of 2% and a forward P/E under 13, I feel this is another great set-it-and-forget-it candidate.

Foolish roundup
Sometimes the trend really is our friend. For The Pantry, rarely are food inflation costs tame for a long period of time, which would bode well for its ability to raise its prices. With regard to the Market Vectors Africa Index ETF, it's about the potential for steady double-digit growth from a number of regions for decades to come. And finally, for Quest Diagnostics, it's about the increasing importance of personalized medical care moving forward.

I'm so confident that these three names will bounce off their lows that I'm going to make a CAPScall of outperform on each one.

As Warren Buffett has shown over five decades, buying solid companies at depressed prices has consistently helped generations of the world's most successful investors preserve capital, minimize risk, and achieve long-term, market-trampling returns. For one such company, read our free report: "The One REMARKABLE Stock to Own Now." Just click here to get started.

Daniel Kahneman: Keeping Score May Be More Dangerous Than You Think

Dr. Daniel Kahneman, winner of the 2002 Nobel Prize in economics joins us to discuss his book, Thinking, Fast and Slow.

In this video segment, Daniel answers a question from the audience and relates an experiment where a financial executive tracked every decision he made for a year, as well as the road not taken. The full version of the interview can be watched here. A full transcript follows the video.

Audience member: Dr. Kahneman, thank you so much for visiting us at The Motley Fool. We are really pleased. We've all learned a lot from you, and we've learned even more in this hour.

When you mentioned, "The more you live, the less you feel that you know," it reminds me of a great quote from, I think it was Archbishop William Temple, who once said, "The greater the island of knowledge, the longer the coastline of mystery." I think that's a wonderful way of thinking about the progression that we all go through over the course of our lives.

I wanted to ask you simply, I see something in the financial world, because that's our world, that looks broken to me and it's probably also broken in other areas of the world, and it's that there is no scorekeeping mechanism.

If people can make predictions and no one's actually holding them accountable or scoring them, then if you think of systems thinking, it's just fundamentally broken and we can't progress. But as soon as you do start to score -- I often liken it to baseball, where everything is scored -- I wish that more for our financial world, for our political world, and others.

Do you see good score systems in the world that we should all learn from, and/or do you have any thoughts about scorekeeping? Thank you.

Daniel Kahneman: I think there is really too little scorekeeping. It's sort of astonishing when you think of those CFOs coming in year after year, and making predictions that make no sense, and they come back next year with the same level of confidence. There is no improvement. There is some absence of scorekeeping there.

On the other hand, there are really many people I think that -- most of us -- have a lot to lose from accurate scorekeeping. That's because of what I said earlier, of our ability for self-delusion, which is really a major asset in our lives. That we can lose.

I have given that advice, to keep score and when you make a decision, document the options that you considered but didn't choose. I was giving that advice a lot, and there was one place -- I didn't know it immediately -- somebody took my advice.

It was in a financial firm. I won't mention what it was. For a year, he kept track of every decision he made and the options he considered and rejected. There was a fair amount of material collected by the end of the year.

Then they told me about it, and we analyzed it. That guy was making well in excess of a million a year, and the conclusion, which I didn't share with anybody, they didn't need him. They could have saved a million dollars. He was adding nothing.

That's the kind of thing that people expose themselves to when they keep score. It's a dangerous activity.

Accenture Gets a New CFO

Management consulting specialist Accenture  (NYSE: ACN  ) has a new bean counter.

The Dublin, Ireland-based consultant announced today that David P. Rowland has taken on the role of CFO effective immediately, succeeding Pamela J. Craig in the position, as she will retire from the company on Aug. 31. The company announced Rowland's appointment back in March.

Rowland, 52, has 30 years of experience at Accenture, and most recently served as senior VP of finance, with global responsibility for the consultant's finance operations. He is also a member of Accenture's global management committee.

After thanking Craig for her 34-year career with the company, Pierre Nanterme, Accenture's chairman and CEO, said in a statement: "David clearly has the financial and operational experience, as well as the leadership capabilities, to excel as Accenture's CFO. I am confident that he will be an outstanding successor to Pam and will move seamlessly into his new role."

Accenture also announced that Richard P. Clark has been appointed chief accounting officer, effective Sept. 1, in addition to his current position as corporate controller. Previously Clark served as Accenture's senior managing director of investor relations and held executive positions in several Accenture business areas. A CPA, Clark will continue to report to Rowland.