Stanley Inc. (SXE) is trading sharply higher today after reporting earnings for the fiscal second quarter.  ZachStocks featured SXE last month noting that the company’s government contracts would likely drive growth in earnings.  Investors are quickly competing to buy shares after the announcement which not only showed strong growth for the quarter, but included strong guidance from management.

For the second quarter (ending in September) the company logged revenue of $217.1 million which was 14% higher than the same quarter last year.  The majority of this growth was organic, although three of the percentage points were due to an acquisition made earlier in the year.  Earnings were also strong with EPS coming in at $0.49, an increase of 32% above last year’s levels.

Stanley receives most of its revenue from government contracts as the company offers support initiatives for military and defense functions.  The earnings report noted the following business lines as showing particular strength:

• IT support systems for US Marine Corps
• Military intelligence training
• Operations support for US Army
• Biometrics software development
• Training and support for Dept. Of Defense
• Space & Navel Warfare Systems Command

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In addition to strong revenue and earnings growth, the company is showing more efficiency.  EBITDA profit margins came in at 10.7% for this quarter versus 9.9% in Q2.  Increased profit margins are due both to a more favorable business mix (contracts with higher profitability) as well as to strategic initiatives aimed at cutting back on administrative and overhead costs.

One of the more important metrics to consider is the company’s backlog of business.  Over the last three quarters, the level has remained relatively constant with a backlog of roughly $2 billion.  For a growth company like SXE, we would like to see this level increase which would indicate that the company is booking more contracts than it is fulfilling each quarter.  Management stated that delays in government procurement processes have kept bookings lower than they would like to see, but they anticipate an increase as these delays are resolved.  For now, it still appears that the company has more than 2 years worth of business to work on regardless of new contracts being inked.

Stanley’s second quarter of fiscal year 2010 demonstrated strong revenue growth and margin improvement, EPS growth and cash flow generation. Expected revenue contributions from recent new awards have enabled us to raise the midpoint of our fiscal year 2010 revenue guidance. ~Phil Nolan, CEO

Estimates for next year (fiscal year ending March of 2011) show analysts expecting $1.91 in earnings.  At the current price near $27, the stock is trading with a multiple of just 14.  This appears to be low considering the strong revenue growth and stability of the US government as a primary customer.  Over the next several months, I want to be involved in names that are less economically sensitive as we could very easily begin to see a “double dip” pattern in markets and in the economy.  SXE will likely offer more stability due to its long-term contracts and healthy backlog of business.

FD: Author does not have a position in SXE

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This week LogMeIn Inc. (LOGM) reported earnings for the first full quarter that the company was public.  The stock has been a rousing success with the initial investors receiving stock on July 1 at a price of $16.  Initially, the stock began trading near $20 for a 25% initial premium to the deal price.  As is usually the case, the stock backed off a bit once the hype of the deal dissipated, and by August the stock was testing the $16. IPO level.  By the middle of this month the stock had successfully tested the initial price and broke to new highs in the low $20’s which is where the stock was positioned coming into the earnings announcement.

The third quarter looked very positive with the company reporting revenue of $19 million which is up 32%.  Earnings were also strong with non-GAAP earnings per share of $0.12 compared to $0.05 last year.  During the quarter the company generated operating cash flow of $7.1 million compared to $4.3 million last year, so the business model is certainly strong with the only question being how quickly and effectively management can scale in the future.

Investors appear to have been disappointed with the company guidance for the fourth quarter.  Management is guiding revenue expectations toward a range of $19.6 to $19.9 million which is 22% growth over the fourth quarter last year.  Earnings should come in between 11 and 12 cents per share so the high end “only” represents a 100% increase over last year.  Considering the last 3 quarters have shown a minimum of 200% growth in earnings per share, this number could be disappointing to investors who have bid up the price of LOGM based on aggressive growth assumptions.

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Looking at the financial strength of the company, it appears that LogMeIn is in a great spot to capitalize on growth opportunities with a strong war-chest of capital.  Currently the company is sitting on cash of $121 million which includes $84.5 million which was raised in the IPO transaction.  In the prospectus for this offering, the company announced that it intended to use the capital for development of new services, sales and marketing activities and capital expenditures.  These investments should continue to assist the company in growing its customer base and developing strong revenue growth.

One of the newest products (LogMeIn Central) appears to be generating revenue and strong interest within the firm’s customer base.  Michael Simon (President and CEO) had this to say about the new product’s performance in the third quarter:

We are particularly pleased with sales generated from the recent release of LogMeIn Central, a web-based console that complements LogMeIn Pro2, Hamachi2 and Free products. While it is early in the release and sales cycle for LogMeIn Central, we are encouraged by the initial adoption of Central by both our premium and free users. ~Michael Simon, President and CEO

Analysts are currently only forecasting 9% earnings growth in 2010 which leaves expectations at $0.59 per share.  However, with a significant amount of cash, a positive operating business model, and growth initiatives underway, I expect these expectations to prove conservative.  Employers are continually looking for ways to make their workforce more competitive and efficient and LogMeIn provides some excellent tools to drive these initiatives.

Thursday’s trading has LOGM rebounding after two days of selling.  It appears that investors are being offered a chance to buy stock at a discount before the stock continues to run ahead of company growth.  I am strongly considering adding a position in this hot technology company to the ZachStocks Growth Model as we have a significant amount of cash on the sidelines waiting to be put to work.  The stock certainly carries some risk with the high price tag, but based on management’s ability to grow earnings, I believe this could be a strong position for 2010.

FD: Author does not have a position in LOGM

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Over the past two months, the IPO market has heated up, allowing companies and private investors to access liquidity by selling new shares to the public.  While the performance of these deals have varied from company to company, Verisk Analytics (VRSK) turned out to be one of the better managed, more profitable transactions for investors.  The stock was offered to the public on October 7th at $22 per share and closed above $28.50 on Tuesday for an attractive gain of nearly 30%

The deal was underwritten by Bank of America (BAC) and Morgan Stanley (MS) along with a syndicate of supporting cast.  Although Bank of America was not considered one of the top tier underwriters for the majority of this decade, their acquisition of Merrill Lynch during the financial meltdown has given them access to a large pool of retail and institutional investors which makes placing IPOs and secondary offerings a bit easier.

It is interesting to watch the trend in underwriting fees which used to be incredibly lucrative for these introducing firms.  While the profit margins are still relatively fat, Verisk Analytics only offered the underwriters 88 cents per share for the offering which represents a 4% haircut.  A few years ago, this underwriting discount could easily have topped 8 to even 10% of the offering price.

Looking at the details of the transaction, it immediately becomes clear that the entire amount of the $1.8 billion raised in the offering goes to selling shareholders with no capital actually flowing to Verisk as a company.  This would usually be considered a black mark against the deal, but Verisk is a different animal.  The company was actually owned by a broad assortment of top tier insurance companies including American International Group (AIG), Berkshire Hathaway (BRK.A), CNA Financial (CNA), Hartford Financial Services Group (HIG) and Travelers.

Verisk was created by these insurance companies as a third party risk analysis and decision support vehicle.  Verisk has built a well-recognized skill base in determining risks associated with a number of different industries, and providing decision support tools allowing clients to properly price, manage, and avoid risks associated with their individual businesses.  The decision to spin off the company appears to be an important liquidity event for these insurance companies, many of which could use some additional stability in their balance sheets.

Earnings have been relatively stable over the past five years with Verisk growing pro-forma EPS from 79 cents per share in 2004 to $1.26 per share in 2008.  The first two quarters of 2009 showed attractive growth with revenue increasing by 14% and 16% respectively and earnings up 9% to 16%.  So far there have been no official consensus estimates for the full year or for 2010 due to the fact that so many underwriters were assisting on the deal and they are barred from issuing an opinion on the stock for about 30 days.  Over the next several weeks we should see these research firms quickly initiate coverage and offer guidance for earnings.

The risk assessment business will likely face significant demand over the next several years as Wall Street and Main Street adjust to the new dynamics of a (hopefully) post recession world.  With VRSK now operating as its own independent business apart from the founding insurance companies, the firm should be able to diversify its client base and expand into promising industries.  In fact, the company recently hired Vince McCarthy who has extensive experience in corporate finance and M&A (Mergers and Acquisitions).  The title of Sr. VP – Corporate Development and Strategy indicates that the company is exploring opportunities to broaden its reach and develop new business lines.

Investors in VRSK are paying a relatively high premium for the potential growth.  Currently, the published PE for VRSK is 21 which is in line with Risk Metrics Group (RMG) which operates in a similar field.  I would expect a bit of a pullback in the stock over the next two weeks as the 30 day restriction on trading is lifted and a few investors cash in on their profitable position.  However, the long-term prospects for this industry are very good and I expect VRSK to begin a steady climb once the IPO trading dynamics have played out.  Investors may want to try to accumulate shares near $24 if they have the opportunity with the intent of holding into the $30’s over the next 12 months.

FD: Author does not have a position in VRSK

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Shares of AECOM Technology Corporation (ACM) got a lift Monday after the company announced a weekend acquisition.  Ellerbe Becket which is an architectural, interiors and engineering firm has been bought by AECOM who continues to build out its portfolio of product offerings by buying out the competition.  The ZachStocks Growth Model has a long position in ACM which has taken more time than expected to mature, but it now appears that the company may be building a strong fundamental base which could lead to a sharp rally in the stock.

It is a bit unusual to see the acquiring firm stock rise on the day that the acquisition is made, because usually investors are wary that the acquiring company may have paid a premium in order to take over the target company.  However, ACM rose more than 12% on a day when the market was experiencing a significant decline.  Volume was roughly double the average number of shares indicating that institutional investors may have been at work building large positions.  The initial strength after the transaction is a positive sign and is likely to point to this being an accretive deal for AECOM.

Ellerbe Becket employs 450 people in 7 offices across the US and the Middle East.  The company specializes in the following types of projects:

• Health care facilities
• Sports complexes
• Government buildings and installations
• Corporate projects
• Higher education facilities

One concern that often arises when a large corporation takes over a smaller rival is that headcount will be reduced resulting in unemployment.  However, in the architectural business, strength comes from human capital and so it is unlikely that AECOM will do much in the way of headcount reduction.  In fact, I imagine that there will be some retention bonuses for key architects and project managers to ensure that the investment pays off.

AECOM purchased Ellerbe Becket as the parent company continues to try to build out its product offerings to cover a broad range of architecture and engineering solutions.  The combination will give existing clients of both companies a wider platform of services for individual products.  AECOM is betting that cross selling these services will result in strong profitability for shareholders.  Although terms of the deal were not released, AECOM has a relatively stable financial position and it is not likely that significant additional debt was needed in order to secure this transaction.

Ellerbe Becket’s decision to join us in order to expand the services available to its clients and the professional development opportunities offered to its employees further establishes AECOM’s position as a preeminent global design consultancy. ~John M. Dionisio, President and CEO

The company will report earnings on November 12 and while the acquisition obviously occurred in the fourth quarter (and will not be included in the September fourth quarter numbers), it will be interesting to see if management sheds any additional light on the transaction.  It would be helpful to know approximate pricing details, any financing efforts that were taken to pay for the deal, and what sort of earnings growth investors can expect as a result of this purchase.

Stimulus measures both in the US and abroad were expected to help the company grow in 2009 and beyond.  Infrastructure projects captured headlines and investors attention, but investors now seem to have lost interest in infrastructure spending.  The earnings do continue to grow quarter by quarter, but investors still seem relatively unsure of the long-term growth prospects.  ACM is currently trading at near 16 times expected earnings for this year, and 13 times earnings expectations for 2010.  The multiple seems a bit low for a company that is growing earnings by 20% on an annual basis and I think patient shareholders will eventually be rewarded for sticking with this name.

Currently, there is no yield on the stock as management has decided to retain earnings to continue building the company.  This may be a wise move from a capital perspective, although a small dividend plan may open the stock up to a broader group of investors who need to have some cash-flow attached to their investment.  The chart pattern is not particularly attractive, but the Ellerbe acquisition could spark interest resulting in a more attractive price movement.

FD: Author has a long position in the ZachStocks Growth Model

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An extensive article in the Wall Street Journal Online today, points out some of the challenges that Tiffany & Co. (TIF) is facing as the company struggles to remain competitive in the current global economy.  The company has increasingly turned to integrating a larger portion of its supply chain by taking interests in overseas miners and opening factories for cutting and polishing its diamonds.  The strategic decisions over the past few years have led to difficulty as the global demand begins to dry up at the same time that Tiffany has built a costly supply structure.

Tiffany is  one of the featured shorts in the ZachStocks Retail Fail sector report.  As the market continues to make new highs on a weekly basis, investors should begin to develop defensive strategies for protecting gains.  Many professional investors initiate short positions in sectors in which prices have advanced much more quickly than the fundamental improvement seen in the businesses.  This strategy can be effective in protecting gains that have been accumulated as the market has rapidly advanced.

The current retail environment for Jewelry remains difficult despite a few positive signs pointing toward economic stabilization.  Over the last three quarters, Tiffany has seen earnings decline by 39%, 58%, and 37% respectively, and the company is expected to report full year earnings of $1.74 this year which is down 24% over last year.  Analysts are handicapping next year’s returns at $2.04 representing a 17% increase for fiscal year 2011 (Tiffany works with a Jan 31 fiscal year end).

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Global sales of jewelry have been constrained with the total market for diamonds expected to fall by 16% this year.  The number of specialty jewelry retailers declined by 1,500 last year and another 900 stores are expected to close in 2009.  With unemployment remaining stubbornly high, and some of the highest earning industries facing compensation scrutiny by regulatory bodies, it is unlikely that the outlook for this industry will turn higher in the next few quarters.

Tiffany has accumulated a significant amount of long-term debt which could eventually turn into a much larger problem if the economy continues to be soft.  At the beginning of the year, long-term debt was roughly $425 million.  But as of the last reporting period, Tiffany now has more than $710 million in long-term debt, plus pension and other liabilities bringing the total long-term liabilities to well above $1 billion.  As a result, interest expense is several times the level seen last year which is becoming a material drain on earnings.

One of the most dangerous issues for the financial health of the company is its surging inventory level.  The second quarter earnings release showed that the company is sitting on $1.5 billion in inventory which is an expensive prospect considering the interest expense along with an unstable sales outlook.  But with significant investment made in the supply chain, it is difficult for management to make the decision to cut back on purchases.  So the options are relatively difficult no matter which direction the company’s leadership decides to take.

Currently, stockholders seem relatively oblivious to the challenges facing this company.  Tiffany is trading at a multiple of more than 20 times aggressive expectations for 2011.  Given the low amount of growth expected, and the uncertainty which surrounds the luxury goods environment, I would not be willing to pay more than 12 times earnings for this mature company.  If the stock traded with this multiple, the price would drop below $25.  This decline seems to have a reasonable chance of occurring over the next 9 months.

With all of the concern over economic recovery, and the financial and strategic risks involved in this stock, I would recommend closing any long positions and potentially shorting the stock.  Alternative measures could be taken including selling calls against a long position, buying puts which will increase in value as the stock declines, or setting up a pairs trade by shorting TIF and buying another instrument such as a market or sector ETF.  Please understand the risks and the trading instruments before putting any strategy into place.  Tiffany is a well known and loved company and stock.  But the price pattern is likely to disappoint many investors over the next several months.

FD: Author does not have a position in TIF

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This week ZachStocks hosts the 112th edition of the Carnival of Financial Planning, the best personal financial planning and personal investment articles this week from personal financial blogs.

Welcome to the October 23, 2009 Edition #112 of the Carnival of Financial Planning.

The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security.

This edition is arranged by subject heading, so that you can browse efficiently.

Enjoy!

The Skilled Investor, Editor

Budgeting

Wise_Bread presents 3 Steps to Organize and Track Your Finances Without the Hassle posted at Wisebread.

GLBL presents Money Savings Tips for a Wedding posted at Gather Little By Little, saying, “I will share all the money savings tips related to weddings that I used for my own wedding: – Talk to people – Go back to school – The DIY method – Try combinations – Prioritize”

Susan Savering presents Personal Budgets posted at Family Financial Planners, saying, “When you don’t understand how much you spend and how much you save and invest, you do not have a financial plan. This dramatically increases your family’s long-term financial risk.”

Economics

Darwin presents Could the US Dollar be Replaced as the World’s Reserve Currency? What it Would Mean posted at Darwin’s Finance, saying, “Could the US Dollar be Replaced as the World’s Reserve Currency? Based on alleged secret meetings between Central Bankers of foreign countries that fund our debt, the US Dollar may have seen its best days. What it Would Mean?”

Roshawn Watson presents The Rich Get Poorer posted at Watson Inc, saying, “The implications of this recent recession have been far-reaching enough to put a big dent in American and world wealth. Both the magnitude of wealth and the number of millionaires decreased profoundly in 2008.”

Tyler Tervooren presents I Am Responsible for the Corporate World’s Waste, or A Lesson in Micro Economics posted at Frugally Green, saying, “When a fellow blogger questioned why we focus our environmental efforts at the individual level when large businesses waste so much more than each of us without prejudice, this is the response I wrote. The answer, interestingly enough, is all about money. You may not have much, and I may not have much, but together, we have more than we could ever imagine. Money talks, and when we use it to tell the business world what we really value, they listen and provide.”

Zach Scheidt presents Mortgage Crisis, Part Deux posted at ZachStocks, saying, “Commercial Mortgages continue to clog bank balance sheets and losses do not appear to have been recognized. Watch for weakness in regional banks with heavy exposure to commercial real estate loans.”

Estate Planning

The Financial Blogger presents Estate Planning: 5 Reasons Why You Should Have A Professional Among Your Liquidators posted at The Financial Blogger, saying, “managing an estate is more complicated than simply writing a few checks! Fortunately, for those who can afford it, you can name a professional among your liquidators.”

Financial Planning

Patrick @ Military Money presents How Much Life Insurance Do Military Members Need? posted at Military Finance Network, saying, “Military members may have different life insurance needs than civilians. Here is information regarding how much life insurance military members should buy, and some resources for finding the best life insurance deals.”

Big Larry presents Fantastic Free Resources for Your Annual Credit Check-Up posted at Out of Debt Christian, saying, “Just like your annual physical, it’s vital that you perform a credit check-up each year. We’ve uncovered some great and truly free resources to help you make sure your credit reports are accurate and your scores are as high as they can be.”

jim presents Beware Bank-paid Complimentary AD&D Insurance posted at Blueprint for Financial Prosperity, saying, “If your bank offers you “free” AD&D insurance, take a closer look because you might be signing up for more than you bargained for.”

Susan Saverton presents Financial Advisor Pasadena California posted at Pasadena Financial Planner, saying, “Appropriately setting your personal asset allocation in line with your personal risk tolerance is a critical decision for every investor. The percentages that are allocated to various asset classes tend to change slowly over time, so it is important to get it right at the outset.”

Dividend Tree presents Building Core Competency for Long Term Survival posted at Dividend Tree, saying, “whether it is running a business or individuals’ investment portfolio, it is important to build a core competency for long term sustainability. In my case, I focus on good quality companies that consistently pay or have potential to pay growing dividends over time.”

Financing a Home

Alex Fotopoulos presents When to Refinance a Mortgage? posted at My Trader’s Journal, saying, “Some key points to consider when refinancing your home.”

Financing Education

Praveen presents Will Education Follow the Housing Bust? posted at My Simple Trading System, saying, “Tips for students to avoid excessive loans and debt”

Health Care

KCLau presents Withdraw EPF Fund to Pay Insurance Premium? posted at KCLau’s Money Tips, saying, “Vincent Lee from Penang generously shares an idea to use your EPF”

Income

FMF presents The Top Ten Turnoffs About Networking posted at Free Money Finance, saying, “Networking is a key part of making the most from your career. This piece lists some of the circumstances that keep people from reaching out to others.”

April presents Five Steps to Six Figures in Seven Years posted at Get Rich Slowly, saying, “FMF from Free Money Finances offers up a guest post in which he recounts, step-by-step, how he was able to generate a 6-figure income in just 7 years.”

Dividend Tree presents Three Companies with Sustainable Dividends posted at Dividend Tree, saying, “Even in soft economic environment, there are companies out there that are continuing to increase dividends for their shareholders. While dividend increase is good, it is more critical to make sure we understand that companies can sustain their dividends.”

Investing

The Investor presents Think you’ve spread your risk? Think again posted at Monevator.com, saying, “Research shows different asset classes are more closely correlated than ever before. Is it still possible to create a less risky portfolio?”

Super Saver presents Why Stocks Still Make Sense to Me posted at My Wealth Builder, saying, “I still believe stocks are a great investment.”

Manshu presents Brazil ETF List posted at OneMint, saying, “A list of ETFs that give you exposure to Brazil”

ABC presents Stock Purchase – Bid/Ask Prices posted at ABCs of Investing, saying, “Bid and Ask prices – Information if you are buying or selling a stock.”

Praveen presents India Fund (IFN) Trade Example posted at My Simple Trading System, saying, “An example of how having a trading system gives you an edge, and let’s you take advantage of market moves outside of your control.”

Jules Wells presents Best Investment Strategy posted at Financial Planning Software, saying, “Personal investing seems incredibly complex, but the best investment strategy also tends to be a more simple investment strategy.”

Leslie Brown presents The Ten Best ETFs You’ve Never Heard Of posted at ETFdb.

Zach Scheidt presents Strategic Acquisition Boosts EBIX posted at ZachStocks, saying, “Ebix Inc. (EBIX) made a strategic acquisition this month which should increase earnings and give the company an inroad to serving a new sector of clients. Shares could increase 50% in the next few quarters.”

Fred Elkins presents Bond Fund Primer: Part Two – Look Before You Leap posted at Finance Banter, saying, “Part two of our bond fund investing series”

Tomas Escent presents Professional Investment Management posted at Nerds on Wall Street, saying, “Think of this book as sort of a Hitchhiker’s Guide to Wired Markets. There are no robots parking cars for six million years, but there are robots trading millions of shares in six milliseconds, so maybe that’s close enough.”

The Skilled Investor presents Investing Strategy posted at Personal Investment Manager, saying, “Investors more easily understand investment costs that are directly measurable, such as fees deducted on investment statements. However, many investors ignore or are unaware of the opportunity costs of their sub-optimal investment behaviors. Opportunity costs are usually much more difficult to measure directly, but these investment costs can be even higher than more visible investment fees.”

The Financial Blogger presents ETFs VS Index Mutual Funds: The Ultimate Battle! posted at The Financial Blogger, saying, “Let’s look at why you probably think ETFs are the best investment in the world: The very first argument is the one that doesn’t lie: yield graph over the past 5 years comparing the TSX 60, the XIU (TSX 60 ETF) and the Altamira Canadian Index Fund (NBC814)”

The Smarter Wallet presents Lending Club Review: Lending Money For Profit posted at The Smarter Wallet, saying, “Alternative investing using a lending platform.”

Tushar Mathur presents Can’t Control the Markets? Try controlling the Costs posted at Everything Finance, saying, “As 2008 proved, the financial markets are prone to unpredictable periods of turbulence. That can make investing feel a bit like a roller-coaster ride. The disappointing results that many mutual funds posted in 2008 and at the outset of 2009 may have left you feeling concerned over your financial future. You’re not alone.”

Frank Vertin presents Low Cost Index Fund posted at Best Index Fund, saying, “Buying an S&P 500 index fund through an investment counselor can substantially increase your initial purchasing costs and and drive up your annual management expense fees. Unfortunately, the vast majority of individual investors buy mutual funds and ETFs through brokers and investment advisers. Rarely do financial advisors recommend that you buy index funds with low fees. This is because low cost, no load mutual funds do not pay them as well as loaded, high fee mutual funds.”

Dividends4Life presents 3 Dividend Stocks Rewarding Their Shareholders posted at Dividends Value, saying, “Investing in dividend stocks provides the investor with continuous feedback. As time passes, dividend investors see their income steadily grow. You do not have to wait five to ten years to determine if the strategy is working.”

FMF presents Bond Primer: Yield vs. Total Return posted at Free Money Finance, saying, “The basics of investing in bonds.”

Larry Russell presents NoLoad Mutual Funds posted at Best No Load Mutual Funds, saying, “Taken as a whole, the vast body of investment research studies show that there really are better approaches to buying and owning mutual funds and ETFs. You do not need to frantically chase fund performance. Performance chasing simply does not work.”

ABC presents More Exciting Facts About Stock Indexes posted at ABCs of Investing, saying, “Some interesting facts about stock indexes.”

Mike Piper presents The Best (Lowest-Cost) ETFs to Buy & Hold posted at The Oblivious Investor, saying, “A collection of the lowest-cost ETFs in each asset class–ideal for constructing a buy & hold portfolio.”

Managing Debt

Adam Williams presents Dave Ramsey said to sell my stuff and payoff debt posted at RabbitFunds.com, saying, “A post in the form of a letter to Dave Ramsey about my experiences in selling my stuff to pay down debt as Dave suggests in his Financial Peace University course.”

Peak Personal Finance presents Teach Your Child About Responsible Credit Use posted at Peak Personal Finance, saying, “Help your children understand proper use of credit.”

Patrick @ Cash Money Life presents What to do About Increased Credit Card Interest Rates posted at Cash Money Life, saying, “Tips on your options if your credit card company raises your interest rates or changes the terms of your credit card agreement. Options include closing the card, transferring the balance to another credit card, or accepting the terms.”

Tom Drake presents When To Consider Filing For Bankruptcy posted at The Canadian Finance Blog, saying, “There are many people who are feeling overwhelmed by the burden of their high credit load. If you are feeling like you’ll never be able to pay off the debt you’ve accumulated, you might be wondering if you should file for bankruptcy.”

The Smarter Wallet presents How To Get A Credit Card That’s Right For You posted at The Smarter Wallet, saying, “How to shop for the right credit card.”

MoneyNing presents Credit vs Debit Transactions with Your ATM Card posted at Money Ning, saying, “Are there any difference with saying credit or debit when you hand over an ATM card?”

FMF presents Make Sure Your Credit Card Has Smart Features posted at Free Money Finance, saying, “Use the right credit card and make it work FOR you — not against you.”

Peak Personal Finance presents How to Compare Secured Loans posted at Peak Personal Finance, saying, “Selecting the right secured loan can save you a heap of money over the life of the loan. This article helps you avoid common pitfalls to identify the best loan for you.”

Miscellaneous

FMF presents The Basics Will Make You Rich posted at Free Money Finance, saying, “If you follow a few, simple steps, you will become wealthy.”

No Load Bond Funds presents Low Cost Bond Funds posted at Bond Index Fund, saying, “Simply put, if you pay higher bond mutual fund fees, then these bond management expenses tend just to be a deadweight loss to you. The best bond fund buying strategy is to pick only very low-cost no load bond funds.”

nissim ziv presents Career Statement: Examples of Career Statement posted at Job Interview Guide, saying, “The purpose of writing a career statement is to give the professional a clear direction for the future. A career statement is a creation of your career vision for inspiring and motivating youself.”

Roshawn Watson presents Should You Buy A House Outright? posted at Watson Inc, saying, “Suppose you find yourself in the somewhat unique predicament of having the resources to purchase your house outright without a mortgage. Is it then financially-wise to make the purchase?”

Susan Savering presents Personal Financial Strategy posted at Family Financial Planner, saying, “When pursuing optimal financial planning and investing strategies and controlling your costs and capital gains taxes, you also need to establish a time-efficient system to monitor, adjust, and adhere to your financial plan.”

Retirement Planning

Jeff Rose presents Why You Should Keep Contributing to Your 401k posted at Jeff Rose.

Madison presents 2010 Roth 401k and Roth IRA Limits posted at My Dollar Plan, saying, “Time to plan for 2010. Here are the 2010 401k and IRA limits.”

Patrick @ Cash Money Life presents Should You Rollover a 401k into an IRA? posted at Cash Money Life, saying, “When you leave your company you have to decide what to do with your 401k. One option is to roll it over into an IRA.”

Paul Kamp presents Bad Attitude, Las Vegas, Retirement, Caution, Risk, American International Group, Gambling Bias, Rationality posted at Don’t Quit Your Day Job – Personal Finance, Economics and Investing, saying, “Vegas is not a good place to learn about retirement planning. It is a good place, however, to learn what not to do.”

Top Stock Index Mutual Funds presents Stock Index Funds posted at Top 10 Index Fund, saying, “To build your retirement portfolio, buy some of these top 10 very low cost no load S&P 500 index mutual funds directly. You do not have to pay the heavy added expenses of buying through a stock broker, financial adviser, investment adviser, or investment counselor.”

Risk Management and Insurance

Jeff Rose presents Term Life Insurance Vs. Cash Value Life Insurance: What Is the Difference? posted at Jeff Rose, saying, “Depending on what your needs are will decide if term life insurance vs. cash value is better in your situation.”

Evolution Of Wealth presents Social Psychological Change posted at Evolution of Wealth, saying, “Have you ever heard of cognitive dissonance? Chances are it is intertwined with your life. It is probably causing some undue stress. If you don’t know you have a problem or want to pretend you don’t then it becomes extremely difficult to fix it. It might just be time to make a change in your financial world.”

Patrick @ Military Money presents COBRA Benefits 2009 Economic Stimulus Recovery Act posted at Military Finance Network, saying, “The 2009 Economic Stimulus Plan includes additional COBRA and unemployment benefits.”

Savings

Silicon Valley Blogger presents Ally Bank (GMAC Bank) Review posted at The Digerati Life, saying, “A review of a popular savings bank.”

Jody T Fransch presents The Law of Saving | jody fransch posted at jody fransch.

MoneyNing presents Why Do High Yield Savings Account Rates Change posted at Money Ning, saying, “Here’s a way to figure out which online bank is best for your money going forward.

KCLau presents How much money you spend in a lifetime? posted at KCLau’s Money Tips, saying, “How much do u spend in a lifetime”

Four Pillars presents $8,000 Credit For First-Time Homebuyers Extended 6 Months – Not Increased To $15k posted at Quest For Four Pillars, saying, “Home buyers credit extended 6 months.”

Four Pillars presents Back To School Cell Phone Deals posted at Quest For Four Pillars, saying, “Comparison of the best cell phone deals for students heading back to school.”

Taxes

Mike Piper presents 72(t) Distribution Rules posted at The Oblivious Investor, saying, “An explanation of the 72(t) rule, which can be used to withdraw money from an IRA prior to age 59 1/2 without having to pay the 10% penalty.”

Jeff Rose presents 2010 Traditional IRA to Roth IRA Conversion Tax Rules posted at Jeff Rose, saying, “Tax implications of converting from a Traditional IRA to a Roth IRA. Don’t forget the after-tax contributions.”

Super Saver presents End of Year Tax Planning – Deductions posted at My Wealth Builder, saying, “For me, October is a good time to review my 2009 financial status for tax return filing purposes. It gives me a few months to make any changes that can lower my taxes.”

That concludes this edition. Submit your blog article to the next edition of Carnival of Financial Planning using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: carnival of financial planning, blog carnival.

First Cash Financial Services (FCFS) reported earnings Tuesday morning and the stock responded by trading sharply higher.  The strength certainly benefited the ZachStocks Growth Model which currently has a 4% position in the stock.  ZachStocks published a positive article on FCFS earlier this spring and while it has been a bumpy ride, it appears that the company is making some good strategic decisions and realizing attractive growth.

Earnings for the third quarter came in at $0.35 per share, above consensus expectations and 21% above the third quarter of 2008.  More importantly, management increased their guidance slightly for the year and it appears both revenue and earnings growth remain solid.  Revenue came in at $94.6 million which is up 20% when taking currency fluctuations into consideration.

Most of the company’s recent strength has come from their operations in Mexico.  Pawn operations south of the border were up 38% compared to 12% for a US store base which is much more mature.  While the dollar has been relatively weak, the peso has had even more difficulty which has added pressure to the revenue side of the income statement.  At the same time, a weak peso has caused store opening and operating expenses in Mexico to be lower, so the positives and negatives balance each other out.  It appears that the strategy for broad expansion into Mexico is paying off.

With 45 store openings year-to-date, we are on target to meet our goal of 60 new pawn stores in Mexico for 2009.  Importantly, the new stores opened this year, along with 64 stores opened and acquired last year, have generated early stage growth in pawn loan portfolios and profits at a record pace. ~Rick Wessel, CEO

One interesting sign of the times is that First Cash is benefiting from the increase in gold prices.  Scrap jewelry can be a strong source of revenue and the company expects that they will see significant additional revenue in the fourth quarter as a direct result of selling jewelry at higher prices for the gold and silver content.

From a financial perspective, FCFS continues to increase its strength.  The total debt level was reduced by $31 million over the last quarter (37%) and it is likely that the company will pay off more debt during the final quarter of 2009.  The fact that the company continues to open new stores while reducing debt and interest expense should add to long-term earnings stability and create a more attractive company for investors.

Free cash flow for the third quarter came in at $43.8 million which was significantly higher than the $9.3 million seen in the third quarter 2008.  This cash flow takes into account the expense of rolling out new stores which is what makes the number so impressive.  At some point over the next year, the company will have to decide whether they have the ability to reinvest this cash positively in their business or whether they should return it to shareholders in the form of either declaring a dividend or purchasing stock.  This kind of issue is a great problem to deal with.

Currently the stock is trading at less than 12 times expected earnings for 2010.  While there is certainly some concern regarding regulatory issues in the industry, the company should be able to continue to operate with strong profits and attractive margins.  I expect investors to be more confident throughout the next year as the regulatory environment becomes more clear and believe that the stock could easily trade into the mid 20’s before this time next year.

FD: Author has a long position in the ZachStocks Growth Model

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Ebix Inc. (EBIX) has been an incredible investment this year.  The shares began 2009 trading in the mid-20’s before hitting a low of $17.12 in the early days of March.  Since that time, the stock has rallied 279% to its most recent close of $64.91 and the stock could still have farther to go.  Estimates for earnings continue to be ratcheted higher, and even today after an incredible rally, the valuation still looks relatively attractive.

The software and services company has developed a strong business serving the needs of insurance companies across the United States.  Their solutions cover a wide range of technology needed by groups and independent agents, and the expertise has allowed the company to carve out quite an attractive niche and grow market share.  Now that the company has proven successful and grown into a market leader, Ebix has its sites set on a much larger target market.

On October 1, the company announced that they have agreed to purchase E-Z Data for the tidy sum of $50.35 million.  The terms require half of the payment to be in cash, and half in stock with Ebix essentially guaranteeing a floor price for the shares at a 10% discount should the shares lose value over the next two years.  E-Z Data is one of the leaders in CRM solutions for insurance brokers and the acquisition helps to round out the technology offering that Ebix can sell to clients.

According to the press release, Ebix is expecting the deal to be immediately accretive and add significant value for shareholders over the years.  The new product line will not only allow Ebix to offer new services to their existing clients, but actually allows Ebix to get their foot in the door serving banks, investment dealers, agents and financial advisors.

This is one of our most strategic acquisitions since this will provide us access to a majority of the life and annuity brokers’ desktop in the United States. We have always had the vision to include CRM into the core fabric of the information exchanged in the insurance business. E-Z Data CRM when blended into our life and annuity exchanges provides the insurance industry with a giant leap forward, in terms of making end-to-end, enterprise-wide information exchange rather seamless for the majority of the industry.~Robin Raina, Chairman, President and CEO

Ebix should have a good idea of a baseline for future revenue from this acquisition.  E-Z Data has an existing revenue base that is primarily subscription based and 85% of all revenue is expected to be recurring.  So even if Ebix does nothing to improve on the business, they should have an attractive business on their hands.  Looking down the road as Ebix sells CRM solutions to existing clients, and internet based services to the new list of E-Z Data, there should be significant synergies driving earnings much higher.

Currently, analysts are expecting the company to earn $2.93 per share in 2009 which represents 29% growth over last year.  The company has been growing earnings steadily for years with earnings at $0.07 in 2002.  While the growth rate may decline a bit due to the magnitude of the company’s current earnings, Ebix can still be considered an aggressive growth company and the stock should continue to trade with a healthy multiple.

In a decision that shows confidence in future growth, management recently announced that they will offer a 3 for 1 stock split which will bring the shares back down to roughly $21 per share.  The transaction is expected to take place at the end of November, so the stock could actually be significantly higher by that time.  With a low debt level and positive cash flow, the company could easily look for additional strategic acquisitions and their financial stability is quite impressive.  It’s customer base is relatively healthy as most insurance companies are recovering from the turmoil of last year and the diversification into the financial industry will help as well.

Analysts are expecting earnings to come in at $3.63 next year and Ebix may very well perform above expectations.  Considering the expectations are correct, and using a conservative multiple of 25, we could still expect the stock to cross above $90 in the next 6 to 12 months.  Any further accretive acquisitions or growth surprises could lead to much larger gains.  So while the stock may be extended, and it may make sense to watch for a pullback, the future looks bright for Ebix and its investors.

FD: Author does not have a position in EBIX

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The housing market may be dead in the US, but in China there is still significant activity.  As a massive population continues its transition to a higher standard of living, millions of rural Chinese citizens are moving to large cities and are in need of housing.  A real estate bubble may be in the works, but it is certainly a long way from popping.

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E-House Holdings (EJ) is a leading real-estate company serving this growing need.  The firm currently operates a large real estate agency with brokerage services.  It also has a consulting and information services business which allows clients to have access to a huge database of information.  This information will be spun off to investors in a complicated transaction this week.  The new IPO will be China Real Estate Information Corp (CRIC).

Over the past year, CRIC has partnered with Sina Corp (SINA) which is a leading web portal in China.  The strategic alliance has allowed the information division to reach a very wide audience and has developed a strong revenue base.  This joint venture will be merged into the new IPO which means that Sina will be a large shareholder in the newly issued company.

Currently it looks like the deal will raise somewhere between $210 million and $242 million depending on whether the underwriters exercise their options to sell excess stock.  It is difficult to determine just how popular the deal will be with investors as we have conflicting trends to deal with.  On the negative side, the most recent IPO out of China was a big disappointment.  Shanda Games saw its IPO flop with the stock offered to investors at $12.50, but the stock (GAME) is now trading close to $10 – or 20% below its offering.  If investors see that previous IPOs are having a tough time generating profits, they will be more hesitant to buy the next deal.  Underwriters may have to price CRIC at the low end of estimates in order to get the deal done which would be a red flag and also provide less capital to the company and selling shareholders.

On the other hand, investor sentiment appears very robust with the Dow crossing 10,000 for the first time since our financial collapse.  Now the rally may be suspect and I understand that there are serious fundamental flaws, but for short-term trades like IPO issues, healthy investor sentiment is much more important than macro fundamental issues.

Investors in CRIC should certainly hold the IPO with a traders perspective.  At this point there is very limited operating information available, and it wouldn’t surprise me to see some hiccups in the first year as a stand alone company.  I expect that the real estate market will remain firm in China for three to five years, which will provide some support for the company as it begins operating on its own.

If you have a relationship with Credit Suisse, UBS, or Bank of America / Merrill Lynch, you may consider taking stock on the deal.  There will likely be a small pop as the underwriters need to price this one attractively to make up for investor concern following GAME.  However, a week after the deal is priced, I think the best option will be to sit back and let CRIC begin to form a trading pattern and watch for the fundamental picture to mature.  I would rather miss out on a good opportunity today, than commit capital to a risky situation that has the potential for disappointing losses.

FD: Author does not have a position in EJ

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Protectionism is alive and well and the Chinese government is tightening pressure on foreign investment.  Most recently the country’s lucrative online gaming industry is seeing tougher regulations aimed at protecting local gaming companies who are finding it difficult to compete with larger players.

On Saturday, the China regulatory body, the General Administration of Press and Publication issued an announcement which bans foreign investors from participating in profits from the country’s online gaming business.  These investors are not allowed to participate in wholly owned investments, joint ventures, or any other manner in which they could profit from the thriving business.

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While the issue at stake appears to be protectionism (an individual country protecting industry within its borders by shutting out foreign competition), the method used to enforce this issue appears to be censorship.  The new restrictions would require approval for all new games launched within China.  This adds another layer of risk to businesses who produce these games as companies could spend millions of dollars to develop games only to be turned down by regulators after the games had been produced.

New games are not the only targets as any upgrades to existing programs will also have to be approved.  Nearly every game that has been successful for a long period of time, has performed well because of continual upgrades to the platform.  Gamers continue to play and generate revenue because the game continues to evolve and capture their imagination.  If this process is thwarted it will likely allow smaller gaming companies to compete, but it could also be very detrimental to to the industry as a whole.

One of the companies which could be most affected by the regulations is Netease.com (NTES) which recently bought the license to distribute Wold of Warcraft in China.  Despite the fact that this license was formerly held by The9 Ltd. (NCTY), China has delayed approval of the game now that NTES is has the license.  If games that are currently licensed in China face scrutiny once they are transferred to another parent company, it could be a significant burden on commerce.

Other companies that may be effected include Shanda Interactive (SNDA) and their recently issued spin off Shanda Games (GAME).  The uncertainty in the market surrounding these regulations has caused the stocks to trade off even given the positive fundamentals.  It does little good to own a company with strong earnings and a healthy cash position if the Chinese government is going to cap growth or potentially nationalize the industry.

While the news is certainly negative for the industry, there are many regulatory bodies in China – not all of which appear to be against foreign investment.  The GAPP has significant influence, but China is also cognizant of the benefit of foreign investment to drive industry growth and technology advancement.  One player in the sector that appears to be holding up well is Perfect World (PWRD).  The stock has pulled back to it’s 50 day average, but technically still looks very sound.  The company is expected to earn $3.43 per share in 2010 which represents a 21% growth rate over 2009.  The stock is just above $40 which is a reasonable multiple given the growth.

Investors should probably wait for a bit more clarity from regulators before committing significant capital, but PWRD may merit further investigation.  A good strategy may be to initiate a small or partial position at the current price and then begin to build that position as the situation improves.

FD: Author has a long position in SNDA and NTES in the ZachStocks Growth Model

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