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 Foot Locker (NYSE: FL ) , whose recent revenue and earnings are plotted below.
Hot Asian Stocks To Buy Right Now: The Travelers Companies Inc.(TRV)
The Travelers Companies, Inc., through its subsidiaries, provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. The company operates in three segments: Business Insurance; Financial, Professional, and International Insurance; and Personal Insurance. The Business Insurance segment offers property and casualty products and services, such as commercial multi-peril, property, general liability, commercial auto, and workers? compensation insurance. It operates in six groups: Select Accounts, which serves small businesses; Commercial Accounts that serves mid-sized businesses; National Accounts, which serves large companies; Industry-Focused Underwriting that serves targeted industries; Target Risk Underwriting, which serves commercial businesses requiring specialized product underwriting, claims handling, and risk management services; and Special ized Distribution that offers products to customers through licensed wholesale, general, and program agents. The Financial, Professional, and International Insurance segment provides surety and financial liability coverage, which uses a credit-based underwriting process; and property and casualty products primarily in the United States., the United Kingdom, Ireland, and Canada. The Personal Insurance segment offers property and casualty insurance covering personal risks, primarily automobile and homeowners insurance to individuals. It distributes its products through independent agents, sponsoring organizations, joint marketing arrangements with other insurers, and direct marketing. The company was founded in 1853 and is based in New York, New York.
Advisors' Opinion:- [By Alex Planes]
Travelers (NYSE: TRV ) has only been on the Dow in its present form since 2009, but it first joined in 1997, only to be replaced by the megabank that acquired it at the turn of the century. Now that it's independent again, the New York City-based insurer has reclaimed a history that stretches further back than JPMorgan's to a $0.02 transaction in Hartford, Conn. Travelers has held up well through the devastation of the financial crisis, but will its pedigree be enough to fend off JPMorgan?
- [By Wallace Witkowski]
While the big banks and financial firms have already reported earnings, Greenhaus noted this week will see the largest number of financial sector firms reporting than any other week. More than 20 S&P 500 financial sector companies report including several insurers such as Dow component Travelers Cos. (TRV) , a number of real-estate investment trusts such as Simon Properties Group Inc. (SPG) , capital markets firms such as Franklin Resources Inc. (BEN) �and State Street Corp. (STT) , as well as exchange operator Nasdaq OMX Group Inc. (NDAQ) �
- [By Jeremy Bowman]
On the other end, Travelers (NYSE: TRV ) flopped in its earnings report, finishing the day down 3.8% after saying it will cut jobs and lower auto insurance prices. Despite that news, earnings per share of $2.13 was well ahead of estimates at $1.60 as the insurer saw fewer catastrophic losses. Still, the company had a 7% decline in personal auto insurance premiums, prompting the decision to lower prices. Shares of fellow insurers also dropped on that news as it may lead to lower industrywide margins and a potential price war.
Top 5 Income Stocks To Own Right Now: Novartis AG (NOVN)
Novartis AG provides healthcare solutions. The Company is a multinational group of companies specializing in the research, development, manufacturing and marketing of a range of healthcare products led by pharmaceuticals. Its portfolio includes medicines, eye care, cost-saving generic pharmaceuticals, preventive vaccines and diagnostic tools, over-the-counter and animal health products. It has five segments: Pharmaceuticals, which include patent-protected prescription medicines; Alcon, which include surgical, ophthalmic pharmaceutical and vision care products; Sandoz, which include generic pharmaceuticals; vaccines and diagnostics, which include human vaccines and blood-testing diagnostics, and consumer health, which include over-the-counter medicines (OTC) and Animal Health. In February 2014, it acquired CoStim Pharmaceuticals, Inc. Advisors' Opinion:- [By Sofia Horta e Costa]
Novartis AG (NOVN) slipped 1.3 percent to 67.20 Swiss francs after JPMorgan Chase cut its recommendation on the drugmaker to neutral from overweight, a rating similar to buy. The stock has rallied 17 percent so far this year, compared with a 15 percent increase for the Swiss Market Index.
Top 5 Income Stocks To Own Right Now: Alliance Resource Partners L.P.(ARLP)
Alliance Resource Partners, L.P. engages in the production and marketing of coal for utilities and industrial users in the United States. It operates nine underground mining complexes, which offer low, medium, and high-sulfur coal. The company also leases land and operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana; and purchases and resells coal. In addition, the company provides mine products and services comprising design and installation of underground mine hoists for transporting employees and materials in and out of mines; design of systems for automating and controlling various aspects of industrial and mining environments; and design and sale of mine safety equipment, such as its miner and equipment tracking, and proximity detection systems. Further, it offers ash and scrubber sludge removal, coal yard maintenance, and arranging alternate transportation services. As of December 31, 2010, the company had approximately 697.4 million tons of coal reserves in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia. Alliance Resource Management GP, LLC serves as the general partner of Alliance Resource Partners, L.P. The company was founded in 1971 and is based in Tulsa, Oklahoma.
Advisors' Opinion:- [By Tyler Crowe]
Looking at these trends might lead one to believe that the glory days of coal are numbered, and these companies are�certainly�priced to fail. All four of the country's largest coal companies trade at values well below the average for the S&P 500.
Company Price to Tangible Book Value P/E Ratio (TTM) S&P 500 5.40 17.7 Peabody Energy (NYSE: BTU ) 1.09 9.22 Arch Coal (NYSE: ACI ) 0.41 N/A Alliance Resource Partners� (NASDAQ: ARLP )2.52
Top 5 Income Stocks To Own Right Now: Bacterin International Holdings Inc (BONE)
Bacterin International Holdings, Inc. (Bacterin), formerly K-Kitz, Inc., develops, manufactures and markets biologics products to domestic and international markets through Bacterin's biologics division. Its products are used in a variety of applications, including enhancing fusion in spine surgery, relief of back pain with a facet joint stabilization, promotion of bone growth in foot and ankle surgery, promotion of skull healing following neurosurgery and subcondral bone defect repair in knee and other joint surgeries. The Company has developed and manufacture and sell several human tissue-based products, primarily allografts, into the medical marketplace through its biologics division. In addition, it also manufactures and sells, directly under its own name and indirectly through distributors, various coating and surgical drain products through its medical devices division.
The Company�� medical devices division develops medical devices intended for use in several diverse clinical areas, including orthopedic, plastic, and cardiovascular surgery. The medical devices division also develops custom surgical instrument kits for use with allografts processed by its biologics division. The medical devices division actively develops intellectual property associated with its devices and coating platforms, for the purposes of protecting its Bacterin-branded devices and for use in alliance projects. The manufacturing and operations of the biologics and medical devices divisions are organized separately while products from both are marketed through several channels, including independent distributors, joint development projects and its direct sales network.
Biologics Division
The Company�� biologics products include OsteoSponge, OsteoSponge SC, OsteoWrap, OsteoLock and BacFast, as well as certain other allograft products, such as OsteoSponge, OsteoWrap, OsteoLock and BacFast and hMatrix. OsteoSponge is a form of demineralized bone matrix made from 100% human bone. Ost! eoSponge provides a natural scaffold for cellular in-growth and exposes bone-forming proteins to the healing environment. The malleable properties of OsteoSponge enable it to conform to, and fill, defects. Upon compressing the allograft, OsteoSponge springs back to completely fill the void. Its mechanical and biological properties make OsteoSponge an bone graft for use in various orthopedic practices, including spine, neurology, cranial/maxillofacial, trauma, plastic/reconstruction and general procedures where new bone growth is needed.
OsteoSponge SC is a form of OsteoSponge designed to be used in joint surgery. Bacterin has shown, in goat studies, the ability to re-generate cartilage in joint repair and believes that this product has the potential to significantly change the standard of care in human joint surgery. OsteoWrap is 100% human cortical bone demineralized through a process to make the graft flexible while maintaining allograft integrity. This product has various applications in orthopedic, neurological, trauma, oral/maxillofacial and reconstructive procedures. OsteoWrap can wrap around non-union fractures to assist with fusion, can act as a biologic plate or can be used in conjunction with a hardware plate system. Additionally, this product provides the surgeon with superior handling characteristics as the allograft can be easily sized using surgical scissors or a scalpel, and will withhold sutures or staples for fixation.
OsteoLock and BacFast are dowels made from human bone. BacFast HD, having the same design as OsteoLock, is optimized through its demineralization technology. OsteoLock and BacFast can be used to augment spinal procedures for mild spinal conditions. hMatrix dermal scaffold is an extension of Bacterin's core biologics technology and its third human acellular biological scaffold. hMatrix is an acellular matrix made from donated human dermal tissue that is used to replace a patient's damaged tissue. hMatrix provides a natural collagen tissue scaffold! that pro! motes cellular ingrowth, tissue vascularization and regeneration. The Company makes and sells sports allografts which are processed specifically for anterior and posterior cruciate ligament repairs, anterior cruciate ligament reconstruction and meniscal repair; milled allografts, which are consists of cortical bone milled to desired shapes and dimensions, also called milled spinal allografts, and traditional allografts for multi-disciplinary applications, including orthopedics, neurology, podiatry, oral/maxillofacial, genitourinary and plastic/reconstructive.
Medical Device Products
The Company�� medical devices division researches, tests and develops coatings for medical devices, particularly antimicrobial-based coatings. This division produces and distributes OsteoSelect DBM putty, an osteoinductive product used by surgeons as bone void filler in the extremities and pelvis. OsteoSelect DBM putty is engineered with the surgeon in mind. OsteoSelect can be molded into any shape and compressed into bony voids. Its medical devices division also develops custom surgical instrument kits for use with allografts processed by its biologics division. The Company sells a surgical drain series called ViaTM, which is used to drain exudate from a surgical site. Building upon the ViaTM platform, Bacterin plans on releasing a second generation product called the Elutia surgical drains, which will be performance enhanced through an antimicrobial coating to help reduce the incidence of surgical site infection.
The Company competes with Medtronic, DePuy, Synthes, Arthrex, Smith & Nephew, Nuvasive, OrthoFix, Biomet, Osteotech, Orthovita, MTF, Stryker, RTI, AlloSource, Lifenet Health, Integra, ConMed/Linvatec, Wright, Exactech, ArthroCare, Harvest and Arteriocyte.
Advisors' Opinion:- [By Bryan Murphy]
It may not be as big as NuVasive, Inc. (NASDAQ:NUVA), and it might not be as sexy as MiMedx Group Inc. (NASDAQ:MDXG). But, Bacterin International Holdings Inc. (NYSEMKT:BONE) offers something to investors that MDXG and NUVA don't - can't - right now... a distinct opportunity for a lot of upside in a short amount of time.
- [By James E. Brumley]
Traders may not want to get married for the long haul to any of them, but for speculators looking for a quick, profitable hit, Arca Biopharma Inc. (NASDAQ:ABIO), Pluristem Therapeutics Inc. (NASDAQ:PSTI), and Bacterin International Holdings Inc. (NYSEMKT:BONE) may be better-than-average bets. Here's why.