The polls are in. The WNA Nuclear Energy Index is a clear winner over the S&P 500. Well, let's quantify that; the S&P 500's 5-year annualized return is 11%, the "back-tested" WNA Nuclear Energy Index returned 33% annualized over the past 5-years. It's fair to say the nuclear index holds a decisive edge. Of course, past performance notwithstanding, the nuclear industry appears poised for stronger momentum in the years to come as nuclear build-out starts to gain traction. Using the last nuclear build-out cycle as an example, a safe assumption would indicate an expansion cycle that may last as long as 15 years. This type of data makes PowerShares' Global Nuclear Energy Portfolio ETF (PKN), which tracks the WNA index, quite attractive as a long-tern investment.

On May 6, PolyOne Corp. (POL), the leader in North America and Europe for polymer compounds and polymer coating systems, reported 2008 1st quarter earnings (see conference call transcript). EPS came in at 7 cents per share vs. 8 cents per share for the same quarter last year. This caused a 43-cent drop (6%) in the stock.

Collective Brands (NYSE: PSS) CEO Matt Rubel responded to last week's unfavorable federal court ruling in which the company was found guilty of trademark infringement and ordered to pay $305M in damages to adidas AG. In a letter to shareholders, Rubel discussed why he believes that the jury's ruling was "unjustified and excessive," and disclosed that the company will file motions asking the court to set aside the verdict, enter a judgment in its favor, order a new trial, or greatly reduce the jury's award.

• The total award of $305M (including $137M of Payless profits and $137M in punitive damages) is ten times the amount of actual damages found ($30.6M) and exceeds the profits that Payless ShoeSource made on its two- and four-stripe shoe styles by 15 times. Though our scope of patent and trademark infringement case is limited, we don't ever recall seeing a jury award of this magnitude.
• If the decision stands as ruled, it may also give adidas exclusive rights to all two- and four-stripe footwear designs. Payless is by no means the only footwear retailer with a private label that resembles adidas' three-stripe design (look around the footwear department at any mass merchant retailer). A ruling like this could potentially give adidas a monopoly on all striped shoe styles, which would have grave consequences across the industry as a whole.

Disclosure: No positions

One of the reason smallcaps can be so lucrative is that they receive very little media or analyst coverage. Unfortunately, it can also be why you can suffer horrific losses when you do not know the reasons behind the price movements in your stock.

The oil and gas story is alive and well and looks to be into the foreseeable future. San Juan Basin Royalty Trust (SJT) looks very well positioned on the higher moving price of natural gas, but has experienced some negativity as recent costs have been higher than expected, cutting into earnings and the last few distributions. Looking forward, this trust looks to have capacity for the next ten years, as they have resources of over 50 trillion cubic feet.

Year over year we have seen oil and gas production decrease 10%, but with realized oil prices doubling last year this coming quarter could be very good for earnings. If we look at average price attained last year gas was $6.11 per Mcf, and oil $63 per barrel. Last year saw a decrease in the collected price of natural gas and that was the main contributor to negativity with respect to earnings. Capital expenditures have also been a problem as 2006 was very large and there wasn't enough of a decrease for last year. I believe we will see these expenditures come down this year more in line with 2005 numbers. The trust estimates capital expenditures will decrease by $5 million for this year.

There have been lots of “whither Google (GOOG)?” stories in dozens of publications, and no doubt there will be dozens more to come. Some talk about competition from Microsoft (MSFT) on the advertising side, and some talk about how Google hasn’t really had any big hits apart from its ability to coin money on keyword-related search. But Adam Lashinsky’s latest piece for Fortune magazine puts its finger on what I think is one of the biggest issues facing the company: namely, the simple fact that it has become a gigantic entity (and one that is getting more gigantic every day), and it’s hard to be as creative or move as swiftly.

I encourage you to read the whole thing, but a couple of things jumped out at me: one was the fact that Google is hiring on the order of 100 people every week. When Google went public in 2004, it had about 2,000 employees — now it has almost 10 times that many. And with all of those employees, and the billions of dollars that the company brings in every quarter, Google has no doubt developed a bureaucracy of sorts, even if it is a bureaucracy composed of kids in threadless T-shirts riding scooters on their way to the free massage area.

I've long compared the cable and phone companies, on the one hand, to the newspaper companies, on the other.

Newspaper companies saw their business being upended by the internet, made small bets and have lost out on the big ad growth the web has generated.

Sirius (SIRI) and XM (XMSR) both reported earnings Monday, and while the results were not stellar, there are many metrics which are scaling in a manner that helps demonstrate the viability of the SDARS business model. Costs are under better control and both companies are seeing the benefits of their respective OEM deals bring in subscribers.

For XM, the contribution of Nissan and Hyundai are beginning to pan out as the installations in these brands are beginning to contribute to the subscriber rolls. For Sirius, the promise of a Ford ramp-up will be substantial in Q3 and beyond.

China Medicine Corporation (CHME.OB) of Guangzhou said Q1 results show a 54% increase in net income ($1.2 million) on revenues that were 39% higher ($7.1 million) than the same quarter a year ago. China Medicine develops and distributes prescription and over-the-counter pharmaceuticals, traditional Chinese medicines, and nutritional and dietary-supplements.

China Medicine said its improved financial performance was helped by an expansion of its distribution network to include the rural areas of its home base in Guangdong Province. The company was also able to take advantage of the online bidding process to increase its provincial distribution rights in Q4 of 2007. Because of the China New Year celebrations, a similar increase did not take place in Q1, but China Medicine expects to continue its penetration of that market in the future.

Big Pharma’s failure to develop enough new blockbuster drugs is combining with other forces to drive fundamental changes in pharmaceutical research and development, according to Deloitte. Chief among these will be the emergence of “NewPharmaCos” concentrating on genotyped market segments. The companies may be startups or spinoffs of existing pharma companies, Deloitte says in a new report The Changing Face of R&D in the Future Pharmaceutical Landscape.

According to the report, current R&D programs focused on developing a small portfolio of high revenue blockbusters will evolve to R&D programs focused on high efficacy treatments developed for smaller patient populations based on specific genotypes. Such treatments, and their higher demonstrated efficacy, may ultimately have the potential for higher per treatment revenues.

I am glad the market in general has been giving such a doom and gloom view on Dell (DELL). Its stock price halved from $40 to $20 just 3 years ago. I think it’s great because it simply gives me the opportunity to buy into a good, if not great, company like Dell.

The Problem(s)

SOA Software, a provider of governance solutions for services-oriented architecture [SOA], has acquired LogicLibrary, a leading SOA repository and governance vendor.

The acquisition of the Pittsburgh, Pa.-based LogicLibrary by Los Angeles-based SOA Software creates a more comprehensive SOA governance and automation solution, said the companies. The goal is to allow companies to accelerate their full adoption of SOA and rapidly deliver services for distributed and mainframe environments.

Safeguard Scientifics (SFE) is a holding company that invests in growth-stage life sciences and technology. In addition to capital, Safeguard provides strategic, operational and management resources to its portfolio companies.

As a public company, Safeguard is not subject to the limits of the three-to-seven-year fund raising cycles found in venture capital or buyout firms. This allows Safeguard to focus on growing its portfolio companies at an appropriate pace.

In equity news overnight Arch Capital (ACGL) added $500M to its existing buyback program overnight. Finmeccania [FNC.IT] announced an official deal to acquire DRS Technologies (DRS) for $81/share for a total of $5.2B. The offer represents a 4.9% premium to yesterday’s closing price. Societe Generale [GLE.FR] reported a first-quarter net of €1.09B overnight, above consensus estimates of €994M. Operating profit declined to €1.18B from €2.16B a year ago, while revenue declined to €5.68B from €6.05B. Societe General had first-quarter corporate and investment bank writedowns of €1.179B, which were offset by gains from one-off items. As of March 31 the bank reported a tier-1 ratio of 7.9%. Credit Agricole [ACA.FR] reported a first-quarter net of €892M, below consensus expectations of €1.17Be. The bank noted that it expects to post €1.2B in writedowns, and added that it is considering a capital increase of €5.9B. Toll Brothers (TOL) reported preliminary second-quarter revenue well ahead of analysts’ estimates this morning, but also relayed some frightening metrics including a 49% y/y decline in gross contracts, a 58% y/y decline in net new contracts, and a 17% y/y decline in average price per unit.

In the newspapers overnight, the Wall Street Journal noted that Exxon (XOM) sent an e-mail to its large shareholders seeking support for its plan to not support the establishment of an independent chairman. Les Echos wrote overnight that EDF [EDF.FR] is the sole bidder for British Energy [BGY.UK], noting that EDF's bid is worth about £11.4B. The Wall Street Journal’s Heard on the Street was cautious on MBIA (MBI) and HSBC (HBC) overnight. The article notes that MBIA is urging investors to not focus on the company's stated book (measure of net worth based on assets minus liabilities), but to pay more attention to its analytic adjusted book value. In terms of HSBC, the WSJ questions if the company has seen the worst of its US related write-downs According to Il Sole 24 Ore, Banca Italease’s [BIL.IT] board may review an offer from Germany's DZ Bank. WirtschaftsBlatt wrote overnight that Telekom Austria (TKA) may sell a stake in its mobile-phone unit. The newspaper said that potential buyers include Telefonica (TEF), Vodafone (VOD), and AFK Sistema. The New York Post wrote overnight that members of the New York Mercantile Exchange (NMX) are moving ahead with plans to kill the $9B takeover by the Chicago Mercantile Exchange (CME) unless the rival futures trading giant significantly boosts its offer.

World demand for biofuels will expand at a nearly 20 percent annual pace to 92 million metric tons in 2011, despite recent concerns about the impact of biofuels on the environment and food supplies, according to Freedonia Research.

Market expansion will come from a more than doubling of the world market for bioethanol, and even faster increases in global biodiesel demand, Freedonia says in an Industry Study on World Biofuels through 2011. Other biofuels will also experience strong growth, though much slower than either biodiesel or bioethanol.

One of the tangible things (and there were also a multitude of valuable intangibles) we walked away with from the Value Investing Congress West was a copy of David Einhorn's new book "Fooling Some of the People All of the Time". A long wait at LAX before a Wednesday night redeye back to Philly left plenty of time to crack open Einhorn's 379 page work. Unfortunately, once I started reading, I could not put it down.

Einhorn presents a very detailed account of financial shenanagins happening within Allied Capital (ALD), a midcap darling of the high yielding, rising dividend "subculture". Seems that, among other transgressions, the investment company was very reluctant to mark down securities (primarily debt)on its balance sheet that were impaired. Instead of being marked to market, these were "marked to fantasy".

Money Morning Investment Director Keith Fitz-Gerald has been leading an investment trip through China, taking in that country’s culture and scenery, as well as its investment opportunities. Here is Part V of a short series detailing his observations and discoveries.

Western investors have always had two major problems when it comes to China.

Money Morning Investment Director Keith Fitz-Gerald has been leading an investment trip through China, taking in that country’s culture and scenery, as well as its investment opportunities. Here is Part V of a short series detailing his observations and discoveries.

The question came to me as I was standing on the floor of the Hong Kong Stock Exchange here. I’d be willing to wager that quite a few investors - both within China and back in the United States - are wondering about this, as well.

According to the AAA's Daily Fuel Gauge Report, the national average price of gasoline just hit a record $3.72 per gallon, up 35 cents per gallon in just one month. Many consumers now believe the $4.00 mark will be broken very soon.

I am absolutely convinced that the run-up in oil and gasoline prices has more to do with the weak U.S. dollar than it does with supply and demand considerations. To a large extent, Federal Reserve policy decimated the dollar and caused inflation in dollar-denominated commodities. The Fed felt a need to aggressively loosen monetary policy because of the U.S. financial crisis and the slowing economy. However, it went way overboard by slashing the target fed funds rate from 5.25% in September all down to 2% where it stands today. Although the dollar had been weakening against the euro since 2002, the Fed's recent actions contributed to the dollar sell-off and the rush toward oil and other commodities.

Monday morning was one of those at your desk near-coffee spill moments when looking up to see shares of eResearch Technology Inc. (ERES) unexpectedly higher. The stock gapped up over $16 right at the opening bell before finishing the day at a 52-week closing high of $16.10, up $.88, or 5.78%, on extremely heavy volume of 1.9 million shares, or about four times the average daily volume over the past three months of 567,965. It’s the fourth day since the cardiac services provider reported earnings on May 5 that the stock has hit a new 52-week high.

One explanation for yesterday’s move could have been an analyst initiating coverage which would be extremely plausible given that only three analysts were on the recent conference call and have ratings on eResearch (FBR, Leerink Swann and Sidoti & Company), and a major brokerage firm starting coverage would create some major visibility for this under the radar stock. Yet that just wasn’t the case, and with the exception of the notion of the continuation of a post-earnings rally, there really was no other obvious catalyst or news item out on Monday that would justify a move of this magnitude on what was the third heaviest trading session for eResearch year to date.

Shares of Apple (AAPL) rose nearly $5 yesterday to close at more than $188 per share. The company is faring very well during an overall weak time for consumer spending, thanks to a strong product lineup, and Wall Street is excited over the prospects for the company's forthcoming next generation iPhone.

This overall bullishness is the polar opposite scenario we saw back in February when I wrote that Apple's Valuation Looks Attractive Again amidst worries over a consumer-led recession and a lapse of new product introductions from the company. Since then the stock has soared from $119 to $188, for a gain of 58%. As a result, the shares have gone from very compelling from a valuation standpoint (22x 2008 earnings estimates) to fairly valued in my eyes (34x 2008 earnings estimates) and accordingly, I have been taking some chips off the table at current prices.

Gazprom (OGZPY.PK), Russia's largest company and the world's largest natural gas producer, has released projections for future expected production of natural gas until 2030 on its website, which overall show moderately growing production and comfortable maintenance of gas export capacity.

Gazprom's projections stand in contrast to doubts raised by several analysts (the reports of whom will be discussed below) as to whether or not Gazprom can maintain production at current levels. Criticism of Gazprom's future production has been mainly directed toward potential decline rates at current producing fields and the perceived lack of initiative by Gazprom to bring new fields online.

Last week, the key online travel players announced their Q1 results, and it was quite a mixed bag as expected by some of these companies.

A year ago, I had wondered if Priceline (PCLN) would ever reach its all-time dot.com high of $104/share again. It had already soared to new heights last quarter, and this quarter was no exception.

NAR Chief Economist Lawrence Yun continues to prove he's lost in the woods. I'm sure most of you who have followed the real estate market recall his long list of ridiculous predictions. Do you remember when he claimed house prices would rebound in 2007? His quotes continue to supply stand-up comedians with new material.

One could reasonably argue that Yun is committing consumer fraud by trying to entice people to buy into a market that is poised to fall further. I suppose he thinks his ridiculous predictions will restore confidence in the real estate market. If in fact his role is to spread optimism, the NAR should be legally required to post an appropriate disclaimer stating their real purpose.

Investors in microcap nursing home provider Advocat, Inc. (AVCA) should be pleased with first quarter earnings. Revenues increased 30.9% year-over year, net income from continuing operations was up 124.7% (to $.50 per share, fully diluted), and funds from operations rose 45.7%. Part of the increase was due to Advocat’s purchase of seven Texas facilities in August 2007, but even on a “same center patient” basis revenues were up 7.2%, while same center expenses were down 1%.

According to CEO William R. Council III:

If any industry has felt the brunt of the internet as a disruptive technology, it’s the music industry, which has been dealt a heavy blow by the onset of digital music distribution. On the April 28, the RIAA again confirmed this state of affairs when reporting that CD sales, the mainstay of the business for the last 15 years, were down a whopping 20.5% in 2007. Then on May 2, a Federal Court ordered AOL (TWX), Real Networks (RNWK) and Yahoo! (YHOO) to pay $100M to music artists as back payment for streaming their music online, proving that it’s not just the Big Four labels who have been affected by this disruptive shift.

Apple (AAPL), a technology company, has become the most powerful player, with sales of 2 billion songs last year. The iPod/iTunes combo, the default of cool in our culture, has freaked out the Big Four and sent traditional music retailers like Wal-Mart (WMT) and web 1.0 giants like Amazon (AMZN) scrambling into digital music distribution. So far their nascent incursions have not had a big impact, despite offering DRM-free music and savings of a few pennies.

Aircastle Ltd. (AYR) caught my eye in March when the company slashed its quarterly dividend from 70¢ per share to 25¢. This was after 6 straight dividend increases from 16¢ to the earlier mentioned 70¢. The stock had peaked at about $40 last summer and had been declining steadily, with the downward slope steepening just before the dividend slash announcement.

I think the early stock price erosion was tied to the overall credit crisis and its effect on a company that requires a lot of debt. The dividend cut was accompanied by the announcement that the company wanted to preserve cash in difficult times. Internet scuttlebutt hinted at difficulty with funding sources.

Remember the 80’s Hall and Oates classic ‘Private Eyes?’ Who can forget such powerful lyrics:

Private eyes, they’re watching you, they see your every move. Private eyes, they’re watching you. Private eyes, they’re watching you, watching you, watching you, watching you.

Well, flash forward 27 years to see just how right they were. If you happen to be a proprietary trader or stockbroker, and you are thinking about becoming a famous rogue trader, think again. While you may get famous and bring down a huge bank like Societe Generale (SCGLY.PK), your chances of landing in prison just increased. Why? Because of Israeli ingenuity. Actimize, a NICE Systems (NICE) company has launched a surveillance product for rogue trading detection.

PMI Group Inc. (PMI)

Q1 FY08 Earnings Call

Valspar Corp. (VAL)

Q2 FY08 Earnings Call