Extreme Networks, Inc (EXTR): Insider Buying – Another Extreme Winner?

Insiders opened up their wallets at the briskets pace in more than two months as measured by the number of purchase records. Executives and directors bought stock in nearly 600 companies last week, which is almost the same as the last two-weeks combined.

Hopefully, the heightened board room enthusiasm is a sign that the economy is going to gain strength in 2014 – fingers crossed.

As readers know, one of iStock favorite insider buying traits is the buyers past performance record. Studies have shown that insiders as a group outperform professional money managers i.e. mutual funds, hedge funds…

We like to take it one step further than just buying, iStock specifically targets insiders with a history of making the correct call. Extreme Networks Inc. (EXTR) Director, Maury Austin is taking a second bite of the apple.

[Related -Cree (CREE) Retreats After CFO Resigns To Take Similar Role At Extreme Networks (EXTR)]

Extreme Networks provides network infrastructure equipment and services for enterprises, data centers, and service providers.

On May 17, 2012, Austin purchased 10,000 shares of the tech stock in the open market at $3.49 for a total investment of $34,900. Last week, he increased the share amount by 50% and invested 2.5 times more money. The Director added another 15,000 shares at $6.39 for a total of $95,850.

It is interesting to note that Austin's previous buy was close to 52-week low while last week's buy was near a 52-week high. We also see substantial differences based on price-to-sales (P/S) and price-to-earnings (P/E) ratios.

[Related -Hot Stocks Of The Day: TM, AIG, GOLD, EXTR, PGNX, DRC, HERO, TXN, WAG, CHSI]

In May of 2012, EXTR was trading at 31.67 times earnings and at 1.02 times sales. Last week, Austin was willing to pay 1.98 times sales, and an infinite P/E as Extreme is unprofitable at the moment.

Looking forward, Wall Street thinks EXTR will make $0.42 for fiscal 2014 on revenue of $556.37 million. The average P/E in ! the last five-years was 44.12 for the networking company, of course that's only when Extreme made money.

If the company trades at its average P/E multiple and meets the street's view, then Austin's $6.39 stock would be worth $15.53.  The five-year, average price-to-sales multiple would need to expand to turn a profit for the Director this time. EXTR's average P/S ratio was 0.91 in the last half-decade, which translates to a price of $5.36 using 2014's consensus sales number.

Overall: It does appear Wall Street is widening Extreme Networks Inc. (EXTR) valuations at the moment. If the company can hit Wall Street's 2014 targets, there seems to be upside, which would make Maury Austin a two-time Extreme winner. 

How Good was the Earnings Season?

MoneyShow's Jim Jubak takes a critical look at the earnings season and shares his thoughts on what it may mean for 2014.

"Earnings for the third quarter are coming in above expectations!" Well, that's how excited you might be if you weren't really paying attention to where expectations were. What we've got, with about 90% of the S&P 500 companies reporting, is, we've got earnings growth, year over year, about 3.7%. That is, indeed, better than the 1% that Wall Street was expecting, but 3.7% growth year over year is certainly nothing to write home about.

Now, the thing about projections is they always start off relatively optimistic and then get, well, more pessimistic or realistic, whatever you want. So, right now, fourth quarter, Wall Street is saying, "Oh, 7% earnings growth." A month ago, they were saying 10%, so we're already starting to come down. I think we'll continue to come down further, so we're looking at maybe another quarter that sort of looks like this one, which is either exciting or not exciting, good or bad news, depending on how you feel about 3.7% earnings growth. It's really not much to look at when you're looking at an S&P that's at a historic high.

Okay, for 2014, right now, the expectations are for about 11% earnings growth. That would be a pretty good year. If you look at that and say, "Oh, okay, so S&P price right now, earnings growth of 11%, it works out to about a 14.8 PE on projected earnings," which really doesn't sound too bad for this market. It would imply that there's room for this market to move up. The question is, of course, how good that projected 11% growth is. The more that comes down, the more that the PE goes up, and the less reasonable the pricing here seems.

So, a lot of this, of course, depends on what your view of the future is. My view of 2014 is that with the Fed beginning the taper and probably bringing its purchase of treasuries and mortgage-backed assets to an end sometime in 2014, without another rate cut from the European Central Bank, with growth in China maybe being set down at 7% as opposed to 7.5%, it's hard for me to see 2014 as being a great year. If that's so, then at current levels, when you ratchet down earnings expectations, the market seems fully priced, so you're not necessarily looking for a big collapse in 2014, but it's hard to figure out exactly why, on the fundamentals, US stocks would go up.

This is Jim Jubak for the MoneyShow.com video network.

Protests In Libya Boost Brent

Brent crude oil was higher on Tuesday morning after seeing its largest gain in over two weeks on Monday.

The commodity rose 2.5 percent on Monday and traded at $109.20 at 5:00 GMT on Tuesday morning as supply worries returned to the market.

CNBC reported that Libyan oil exports tumbled as the country lost its grip on containing labor riots that previously cut the nation's exports in half. Libyan government officials had made promising progress and reopened several of the nation's oilfields over the past month.

Related: #PreMarket Primer: Tuesday, October 29: Fed Meeting Likely Uneventful

However, over the weekend a fresh round of protests depressed exports to 90,000 barrels and boosted Brent prices by nearly $2 per barrel.

US industrial production data also supported crude prices as the number one oil consuming nation's industrial production figures had their largest jump in seven months. The data, from September, indicated that demand is picking up.

Moving forward, investors will be watching for progress between Iranian officials and six world powers as a two day meeting between the two sides is set to begin on Wednesday. Sanctions designed to cut funding to Iran's nuclear development program have kept about 1 million barrels of crude from the market over the past decade. With Iran and the West working toward a diplomatic solution to the longstanding dispute, oil prices have been under pressure. Should the two sides reach an agreement, the influx of supply would send Brent prices tumbling.

On Tuesday investors will also keep an eye on American Petroleum Institute data, due out at 20:30 GMT. Most are expecting the data to show that US oil inventories rose 3.2 million barrels last week.

Posted-In: American Petroleum InstituteNews Commodities Forex Global Pre-Market Outlook Markets Best of Benzinga

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  Around the Web, We're Loving... Learn to Use Trading Platforms Like Hedge Fund Traders do Rumsfeld: Denial of Benefits to Fallen Soldiers' Families 'Inexcusable' Come See How the Pro's Trade in this Exclusive Webinar Facebook, Baidu Lead Big Caps Beating Shutdown What Should You Know About AMZN? Most Popular Earnings Expectations For The Week Of October 28: Apple, Facebook, GM and More Apple Down 2% After Q4 Earnings Beat, 33.8 Million iPhones Sold Apple Earnings Preview: Were Nine Million iPhones Enough? (AAPL) CONSOL Energy Executes Agreement to Sell Five West Virginia Longwall Coal Mines and Related Assets for $3.5 Billion of Value; $850M in Cash; $184M in Future Payments Mystery Barge in San Francisco Bay Might Belong To Google UPDATE: Morgan Stanley Upgrades Bristol-Myers Squibb Co. on Potential of New Cancer Drugs Related Articles (BNO + BROAD) Protests In Libya Boost Brent Spread Between WTI And Brent Narrows Euro Holds On To Gains Despite Soft Data Euro Shrugs Off Weak PMI Data Brent Below $107 On Uncertainty In The US ECB Banking Tests To Be Harder Than Anticipated View the discussion thread. Partner Network #marketfy-ae-block { display: none; border: 2px solid #0a3f75; overflow: hidden; width: 300px; height: 125px; text-align: center; background-color: #45719E; position: relative; z-index: 1; } #marketfy-ae-block a { display: block; width: 300px; height: 125px; position: relative; z-index: 2; color: #ffffff; text-decoration: none; } #marketfy-ae-block-countdown-text { color: #f9fc99; padding: 0px 0 0 0; font-size: 19px; font-weight: bold; line-height: 19px; } #marketfy-ae-block-countdown-text-start { font-size: 12px; } #marketfy-ae-block-countdown { padding: 5px 0 5px 0; font-size: 26px; } #marketfy-ae-block-signup { padding: 5px 47px; } #marketfy-ae-block-signup:hover { background-color: #457a1a; } #marketfy-ae-block #marketfy-ae-block-logo { display: block; padding: 3px 0 0 0; margin: 0; } #marketfy-ae-block-logo { text-indent: -9999px; } #marketfy-ae-block-free { display: block; position: absolute; top: 7px; right: -23px; width: 80px; height: 16px; line-height: 16px; text-align: center; opacity: 1; -webkit-transform: rotate(45deg); -moz-transform: rotate(45deg); -ms-transform: rotate(45deg); transform: rotate(45deg); font-size: 13px; font-weight: normal; color: #333333; background-color: yellow; z-index: 500; text-shadow: 1px 1px #999999; } #marketfy-ae-block-arrow { position: relative; width: 60px; height: 60px; z-index: 10; margin: -80px 0 13px -21px; } #marketfy-ae-block-arrow img { height: 60px; width: auto; } Marketfy's International
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European Stocks Little Changed; Commodity Producers Fall

European stocks advanced, extending a second weekly gain for the Stoxx Europe 600 Index, as companies from Fresenius SE to Kabel Deutschland Holding AG rallied following mergers-and-acquisitions activity.

Fresenius rose 3.6 percent after its Helios subsidiary agreed to buy 43 hospitals from Rhoen-Klinikum (RHK) AG. BHP Billiton Ltd. and Anglo American Plc both dropped at least 2 percent, contributing the most to a decline by a gauge of commodity producers. TDC A/S fell 3.1 percent as a group of private-equity firms sold its stake in Denmark's biggest phone company.

The Stoxx 600 rose 0.2 percent to 311.46 at the close in London after earlier dropping as much as 0.4 percent. The equity benchmark gained 1.8 percent this week as investors awaited the next Federal Reserve meeting, while a report showed that Chinese exports (CNFREXPY) grew at a faster-than-expected pace.

"With acceptable macro data and some progress on the Syria issue, sentiment seems to have slightly improved," said Anja Hochberg, the chief investment officer for Europe and Switzerland at Credit Suisse Group AG in Zurich. "In spite of our optimistic medium- to longer-term outlook, we stay on the sidelines for the time being. Markets are eagerly awaiting the Fed meeting next week."

The Stoxx 600 fell from its highest level in more than five years yesterday as a report showed the euro area's industrial output contracted more than forecast.

Syria Talks

U.S. Secretary of State John Kerry meets with Russian counterpart Sergei Lavrov in Geneva to discuss a deal to remove Syria's chemical weapons. Syrian President Bashar al-Assad said that the administration of President Barack Obama must stop its military threats and cease arming rebel groups for the nation to give up its chemical arsenal. Obama delayed a decision on military action after Russia proposed putting the chemical weapons under international control.

In the U.S., a Commerce Department report showed that retail sales rose at a slower pace in August. Purchases (RSTAMOM) climbed 0.2 percent, after increasing a revised 0.4 percent in July. The median forecast in a Bloomberg News survey had called for sales to increase 0.5 percent.

The retail report was one of the last pieces of data before the Fed meeting on Sept. 17-18 when policy makers will discuss whether to reduce their monthly bond purchases. Chairman Ben S. Bernanke has said that the central bank may consider tapering if the economy continues to grow in line with its forecasts.

National benchmark indexes climbed in 11 of the 18 western-European markets. France's CAC 40 and Germany's DAX each rose 0.2 percent. The U.K.'s FTSE 100 fell 0.1 percent.

Fresenius Gains

Fresenius increased 3.6 percent to 91.10 euros and Rhoen-Klinikum rallied 11 percent to 19.45 euros. The boards of both German companies endorsed the deal for Fresenius's Helios unit to buy 43 hospitals from Rhoen-Klinikum. The deal requires regulatory approval and the support of minority shareholders and the former owners of some of the hospitals. Fresenius said that the purchase will add 2 billion euros ($2.7 billion) in annual revenue and 250 million euros in earnings before interest, taxes, depreciation and amortization.

Kabel Deutschland jumped 6.3 percent to 91.82 euros. Vodafone Group Plc said that at least 75 percent of the German company's shareholders supported its 7.7 billion-euro bid before yesterday's deadline expired. Kabel Deutschland investors who haven't tendered their shares will get a second chance to do so from Sept. 17 to Sept. 30.

Carlsberg Climbs

Carlsberg A/S gained 1.6 percent to 579 kroner. The brewer predicted that it will sustain the 5 percent organic-sales growth in the China from the first half.

Separately, Goldman Sachs Group Inc. raised the stock to neutral, the equivalent of hold, from sell. The brokerage cited the improving economy in Europe and cost-saving measures.

BHP Billiton slid 2 percent to 1,885 pence and Anglo American, the world's largest platinum producer, lost 3.2 percent to 1,568.5 pence as a gauge of mining companies posted the biggest decline of the 19 industry groups in the Stoxx 600.

TDC dropped 3.1 percent to 46.41 kroner as a group of private-equity firms sold its stake in the company for 4.17 billion-krone ($743 million). NTC sold 90 million shares at 46.30 kroner apiece. That amounted to an 11 percent stake in TDC, (TDC) according to JPMorgan Chase & Co. which managed the sale.

Gerry Weber International AG sank 8.1 percent to 29.42 euros, its biggest slump since October 2011. The German apparel maker posted third-quarter net income of 11.5 million euros, missing the average analyst estimate of 12.8 million euros. The company also cut its forecast for earnings before interest and taxes in the year through October to 105 million euros. It had predicted Ebit of 120 million euros.

The volume of shares changing hands in Stoxx 600-listed companies was 15 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.

UAW in Talks to Represent VW Plant Workers in Tenn.

Erik Schelzig/APWorkers assemble a Volkswagen Passat at the German automaker's Chattanooga, Tenn., plant. DETROIT -- Volkswagen AG and the United Auto Workers said they are in talks about the U.S. union's bid to represent workers at the German carmaker's Tennessee plant, which would be a milestone in the UAW's long-running effort to organize foreign-owned auto plants. Volkswagen officials, in a letter distributed to workers at the Chattanooga, Tenn., plant Thursday night and Friday morning shifts, said worker representation at the plant can only be realized by joining with a U.S. trade union. "In the U.S., a works council can only be realized together with a trade union," Fischer's letter says. "This is the reason why Volkswagen has started a dialogue with the UAW in order to check the possibility of implementing an innovative model of employee representation for all employees." The letter to the 2,500 Chattanooga workers was signed by Frank Fischer, chief operating officer and manager of the plant, and Sebastian Patta, head of human resources in Chattanooga. UAW President Bob King has been trying without success thus far to organize foreign-owned, U.S.-based auto plants to bolster membership in the union, which has fallen from its peak in the late 1970s. The UAW has been working with the German union IG Metall to try to organize workers at the Volkswagen plant. King is open to what Fischer called "an innovative model" in order to gain acceptance by workers at foreign-owned auto plants, which are primarily in the U.S. South. "VW workers in Chattanooga have the unique opportunity to introduce this new model of labor relations to the United States, in partnership with the UAW," the UAW said in a statement Friday morning. "If Bob King can get his foot in the door at Chattanooga, even if it's just a works council, it's pretty significant," a former auto executive at a foreign automaker with U.S. plants, who wished to remain anonymous, said earlier this week. On Wednesday, during a call about Volkswagen's U.S. sales, Jonathan Browning, head of the company in the United States, said: "We've been very clear that that process has to run its course, that no management decision has been made and that it may or may not conclude with formal third-party representation." Browning also said that ultimately, the decision on whether to have third-party representation will be decided by Chattanooga's workers by a formal vote. There was no indication in the letter to workers when such a vote would be held. The UAW also confirmed that King met last Friday with VW executives and officials from the company's "global works council," which represents VW blue- and white-collar employees around the world. The UAW said last week's meeting, "focused on the appropriate paths, consistent with American law, for arriving at both Volkswagen recognition of UAW representation at its Chattanooga facility and establishment of a German-style works council." At VW plants, workers are represented by so-called works councils, which include laborers as well as executives who cooperate to determine issues ranging from company strategy to job conditions. They do not negotiate wages or benefits. Volkswagen has about 100 plants worldwide, and all of them except for the Chattanooga factory and the company's six plants joint venture plants in China have such a council, an expression of the company's belief in what it calls "co-determination." While the UAW, and VW in its letter to Chattanooga workers, say that a U.S. trade union must be allied with any group of workers at a foreign-owned company, some disagree. "Volkswagen workers can discuss their work with their employer without UAW unionization," Mark Mix, president of the anti-union National Right to Work Foundation, said in a statement Thursday. "The UAW's campaign of misrepresentation is meant only to misinform workers into thinking that they have no choice but to unionize," Mix said. The anti-union organization is based in Virginia.

By Michael Zak | AOL Autos

A recent Interest.com study looked at the 25 largest metropolitan areas in the United States to see which median-income households in those respective areas can afford to purchase a new car, the average price of which was $30,550 in 2012, according to TrueCar. The study found that in only one city can residents actually afford a car with this sticker price -- Washington, D.C. Households with an average income in Washington, D.C. can afford a payment of up to $628, which would allow for purchase of a $31,940 vehicle. The next closest city, San Francisco, can only afford $537 per month, equating to a $26,786. While it's not news that Americans like to buy things that they can't afford, the data is a little surprising given how many great cars there are out there for well under $30,000. Solid hybrids, CUVs, sedans and sports cars can all be had for less than this.

Why It’s Getting Easier to Win New Clients

Maybe it’s the “taper tantrum,” wild markets, dysfunctional government or riots overseas—whatever the reason, advisors are confident clients need, and are looking for, help.

A new report from Russell Investments released Thursday found the “overwhelming majority” of advisors optimistic about client acquisition in 2013: 87% reported feeling optimistic about acquiring new clients and households.

This follows similar numbers for 2012: 86% of advisors acquired more clients than they lost in 2012, with nearly half indicating they brought on more than 10 clients or households.

The quarterly Financial Professional Outlook survey focused on client acquisition, the use of referrals to drive business growth, and the implications of an aging client base.

Top acquisition strategies for 2013 include receiving client referrals reactively (76%), referral prospecting through current clients (54%) and professional networking (43%).

Fully 32% of advisors say they believe clients are optimistic about the capital markets over the next three years—the highest proportion since the March 2011 FPO survey. Three-quarters (75%) of advisors reported that they, too, are optimistic about the markets.

“Many advisors are finding it easier to acquire new clients than it was just six months ago, as investors’ willingness to participate in the market is bolstered by strong recent performance,” Kevin Bishopp, director of practice management for Russell’s U.S. advisor-sold business, said in a statement. “Yet there is a finite universe of individual investors and a highly competitive environment for advisors. To differentiate themselves, advisors need to deliver a superior service and relationship experience, not just a product or portfolio.”

In addition to acquiring new clients, most advisors reported fairly high levels of client retention. The majority of respondents (55%) said they lost one to three clients in 2012, while only a quarter (26%) lost four or more clients. In identifying the primary reasons for losing clients, many advisors pointed to a cause beyond their control: a client’s death.

“It’s important for advisors to consider the composition of their books of business when establishing an acquisition strategy. If an advisor has many clients in the decumulation phase of retirement, when income distributions begin to exceed investment returns, it can be important to seek out younger clients in their peak accumulation years to help maintain a sustainable business,” Bishopp said. “One rule of thumb is that for every client over age 70, an advisor likely needs one or two clients in their fifties who are accumulating at an increasing rate. This can be an important consideration when thinking about the types of new clients to seek out.”

He also pointed to the “generational risk” clients in retirement can pose, or the danger that an advisor may not retain the assets transferred to an investor’s beneficiaries.

“When thinking about client acquisition, it’s also important that advisors consider establishing relationships with their clients’ children and heirs,” Bishopp concluded. “If they can demonstrate their value and engage these emerging prospects, they can put themselves in a strong position to continue to manage inherited assets and drive referrals amongst the next generation of investors.”

---

Check out Lessons From Losing a Client by Mike Patton on AdvisorOne.

This Stock Is Leading the Dow's Charge

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is making big gains following some mixed reports on the economy. As of 1:20 p.m. EDT the Dow was up 134 points, or 0.88%, to 15,426. The S&P 500 (SNPINDEX: ^GSPC  ) is up 1.01% to 1,669.

There were two U.S. economic releases today.

Report

Period

Result

Previous

Initial unemployment claims	June 30 to July 6	360,000	344,000
Import price index	June	(0.2%)	(0.7%)

Source: MarketWatch U.S. Economic Calendar.

The unemployment claims report is the one to make note of. Unemployment claims rose this week by 16,000 to 360,000, well above analyst expectations of a rise to 349,000. The four-week moving average rose 6,000 to 351,750.

US Initial Claims for Unemployment Insurance data by YCharts.

Nevertheless, unemployment claims are steadily trending below last year's average of 360,000 to 370,000 and are well below the levels of the past three years. The economy is improving, albeit slowly.

Investors would do well to remember that the economy is not the same as the market. Both are being supported by the Federal Reserve's low federal-funds rate, as well as its monthly purchases of $85 billion worth of long-term assets. Today the market has found encouragement in the minutes of the June meeting of the Federal Open Market Committee, released yesterday. The minutes showed that the Federal Reserve will continue its quantitative easing for the time being, spurring on the economy and the market. The question investors need to ask themselves is whether this information is priced into the level the market is trading for. Investors pay a high price when things are going well and everyone is excited. This week's American Association of Individual Investors sentiment survey showed that 49% of those surveyed are bullish, above the long-term average of 39%, while only 18% are bearish, below the long term average of 30%.

Today's Dow leader is Intel (NASDAQ: INTC  ) , up 2.5%. Intel's stock got hit hard earlier in the week after it was downgraded by Evercore and Citigroup, who believe the chip maker will struggle as PC sales continue to weaken. PC sales experienced their worst quarterly drop in history in the first quarter of this year. This has been attributed to both the rise in mobile and consumers' discontent with Microsoft's new Windows 8 user experience. Intel is heavily dependent on the PC market, as its mobile offerings lag those of competitors in the field. While Intel is making major investments to catch up to the likes of ARM and Qualcomm, it remains to be seen who will win the race to dominate chip sales for the mobile market.

Want to get in on the smartphone phenomenon? One company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! Yet it stands to reap massive profits no matter who ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

What Drives This Powerful Brand to Market-Beating Returns?

Payment processors are an enigma. The ubiquity of the brand and how frequently we use it make it seem so simple. Yet digging into the process and the business is anything but. At the end of the day, the power of the brand is huge, and while MasterCard (NYSE: MA  ) may not look like a growth stock to some, the company's recent presentation at the William Blair Growth Stock Conference says otherwise.

MasterCard is relying on three simple yet very powerful drivers of growth over the coming years, as the chart below illustrates:

Personal Consumption Expenditure
This one is pretty much how it sounds. MasterCard does well when people spend money, and with more than 2 billion cards sporting the MasterCard logo around the globe, it's plain to see that MasterCard is going to get its share.

Cash and check payments vs. electronic payments
According to management, about 85% of the world's transactions are still in cash and check, and when you translate this number into actual volume (based solely on personal consumption expenditures), about 60% of the volume is still in cash and checks. It's also worth remembering that this second driver is subject to geographic region. For example, the U.S. sees about 60% penetration in electronic payments versus Russia or India, where penetration is lower.

MasterCard's share of electronic payments
This represents the share of the 15% of transactions that are already in electronic form. On the one hand, according to the Nilson Report competitor Visa (NYSE: V  ) holds about 63% share versus MasterCard's 31%. But when we consider that MasterCard's network has the capacity to handle more than 160 million transactions per hour, and only runs at about 80% capacity per day, there is obviously room to grow, and that is what management is doing. CFO Martina Hund-Mejean put it bluntly: "Look, we are looking at ourselves as a growth company, and obviously all of our investments that we are doing are really pointed to make sure that the top line continues to grow." 

There's still time
There's a whole world out there that will make the transition over to electronic payments over the coming decade (and beyond). MasterCard is one of the two biggest players in the space, and I don't see anything changing that. Yes, there will be innovation and change. But it won't be in spite of MasterCard; it will be because of it. MasterCard will be part of the movement. And for investors, that's a great position in which to be.

Click here to follow Jason on Twitter.

Should Tim Cook Back Off?

The following video is from Friday's Motley Fool Money roundtable discussion, with host Chris Hill, and analysts Ron Gross, James Early, and Charly Travers.

This week at the WSJ All Things Digital conference in California, Apple (NASDAQ: AAPL  ) CEO Tim Cook said that Apple has "several more game changers." Cook also said that he didn't think Google (NASDAQ: GOOG  ) glasses would appeal to the mainstream. What should investors make of the Apple CEO's latest musings? Is Cook smart to raise expectations? In this installment of Motley Fool Money, our analysts tackle those questions.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

The relevant video segment can be found between 6:24 and 8:42.

For the full video of today's Motley Fool Money, click here.

This Is Exactly How Much Debt Will Help Apple

Alongside Apple's (NASDAQ: AAPL  ) earnings release last week, the company dropped a capital structure bombshell: It will be tapping the debt markets to raise cash. This has been a topic of debate for some time, since Apple's cash balance has reached legendary status.

Some investors may initially think the move counterproductive: Why raise debt when you have cash?

All abroad
The first reason is that the bulk of Apple's cash -- $102.3 billion to be precise -- is currently held overseas by foreign subsidiaries. Apple would face quite a tax bill if it wanted to repatriate those dollars back home.

Source: SEC filings. Calendar quarters shown. MRQ = most recent quarter.

At the same time, investors have been demanding that Apple return more cash, so the only way to balance those two interests is to tap debt markets to raise domestic cash.

In theory
The other benefit to Apple of raising debt is to reduce the company's weighted average cost of capital, or WACC. How much of a benefit are investors possibly looking at? Let's start with the WACC formula.

Figuring out Apple's current WACC is fairly straightforward, because it currently has no debt. Using the capital asset pricing model, I estimate Apple's current cost of equity at 8.5%, lower than my February estimate of 10.5%. This is because Apple's volatility (measured by beta) has declined and the risk-free rate (measured by 10-year Treasury yields) has also declined. The equity risk premium is largely unchanged.

With no debt, Apple's current WACC is simply its cost of equity, or 8.5%. Let's now add in some debt.

Lever up, WACC down
The (1-t) component above represents the tax break that comes with debt, since interest expense is tax-deductible. Like all American corporations, Apple faces a statutory federal income tax rate of 35%, which is what applies here. Apple's effective tax rate is much lower (around 26%), in part because of keeping foreign earnings "indefinitely reinvested" abroad.

As far as estimating the cost of debt, let's say that Apple issues paper with a 2.25% coupon. That would be slightly higher than 10-year Treasuries (Apple carries the same credit rating as the U.S. government) as well as the 1.25% that IBM borrowed at earlier this year.

Using these estimates, this is how differing amounts of debt raised would affect Apple's WACC right now.

Debt Raised

Annual Interest Expense

WACC

$0 (current)	$0 (current)	8.5%
$20 billion	$450 million	8.15%
$40 billion	$900 million	7.83%
$60 billion	$1.35 billion	7.54%
$80 billion	$1.8 billion	7.28%
$100 billion	$2.25 billion	7.03%

Source: Author's calculations.

If Apple raised up to $100 billion in debt, it could realize a WACC reduction as high as 1.5%. Realistically, though, the company will sell between $40 billion and $60 billion in paper, because it still generates operating cash flow domestically. Apple's generated $6.2 billion in cash domestically over the past year, which is after paying out $9.4 billion in dividends and buybacks so far.

It may be an implicit gain shrouded in financial theory, but Apple investors can look forward to seeing Apple's overall cost of capital come down.

With Apple's cost of capital about to decline, is now the time to buy Apple? The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

No Dead Bodies Here: New Highs for the S&P 500, Dow; Small Caps Soar

Do you like dead bodies? If you do, the Nightcrawler is the movie for you. It stars Jake Gyllenhaal as a psychotic cameraman who listens to a police scanner for horrific accidents, murders and crimes that he can film for the local news. And as with most movies of this type, at some point the line between observer and actor gets crossed. Gyllenhaal pulls out all the tics in this comedy-horror, enough to make DFW.com’s Preston Jones call Nightcrawler ”a Taxi Driver for the TMZ age,” while the LA Times’ Kenneth Turan calls it “pulp with a purpose.” And in a week with very few choices at the cinemaplex, Nightcrawler also stands a good chance of leading at the box office with a $15 million haul, according to BoxOfficeMojo.com.

Open Road Films

Don’t go looking for any dead bodies in the stock market–unless it’s those of the short sellers. The S&P 500 gained 2.7% to 2,018.05 this week, a new all-time high. Even more remarkable: After being down 5.6% to start the month of October, the S&P 500 finished up 2.3%.

Not to be left out of the fun, the Dow Jones Industrial Average advanced 3.5% this week to 17,390.52, also a record, while the Nasdaq Composite advanced 3.3% to 4,630.74, its highest since March 2000, and the small-company Russell 2000 jumped 4.9% to 1,173.51. Remember when the Russell 2000 was down on the year? Yeah, neither do we, as the index is now up 0.8% in 2014 after gaining 6.5% in October, its best month since July 2013.

What’s responsible for the sudden surge of enthusiasm? It certainly helped that the Bank of Japan surprised nearly everyone by announcing that it would buy even more assets as it tries to get the Japanese economy up and running. Citigroup’s Tobias Levkovich explains why the move has helped U.S. stocks:

The announcement by the Bank of Japan that it was adding to its purchase programs is a clear positive for the stock market that had been largely unexpected. Additionally, the decision by the Japanese pension fund to bump its holdings of foreign stocks to 25% of its monetary base (from roughly 16% currently) establishes a new incremental buyer of shares and the US should be a significant beneficiary. These new developments were not part of the Street's mindset a day ago and thus cannot be discounted as a flash in the pan since it provides some downside support to the broad market…

While the exact amount of money coming to the US is hard to calculate, the overall contribution to non-Japanese stocks could approach $60 billion of new purchases and we suspect that half could make its way into the US by the end of 2015. Moreover, foreign investors typically buy large cap stocks which have greater index impact. Thus, one cannot ignore the possibility that stock prices jump above our year-end 2014 S&P 500 target on this new news that few had perceived even one day ago, let alone last December/January or even during the summer when many targets were established or changed.

But there’s far more going on than just more monetary stimulus–especially since the Fed finally ended its quantitative easing this week. It certainly helped that U.S. GDP rose 3.5% during the third quarter of 2014, but investors had already moved beyond the growth fears by the middle of the month. Marketfield’s Michael Shaoul gives solid earnings some of the credit:

Although we were fairly sure the damage would be short lived and followed by a powerful rebound, we were still unsure as to whether the "market knew something we didn't". Having seen the quality of corporate earnings and the powerful stock-by-stock rally that greeted those companies that beat their forecast it would appear that the strength of US economic data was no mirage, and that the fears of weak European growth creating a deflationary hole in corporate earnings have been overblown.

This is important since better earnings should put something of a "bottom up" floor under the US equity market. It certainly would come as no surprise to see a portion of recent gains given up, but it will be rather more difficult to force the entire index lower without a new catalyst.

Until then, enjoy the ride.

3 Battered Stocks to Buy for the Rebound

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Sometime last week, I happened to see a quick blurb that eBay (EBAY) was trading within 5% of its 52-week low.

I did a quick screen courtesy of FINVIZ looking for stocks to buy in the U.S. — anything trading within 5% of its 52-week low and possessing a minimum market cap of $300 million. When stocks start to fall that low, it’s usually a good bet that some are hitting oversold territory. If so, they make great stocks to buy for the rebound.

A week ago, 31 stocks met my criteria. By today, the selection of stocks to buy had increased to 52, making my job a heck of lot easier. Seven different sectors had at least one stock trading at low levels. Here are three stocks that have fallen hard in the past year, but are poised for a rebound:

Gutted Stocks to Buy — IPC The Hospitalist Company (IPCM)

When it comes to healthcare companies, there was only stock that met our criteria, but it has a lot going for it. IPC The Hospitalist Company (IPCM) has arguably the worst name in the healthcare business. However, if you're able to get past its name, IPCM delivers solid revenue growth and profits.

IPCM has approximately 2500 hospitalist providers in the U.S. These doctors work with 39,000 primary care physicians who refer patients to the company when they are in need of a hospital care physician. Needless to say, malpractice is a part of its business reality. However, something unrelated to doctor care has contributed to IPCM stock spiraling lower.

In December, the U.S. District Court for the Northern District of Illinois lifted the seal on a case involving Medicare and Medicaid claims made between Jan. 1, 2003, and June 10, 2010. The case is investigating “potential breaches of fiduciary duties by certain officers and directors at IPC The Hospitalist Company.”

There are 13 states involved in the investigation, and it's unknown what this will do to the company's financial position. But it has already had an effect on IPCM stock, which is down more than 30% since the lifting of this seal.

Since February 2011, IPCM stock has traded below $40 on only three occasions. And even then, the dips usually lasted a few months. With management continuing to acquire new practice groups across the U.S. while upping its emphasis on recruiting, IPCM stock looks to be undervalued, despite the legal uncertainty hanging over its head.

Gutted Stocks to Buy – NeuStar (NSR)

Once owned by Lockheed Martin (LMT), NeuStar (NSR) was spun off to private equity interests in 1999 on neutrality concerns between it and COMSAT, a global telecommunications company that LMT acquired the same year.

NeuStar does a lot more than its original mission, which was to handle number portability for individuals wishing to change telephone service providers. Now it also provides marketing, data and security services to industries other than telecom.

In 2014, NSR stock has dropped 52% year-to-date. One reason for the drop is a four-cent earnings miss from its Q1 report in April. More recently, it has been losing ground because of a leaked email that suggests it will lose some business to Ericsson (ERIC).

Neustar has made no attempt to alter its adjusted EPS outlook for 2014, which currently sits in a range from $3.64 to $3.80. I don't care how big this lost contract is, I highly doubt it's worth a 50% haircut. For this reason, NSR makes our list of gutted stocks to buy.

Gutted Stocks to Buy – Bed Bath & Beyond (BBBY)

Right now, you can buy Bed Bath & Beyond (BBBY) for nearly the same valuation as Staples (SPLS), which is insane, considering how much better BBBY’s business is. BBBY’s enterprise value is 6.2 times EBITDA, compared to 4.8 for SPLS.

Bed Bath & Beyond has absolutely no debt, almost a billion dollars in cash and is still growing, albeit at a slower pace than in the past. In 2014, it expects mid-single-digit EPS growth which would mean delivering above $5 for the first time in its history. With BBBY stock sitting just above $60, we're talking about a price-to-earnings ratio of 12, far less than many of its home furnishing peers.

In early January, I covered the aftermath of its Q3 earnings report. I came to the conclusion that BBBY stock was taking a breather and was even possibly headed for a bit of a decline. Since then, it's down 13.3% which makes me think the worst is over. That doesn't mean there won't be any more bad news in the near future or further declines in its stock price … but it does suggest that BBBY is one of the better values available in retail at the moment. In terms of gutted stocks to buy, BBBY is one of the best options out there.

As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.

Apple's Bid for Beats: There's a Method in the Madness

Apple Inc. (Nasdaq: AAPL) is not a rash and foolish company, and neither is its CEO, Tim Cook.

So the general condemnation in the media of the possible purchase of Santa Monica, Calif.-based Beats Electronics for $3.2 billion by the Cupertino, Calif.-based tech giant seems a bit premature.

While the deal is not official, the news first appeared in the Financial Times and was quickly backed up by stories in most other major financial news publications. If true, which appears very likely, an announcement could come as early as next week.

AAPL stock barely reacted and was down less than 1% in mid-day trading.

Beats, which sells a very popular line of headphones and recently launched a streaming music service, was founded by hip hop legend Dr. Dre and renowned music producer Jimmy Iovine in 2008.

The deal would be the biggest ever for AAPL (the record is the $400 million acquisition of NeXT in 1997, which brought Steve Jobs back to Apple - the bargain of the century). But for a company that rakes in about $40 billion a year in profits and has more than $150 billion in cash, $3.2 billion is trivial.

Still, the question on everyone's mind is why.

There are lots of reasons it would be crazy for Apple to buy Beats:

The main business of Beats is selling headphones; Apple hardly needs to drop a lot of coin for that. It already designs its own earbuds. The Beats music-streaming service is relatively new and small with about 200,000 subscribers. And Apple already has an iTunes streaming service (though it hasn't exactly caught fire). Beats has revenue of about $1.4 billion a year. AAPL has revenue of nearly $180 billion. The deal clearly doesn't work as a strategy to "buy growth." Beats is a very hot brand, particularly among young consumers. But Apple is already one of the best-known and liked brands on the planet. Apple is no stranger to acquisitions, but it has never made big, splashy acquisitions. And usually the smaller companies it buys have some sort of technology it plans to adapt. Beat doesn't seem to possess anything Apple doesn't already have.

Veteran AAPL analyst Gene Munster of Piper Jaffray had a typical reaction, sending out a note that said the acquisition "sounds like bad deal."

Munster said he'd rather see Apple spend its copious cash on something in the Internet services space such as Yelp Inc. (Nasdaq: YELP), Twitter Inc. (NYSE: TWTR), Square, or Yahoo! Inc. (Nasdaq: YHOO).

"We are struggling to see the rationale behind this move," Munster wrote.

What could Apple possibly be thinking?

Here's a closer look...

Why Apple Inc. (Nasdaq: AAPL) Could Be Buying Beats

We have to start from the premise that Apple has a good reason for buying Beats, even if that reason isn't obvious.

Hopefully Cook will explain himself if and when the deal becomes official. But we can make a few informed guesses in the meantime.

One possibility is that Apple feels that Beats could help with its music-streaming strategy.

Despite having the capability, AAPL purposely shunned a streaming model for years because Steve Jobs hated it. He was convinced people wanted to own their music.

And for a while, Jobs appeared to be right. Sales of iTunes downloads soared while streaming music companies struggled.

But in the past few years, that trend has reversed. Pandora Media Inc. (NYSE: P) has 75 million active users, and Spotify, which is planning an IPO this year, has 24 million active users. And those numbers are growing.

Apple's iTunes Radio, launched last year, has gained some users - about 20 million - but hasn't gained the kind of traction the company would like. And it's not available on devices that run Google Inc.'s (Nasdaq: GOOG, GOOGL) Android, which dominate the market.

This is where Beats could help.

AAPL could see Beats as a way to attract younger users to iTunes Radio - by adopting the Beats brand.

While Apple has a strong global brand, it's not as hip as used to be and certainly doesn't have the same "cool factor" that Beats now has. That's what happens when you become the largest company on the planet.

It would also be less awkward (and a little bit sneaky) for Apple to port a Beats-branded music streaming app to the Android platform.

The Beats headphones business would be a bonus for AAPL, which already sells the gear in its stores. While critics think the headphones are junk, young people are willing to pay a premium for them - anywhere from $170 all the way up to $450. And they carry a tidy 33% profit margin, which is just short of Apple's average.

For that matter, Beats would supply $450 million in cash flow, which makes it a much better addition than many of the profit-starved companies Apple's competitors have been spending billions on like WhatsApp.

Another big reason AAPL may be going after Beats is for the insights of Jimmy Iovine.

In an interview with The Wall Street Journal last year, Iovine criticized iTunes but offered a lot of ideas on how to fix it, particularly in the area of curation - the context in which you're listening to music (exercising, driving) and the order in which you hear the songs.

"iTunes was great, but it needs to step forward now," Iovine told the Journal. "Most technology companies are culturally inept. They're never going to get curation right."

So why do you think Apple is looking at buying Beats? Will it turn out to be a brilliant move or a colossal blunder? Speak out on Twitter @moneymorning or Facebook.

AAPL stock recently breached the $600 mark for the first time since November 2012. Beats deal aside, Apple has been making a lot of moves lately - and investors have been cheering most of them. Here's why AAPL should keep going higher in 2014...

Related Articles:

Business Insider: Jimmy Iovine Is Going to Be Awesome for Apple The Daily Ticker: Apple Buying Beats for $3.2 Billion? Smart Move Business Insider: GENE MUNSTER: Apple Buying Beats 'Sounds Like a Bad Deal'

Groundfloor stretches crowd-funding's limits

A renovated historic home near downtown Atlanta hits the market this week, an accomplishment for 39 Georgians who lent $40,000 for the project through Groundfloor, an online crowd-funding platform.

In six months, the home's renovator will pay back those individuals with 8% interest on each loan. The private investors' money funded the project instead of a bank.

While some start-ups await the Securities and Exchange Commission's promised rules for allowing non-accredited investors to participate in crowd-funding, Raleigh, N.C.-based Groundfloor is working within existing state laws to get a head start.

Today, it announces the expansion of its Georgia pilot to Illinois, Pennsylvania, Arizona, Massachusetts and Virginia, where regulators have authorized the company to solicit residents to participate in its deals around the nation. Georgia approved intrastate crowd-funding in 2011.

Founder Brian Dally says his platform will now be available to 47 million Americans. It's the first major milestone in a plan to expand real estate crowd-lending nationally.

Dally believes the timing is perfect. Real estate crowd-funding leader Realty Mogul raised $9 million from investors in March to expand its platform for accredited real estate investing. The Washington, D.C., site Fundrise has successfully crowd-funded commercial real estate in Virginia. At least 20 platforms are operating in the real estate business today.

But Dally says Groundfloor is unusual in that its mission opens real estate investing to the general population. The minimum investment is $100, and the maximum is $2,000. Terms are six months to several years, the investment is secured by the real property, and there's an aggressive pre-screening process for developers. The site targets small residential-development projects.

"We think this is a revolutionary concept for personal finance," Dally says. "This is a steady, tangible way for ordinary people to make good returns on their money, a new class of product th! at didn't exist yesterday."

Developers in Georgia have embraced the opportunity. They see it as a viable way to quickly raise cash for a project — the historic renovation deal closed in five days — and to fund projects that banks either don't fund or review for months before making a loan.

"They're tapping into a submarket I couldn't touch — the people who have $500 to $1,000," says John Mangham, who renovated the home in Atlanta and has 30 years of experience in the industry. "They are multiplying my reach."

And as Kickstarter and Indiegogo do for consumer products, electronics, films and other start-up projects, Groundfloor helps build awareness for the real estate that developers hope to eventually sell, lease or rent to individuals and businesses.

That's a draw for Rick Tuley, another Atlanta developer who made an angel investment when he learned of Groundfloor. He believes he's an early supporter of a $1 billion-a-yearcompany in the making.

"There are literally trillions of dollars in certificates of deposit in a bank, that might be earning 1% for six or 12 months," he says. "It doesn't take a very large percentage of those investors to make this a really attractive company."

Dally expects momentum to grow quickly in coming weeks. Groundfloor will soon list deals in such cities as Pittsburgh, Cincinnati, Raleigh, Fort Myers, Fla., Huntsville, Ala., and Orlando. It will use online marketing strategies to find people in the six approved states to invest in the deals — that's worked in Georgia, so far.

Mangham, meanwhile, just closed his latest Groundfloor deal. He raised $60,000 from 53 investors, who've agreed to a 12% interest rate and a six-month term. Construction is already underway on the renovation project, and he's got his eyes on more.

"I drove by two properties with new signs up," he says. "All my funds are committed right now, but if I thought I could get funding in a week, I could be making offers. I'm excited to be at the early sta! ges of th! is process."

Laura Baverman is a Raleigh, N.C.-based business journalist covering start-ups and entrepreneurship for regional and national publications. Baverman can be reached via e-mail at lbaverman@gmail.comor Twitter @laurabaverman.

Blogger Kitces stokes debate over CFP Board compensation definitions

Michael Kitces

The way that the CFP Board categorizes financial adviser compensation makes it nearly impossible for an adviser to be deemed fee-only, according to a popular blogger who is almost single-handedly stoking the debate.

In a 4,360-word post on his blog this week, Nerd's Eye View, Michael Kitces said that the Certified Financial Planner Board of Standards Inc. defines compensation so expansively that almost every financial planner must be labeled as “commission and fee.”

Under CFP Board rules, a planner can be fee-only only if he or she generates revenue through fees and doesn't charge commissions and isn't affiliated with a firm that could charge commissions. The group's compensation categories also include commission-only.

(See where the new CFP Board chairman stands on the fee-only definition.)

“When nearly all advisers must use the same compensation disclosure label of 'commission and fee' to define a wide range of actual compensation structures from 0% commissions to 100% commissions, the very purpose of compensation disclosure begins to lose its meaning, value and clarity for the public that the CFP Board purports to serve,” wrote Mr. Kitces, director of research at Pinnacle Advisory Group.

In an interview, Mr. Kitces said that he is emphasizing the issue because the leading financial planning membership organizations – the Financial Planning Association and the National Association of Personal Financial Advisors -- are standing back. Both have indicated that the CFP Board, as the certifying body, determines compensation rules.

“This needs to be fixed,” Mr. Kitces said. “I really don't know why they are silent on this issue. The CFP Board insists there is no problem, and NAPFA and FPA have said they're going to let the CFP Board act first. I can't do this all by myself – nor should I.”

In his blog post, he outlined six scenarios in which advisers in disparate business models all would have to label themselves as fee-and-commission. Mr. Kitces' post generated a strong reaction on social media.

One of those who tweeted in support was Alan Moore, founder of Serenity Financial Consulting.

“Now there's even more confusion because how [advisers] are paid is not relevant,” he said in an interview. “It's how they could get paid. It adds layers of complexity.”

The CFP Board has been embroiled in court and disciplinary cases involving compensation definitions for more than a year.

The organization didn't respond to a request for comment about Mr. Kitces, but officials addressed the issue in a webinar Thursday.

“We have a definition around fee-only, and we believe our definition is very clear,” said Ray Ferrara, chairman ! of the CFP Board and president of ProVise Management Group. “We all here at the CFP Board understand what the word 'only' means, and it's hard to make it any clearer than that.”

William Sweet, president of Stevens & Sweet Financial, endorsed Mr. Kitces' point of view, calling the CFP Board's approach to compensation definitions “a little silly.”

The group is “enforcing the letter of the law rather than the spirit,” Mr. Sweet said. “I would prefer if the focus of the CFP Board was on ensuring that all financial advisers adequately disclose their source of compensation and all potential conflicts of interest rather than on categorizing the type of compensation offered.”

The CFP Board is blurring the lines between fee-only and commission-charging advisers, said Randy Bruns, a private wealth adviser at HighPoint Planning Partners.

“We're painted with the same broad brush, and I don't know if that's fair to the client,” he said. “It doesn't create a clear picture for the client of how different the advisers are in this case.”

The biggest problem is that the commission-only category could diminish within the CFP Board's framework, Mr. Moore said.

“I'm not aware of anybody who could claim commission-only based on how they're defining compensation,” he said. “I don't believe there's going to be a commission-only category at this point.”

An adviser who is fee-only — and remains so under the CFP definition because he charges clients a flat fee of $4,500 annually — supports the CFP Board's effort to parse compensation.

“It is worthwhile to delineate those who have an opportunity to earn commissions and those who don't,” said James Osborne, president of Bason Asset Management.

“If you'd like to be fee-only, it's not difficult to be fee-only,” he said. “It's fairly easy to be in a position not to earn a commission.”

There are benefits and drawbacks to e! ach of th! e fee models, advisers said.

The bottom line is that investors know what they are paying for and why.

“The most important thing is that investors understand the exact cost of the engagement, are getting what they believe to be a fair level of services for that cost and that their financial plan accurately accounts for that cost,” Mr. Bruns said.

Risks lurk in annual 401(k) matches

As major employers tweak their 401(k) matching contribution schedules, opting for an annual lump-sum payment rather than per pay period, advisers are calling for more conversations with their employer clients to discuss plan design and benefit restructuring.

“We're entering a key time with most employers,” said Jim O'Shaughnessy, a managing partner at Sheridan Road Financial. “A lot of it has to do with the last decade. We're having these deeper discussions with our clients on all benefits, and the primary focus is on how the retirement benefits are coordinated with other benefits.”

Some of the largest employers match on an annual basis, according to an analysis by Bloomberg, including financial services firms that have touted the importance of retirement savings. Those firms include such household names as The Charles Schwab Corp., Citigroup Inc., Morgan Stanley and JPMorgan Chase & Co.

(Also: Which companies are squeezing their 401(k) plans?)

But advisers worry that employees who decide to switch jobs at the wrong time, thus missing the annual match, could end up denting their retirement savings. Further, there's the problem of making one lump-sum investment into the market; investors miss out on dollar-cost averaging. The S&P 500 index enjoyed a sharp 30% gain over the course of 2013, so investors who bought stocks at the end of the year had already missed out on the rally through the year.

“The lump sum match can put the participant at a disadvantage if the market is at the wrong place in the wrong time,” said Craig Morningstar, chief operating officer at Dynamic Wealth Advisors. “This seems like one of those changes that works to decrease outcomes for the participant.”

(Don't miss: Massachusetts opens inquiry into 401(k) plan contribution delays)

Anecdotally, service providers and advisers in the trenches are reporting that the concept of tinkering with match scheduling is trickling down to the small- and midsize markets. But in order to decide how to best proceed when an employer entertains such an idea, advisers need to understand the true motivation behind it.

TALENT RETENTION TOOL

There's the talent retention argument, for instance.

“There's such a hunger for talent that can help accelerate a business and the recruiting is becoming competitive,” said Tom Zgainer, chief executive of America's Best 401(k), a firm that offers fiduciary investment manager services to plans.

“Some companies don't want their employees to take their ideas to a competitor,” he added. “This [change to the match schedule] is an incentive to consider staying or leaving on the employer's terms.”

There's also the “meet the bottom line before making the match” argument.

“On a per-period basis, the employee gets the money and it goes to work for them sooner,” said George Fraser, managing director an! d financial consultant at Retirement Benefits Group, a firm that's affiliated with LPL Financial.

“Some [employers] are considering a year-end match because they aren't sure what the finances will look like; they want to give the most based on their year-end numbers,” he said. “They determine the match based on the company's profitability.”

Finally, there's the record keeping and administration simplification argument.

“Companies that make that decision aren't necessarily doing it for cost cutting but to ease some administrative problems and record keeping issues that plans have,” said Mr. O'Shaughnessy. “I think you'll see more annual funding based on plan designs that incorporate financial wellness — where if you do certain behaviors, you are rewarded with a match and a kicker.”

But many factors go into making discretionary matches, and the changes that could be made to the schedule should be considered alongside the other levers employers can pull. For instance, requiring higher employee contributions before receiving the match or adjusting vesting schedules — while maintaining the match — to ensure the most committed employees are rewarded.

“Even if you had a high-turnover business and your employer wants to retain more money for the participants, you can do that through the vesting schedule structure,” said Francis Gillis, a retirement manager at Dynamic Wealth Advisors.

VESTING SCHEDULES KEY

Vesting schedules are an important factor when it comes to setting matches. Mr. O'Shaughnessy recommends a two- to five-year schedule, considering that younger employees tend to have high turnover and may end up leaving with very little in vested dollars for the early part of their careers. In turn, those who stick around are also rewarded for their loyalty and get to keep their matches when they leave.

“What's the motivation around [the decision]: If it's high turnover and it's a legit decision based on that! , then th! ere could be situations where executing a delayed match is in the best interest of the participant,” said Mr. Gillis. “In that case, evaluate all the elements when you devise a strategy for it. You can't just say you're going to delay the match until the first quarter or year-end.”

Regardless of how plans decide to proceed, advisers should bear in mind the great strides many employers have made over the years to improve outcomes for their workers. Of the 1,014 people who participated in a Bank of America Merrill Lynch survey last March, 84% of the respondents said their employer offers a 401(k) match and 78% contributed enough to qualify for it.

“More companies are being aggressive about their initial default rate, and they're making it higher, and we've seen strong increases in the number of companies using auto-enrollment,” said Kevin Crain, a senior relationship manager at Bank of America Merrill Lynch. “I'm fascinated about companies [changing their schedules] but what's missing here is that there are more people in the system, saving money that they didn't before and they're getting their matches.”