Asia Markets: Asian stocks rebound, Japan’s Nikkei continues rally on weak yen

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Japanese stocks get a boost from a weaker yen which will help exporters.

Stocks in Asia recovered from their weakness to advance Wednesday while Japan’s Nikkei continued to rally as the yen remained weak against the U.S. dollar.

Chinese and Hong Kong shares posted relatively robust gains following recent losses with the Shanghai Composite
SHCOMP, +0.51%
 up 0.4% and Hong Kong’s Hang Seng
HSI, +0.26%
 also rising 0.4%.

The Wall Street Journal reported that Hong Kong and Chinese stock exchanges are working on a system to allow investors in China to buy and sell shares of companies with supervoting equity via the Stock Connect link.

Japan’s Nikkei
NIK, +0.77%
 extended its rally to climb 1% on the back of a weak yen which is expected to help the country’s exporters. The dollar
USDJPY, +0.06%
 last bought 112.94 yen versus ¥112.86 earlier.

Stocks in other major Asian markets were also higher.

Korea’s Kospi
SEU, +0.23%
 added 0.2%, shrugging off news that the Korean government projects 2018 economic growth to slow to 2.9% versus 3.1% in 2017. Seoul blamed the country’s shrinking workforce as well as weaker overseas demand for Korean automobiles and ships for the softer growth forecast, according to Dow Jones Newswires.

Australia’s S&P/ASX 200
XJO, +0.69%
 gained 0.7% and Taiwan’s Taiex
Y9999, +0.46%
 climbed 0.6%.

Open Your Eyes To Closed-End Funds

Fixed-income investors are often attracted to closed-end funds because many of the funds are designed to provide a steady stream of income, usually on a monthly or quarterly basis as opposed to the biannual payments provided by individual bonds.

Perhaps the easiest way to understand the mechanics of closed-end mutual funds is via comparison to open-end mutual and exchange-traded funds with which most investors are familiar. All these types of funds pool the investments of numerous investors into a single basket of securities or fund portfolio. While at first glance it may seem like these funds are quite similar – as they share similar names and a few characteristics – from an operational perspective, they are actually quite different. Here we’ll take a look at how closed-end funds work, and whether they could work for you.

SEE: Mutual Fund Basics Tutorial

Open-End vs. Closed-End Funds

Open-end fund shares are bought and sold directly from the mutual fund company. There is no limit to the number of available shares because the fund company can continue to create new shares, as needed, to meet investor demand. On the reverse side, a portfolio may be affected if a significant number of shares are redeemed quickly and the manager needs to make trades (sell) to meet the demands for cash created by the redemptions. All investors in the fund share costs associated with this trading activity, so the investors who remain in the fund share the financial burden created by the trading activity of investors who are redeeming their shares.

On the other hand, closed-end funds operate more like exchange-traded funds. They are launched through an initial public offering (IPO) that raises a fixed amount of money by issuing a fixed number of shares. The fund manager takes charge of the IPO proceeds and invests the shares according to the fund’s mandate. The closed-end fund is then configured into a stock that is listed on an exchange and traded in the secondary market. Like all shares, those of a closed-end fund are bought and sold on the open market, so investor activity has no impact on underlying assets in the fund’s portfolio. This trading distinction can be an advantage for money managers specializing in small-cap stocks, emerging markets, high-yield bonds and other less liquid securities. On the cost side of the equation, each investor pays a commission to cover the cost of personal trading activity (that is, the buying and selling of a closed-end fund’s shares in the open market).

SEE: Introduction to Exchange-Traded Funds

Like open-end and exchange-traded funds, closed-end funds are available in a wide variety of offerings. Stock funds, bond funds and balanced funds provide a full range of asset allocation options, and both foreign and domestic markets are represented. Regardless of the specific fund chosen, closed-end funds (unlike some open-end and ETF counterparts) are all actively managed. Investors choose to place their assets in closed-end funds in the hope that the fund managers will use their management skills to add alpha and deliver returns in excess of those that would be available via investing in an index product that tracked the portfolio’s benchmark index.

Pricing and Trading: Take Note of the NAV

Pricing is one of the most notable differentiators between open-end and closed-end funds. Open-ended funds are priced once per day at the close of business. Every investor making a transaction in an open-end fund on that particular day pays the same price, called the net asset value (NAV). Closed-end funds, like ETFs, have an NAV as well, but the trading price, which is quoted throughout the day on a stock exchange, may be higher or lower than that value. The actual trading price is set by supply and demand in the marketplace. ETFs generally trade at or close to their NAVs.

If the trading price is higher than the NAV, closed-end funds and ETFs are said to be trading at a premium. When this occurs, investors are placed in the rather precarious position of paying to purchase an investment that is worth less than the price that must be paid to acquire it.

If the trading price is lower than the NAV, the fund is said to be trading at a discount. This presents an opportunity for investors to purchase the closed-end fund or ETF at a price that is lower than the value of the underlying assets. When closed-end funds trade at a significant discount, the fund manager may make an effort to close the gap between the NAV and the trading price by offering to repurchase shares or by taking other action, such as issuing reports about the fund’s strategy to bolster investor confidence and generate interest in the fund.

Closed-End Funds’ Use of Leverage

A distinguishing feature of closed-end funds is their ability to use borrowing as a method to leverage their assets, which, while adding an element of risk when compared to open-end funds and ETFs, can potentially lead to greater rewards. An ideal opportunity exists for closed-end equity and bond funds to increase expected returns by leveraging their assets by borrowing during a low interest rate environment and reinvesting in longer-term securities that pay higher rates. 

In low interest rate environments, closed-end funds will typically make an increased use of leverage. This leverage can be used in the form of preferred stock, reverse purchase agreements, dollar rolls, commercial paper, bank loans and notes, to name a few. Leverage is more common in funds that are invested in debt securities although several funds invested in equity securities are also using leverage.

The downside risk of using leverage is that when stock or bond markets go through a market downswing, the required debt service payments will cause returns to shareholders to be lower than those funds not utilizing leverage. In turn, share prices will be more volatile with debt financing or leverage. Also, when interest rate rise, the longer-term securities will fall in value, and the leveraging used will magnify the drop, causing greater losses to investors.

Why Closed-End Funds Aren’t More Popular

According to the Closed-End Fund Association, closed-end funds have been available since 1893, more than 30 years prior to the formation of the first open-end fund in the United States. Despite their long history, however, closed-end funds are far outnumbered by open-ended funds in the market.

The relative lack of popularity of closed-end funds can be explained by the fact that they are a somewhat complex investment vehicle that tends to be less liquid and more volatile than open-ended funds. Also, few closed-end funds are followed by Wall Street firms or owned by institutions. After a flurry of investment banking activity surrounding an initial public offering for a closed-end fund, research coverage normally wanes and the shares languish.

For these reasons, closed-end funds have historically been, and will likely remain, a tool used primarily by relatively sophisticated investors.

The Bottom Line

Investors put their money into closed-end funds for many of the same reasons that they put their money into open-end funds. Most are seeking solid returns on their investments through the traditional means of capital gains, price appreciation and income potential. The wide variety of closed-end funds on offer and the fact that they are all actively managed (unlike open-ended funds) make closed-end funds an investment worth considering. From a cost perspective, the expense ratio for closed-end funds may be lower than the expense ratio for comparable open-ended funds.

Master of Public Administration – MPA

What is a ‘Master of Public Administration – MPA’

A Master of Public Administration (MPA) is master’s level degree in public affairs that prepares recipients of the degree to serve in executive positions in municipal, state and federal levels of government, and nongovernmental organizations (NGOs). The focus of the program centers on principles of public administration, policy development and management, and implementation of policies. It also prepares the candidate to deal with specific challenges faced in public administration.

As a professional level degree, the MPA requires students first have an undergraduate level degree from eligible universities. Students enrolled in an MPA program are expected to possess above-average leadership skills and competence in economic and quantitative analysis, among other skill requirements.

BREAKING DOWN ‘Master of Public Administration – MPA’

The Master of Public Administration (MPA) is considered the public sector equivalent of the Master of Business Administration (MBA) degree in the private sector. It is also closely related to the more theoretical Master in Public Policy (MPP) degree. The MPP focuses on policy analysis and design, while the MPA focuses on program implementation. Many graduate schools offer a combined J.D. (law degree) and MPA; a few offer combined MBA/MPA programs.

Master’s Degree Background

The first master’s degree program in public administration was established at the University of Michigan in 1914 as part of the Department of Political Science. The goal was to improve efficiency in municipal government and eliminate corruption. The program was developed by department chairman Jesse S. Reeves, who later served as a technical adviser to the League of Nations Hague Conference in 1930. The program has since expanded to a full graduate school, which is known as the Gerald R. Ford School of Public Policy.

The Kennedy School of Government at Harvard University and the Woodrow Wilson School of Government at Princeton University were both founded in the middle of the Great Depression as part of a broader move to give government and social services a scientific and professional grounding. The New Deal programs of President Franklin Delano Roosevelt greatly increased the scope of the U.S. government and its programs, creating a need for skilled, professional managers.

Course Requirements

MPA students are required to have a bachelor’s degree from an accredited college or university; many graduate schools also require applicants to take the Graduate Records Exam (GRE) before they apply. Programs are interdisciplinary, and include classes in economics, sociology, law, anthropology and political science. Most programs require two years for completion. Some executive MPA programs designed for experienced, mid-career professionals can be completed in one year. In addition, a limited number of programs grant a Doctor of Public Administration (D.P.A.), which is a terminal degree usually intended for research. The D.P.A. is considered on par with a Ph.D.

System Open Market Account – SOMA

What is the ‘System Open Market Account – SOMA’

The System Open Market Account (SOMA) is managed by the Federal Reserve Bank and contains assets acquired through operations in the open market. The assets in the SOMA serve as a management tool for the Federal Reserve’s assets, a store of liquidity to be used in an emergency event where the need for liquidity arises and as collateral for the liabilities on the Federal Reserve’s balance sheet, such as U.S. dollars in circulation.

Assets in the SOMA include both domestic securities and foreign currency portfolios of the Federal Reserve. The domestic portion consists of U.S. dollar-denominated Treasuries. The foreign currency portion consists of a range of different investments denominated in either euros or Japanese yen.

BREAKING DOWN ‘System Open Market Account – SOMA’

System Open Market Account (SOMA) transactions are executed by the Open Market Desk of the Federal Reserve Bank of New York, which is commonly referred to as the New York Fed. Policy decisions regarding such transactions are made by the Federal Reserve Open Market Committee (FOMC).

Conducting Monetary Policy

A primary responsibility of the Federal Reserve is to establish monetary policy for the United States and to execute transactions to carry out that policy. When the Fed sets a target for the Federal Funds Rate at which banks lend to each other, it executes purchases and sales of the securities in the SOMA to increase or decrease liquidity in the system. The Fed buys securities to add liquidity to the system and sells securities to reduce liquidity.

Such transactions can be either outright purchases and sales, or short-term transactions that are known as repurchase agreements (repos) and reverse repos. Repos and reverse repos are commonly done to adjust the amount of liquidity in the system, which changes daily due to commercial transactions, rather than to make a major liquidity adjustment due to a policy change.

Large-Scale Asset Purchase Program

The Fed has historically bought and sold short-term U.S. Treasury bills to impact short-term interest rates. Between October 2008 and October 2014, in the aftermath of the financial market collapse, the Fed also purchased substantial amounts of long-term U.S. Treasury bonds to push long-term interest rates lower, with the goal of helping to stimulate the U.S. economy.

The Fed also purchased large quantities of mortgage-based securities from government-sponsored entities Fannie Mae, Freddie Mac and Ginnie Mae to support the housing market and increase funding for mortgage lending.

The Fed releases a weekly statistical report known as H.4.1, which details the balances it holds.

Fed Profit

The interest paid on the securities held in the SOMA provides the majority of the Fed’s income. While the Fed sometimes makes money by buying and selling securities, those transactions are dictated by monetary policy requirements rather than potential trading gains.


DEFINITION of ‘Caveat’

Caveat is a Latin term that means “let him beware.” There are many types of caveats in law and finance, with the most common being “caveat emptor,” meaning “let the buyer beware,” and “caveat venditor,” meaning “let the seller beware.” The legal applicability of these concepts can determine civil and criminal liability.


Caveat is a warning or caution to an individual or entity to use care before proceeding. The term has a range of usages.

Examples of Caveat Usage

The most common usage is “caveat emptor,” which means that the buyer of goods or services is expected to exert caution and cannot recover damages for an inferior product. In some jurisdictions, consumer protection laws provide for refunds or exchanges for consumers that purchase goods that do not do what they’re supposed to do. Many transactions between businesses treat the two as equals with no protection to the buyer unless fraud can be demonstrated.

“Caveat venditor” puts the burden on the seller to investigate potential flaws in the goods or services to be sold and to meet all legal requirements related to the transaction. Failure to do so can make a contract unenforceable.

“Caveat lector” warns the reader to beware of what may be written, while “caveat auditor” warns the listener to beware of what he may hear.

Mortgage-Backed Securities

Among the factors that fueled the 2008 market crisis was the widespread sale of securities that were backed by pools of mortgages that were bundled and sold by investment banks. The securities were backed by multiple tranches of residential mortgages of differing credit quality, and the securities were known to include sub-prime mortgages. Many of the securities quickly became worthless as the housing market collapsed.

The U.S. Securities and Exchange Commission (SEC) and the Department of Justice have charged many of the country’s largest financial institutions with defrauding investors because they lied about the quality of the underlying mortgages. They have had only limited success in criminal prosecutions but have reached civil settlements in the billions of dollars with Goldman Sachs, Citigroup, Bank of America and JPMorgan Chase.

The packaging of the securities, which were given investment-grade ratings by the credit rating agencies, was done under the caveat emptor concept. The concept was central to the business model as the purchasers of the securities were considered sophisticated investors who should be able to evaluate their worth. While that has made successful criminal prosecutions difficult, it has not been a protection against civil charges.


DEFINITION of ‘Cancellation’

A cancellation is a notice made by a broker, to his or her client, informing him an erroneous trade was made and is being rectified. Despite the fact technology is an ever-present and ever-evolving part of daily life, trading mistakes are made, either by human or electronic error, and brokers must correct the mistake immediately, notifying the client of all errors and actions taken to resolve the mistake. Naturally, all transactions and steps taken are recorded to lay out the cancellation and ensure the broker is not mishandling the account.

BREAKING DOWN ‘Cancellation’

While technology plays a vital role in the trading world and has arguably made trading more efficient and speedier, it can also play a role in erroneous trades being made and thus generate the need for a cancellation.

Examples of Cancellations

One example of a cancellation involves overbuying. Assume a broker purchased 4,000 shares of company ABC for a client, but the order was supposed to be for 3,000 shares. The broker made a purchase in excess of the amount specified by his client, accidentally substituting a four for a three. In this instance, the broker is required to sell the additional 1,000 shares purchased at his own expense. The broker must then make a cancellation notification to his client, explaining the error and the steps he has taken to correct the mistake.

For another example, imagine a client asks his broker to purchase 500 shares of company XY, but the trading floor puts in an order for 500 shares of company Y instead. The client receives a cancellation notification indicating this error. The client’s broker must then rectify the error by quickly putting in the correct order. If the price of the shares for company XY increase before the broker puts in the correct order, it is his responsibility to take on the additional cost per share, offering the client the original cost of 500 shares in the company at the time the order was requested.

Erroneous Trades

Despite all modern conveniences and tools, erroneous trades occur on a fairly regular basis, whether due to a technological malfunction or due to human error. The Securities and Exchange Commission (SEC) approved new rules on exchanges in 2009 to stop erroneous trades from being executed. These new rules permit an exchange to break trades when the price differs by a specified percentage from the last consolidated sale price. As an example, during regular market hours, the percentages are 10% for stocks under $25; 5% for stocks priced between $25 and $50; and 3% for stocks with a value of $50 and higher. Also stipulated in the SEC’s new rules: erroneous trade reviews must start within 30 minutes of the trade and be resolved within 30 minutes of the review process.



The close is the end of a trading session in the financial markets when the markets close. It can also refer to the process of exiting a trade or the final procedure in a financial transaction in which contract documents are signed and recorded.


The most visible example of a market close is the close of the New York Stock Exchange when the closing bell is rung, but closing times vary between markets and exchanges.

Common Hours

NYSE equity trading hours are from 9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time. Pre-market hours begin at 6:30 a.m. Eastern Time, while after-hours trading closes at 8:00 p.m. Eastern Time. The bond markets tend to be open a bit longer from 8:00 a.m. Eastern Time to 5:00 p.m. Eastern Time. Futures market hours vary widely based on the exchange and commodity — traders should see the exchanges’ websites for more details.

The most common market holidays include:

  • New Year’s Day
  • Martin Luther King Jr. Day
  • Washington’s Birthday
  • Good Friday
  • Memorial Day
  • Labor Day
  • Thanksgiving Day
  • Christmas

After Hours

Many markets have after-hours trading, which enables investors to place orders after the close of the trading session. While this may be tempting, there are several drawbacks that investors should consider before trading in after-hours sessions.

The primary drawbacks to consider include:

  • Limited Liquidity: Fewer traders are active in after-hours trading, which means that there’s less liquidity, inefficient pricing, and higher bid-ask spreads.
  • Professional Competition: Most after-hours traders are professional traders working for hedge funds or investment banks, which makes it hard to compete.
  • No Guarantees: There is no guarantee that after-hours prices reflect a security’s opening price the next day since they are entirely different sessions.

Most traders should stay away from after-hours trading unless they have a lot of experience and a compelling reason to trade after the close.

Closing Prices

Closing price is the price of the final trade before the close of the trading session. These prices are important because they are used to create traditional line stock charts, as well as when calculating moving averages and other technical indicators.

Since closing prices are widely followed, they may be manipulated by fraudulent traders to make the appearance of a rally. This practice, known as “high close” is especially prevalent with micro-cap stocks that have limited liquidity since less dollar volume is needed to move the price higher. Traders should be wary of using closing prices as a gauge of micro- and small-cap stock successes and look at candlestick charts and other indicators for added insight.

The Bottom Line

The close is simply the end of a trading session in the financial markets. However, closing times tend to vary between market and exchange. Many markets also offer after-hours trading that may go beyond the official market close, although traders should exercise caution before transacting outside of traditional market hours. Understanding the closing times of various markets is important to avoid making any costly mistakes.

How Can I Access a Company’s Earnings Report?


One of the most important tools in the arsenal of the fundamental investor is the corporate earnings report. The earnings report is a public display of profitability, financial standing and the official word on recent overall business performance. All publicly-traded companies in the U.S. are legally required to file quarterly reports, annual reports, and the 10-Q and 10-K reports.

Current and potential shareholders can track coming earnings releases through online resources such as the Nasdaq online earnings calendar. Released earnings reports can be found through and other publications, such as the earnings calendar provided by Yahoo Finance and Morningstar.

How to Track Earnings Reports Through Nasdaq

The Nasdaq earnings calendar presents a collection of coming earnings reports. You can search companies based on a specific release date or by ticker symbol, and the website will give a brief overview of key information.

For example, you can see reports released on the current day, complete with fundamental data such as market capitalization, consensus earnings per share (EPS) forecasts and last year’s EPS.

How to Track Earnings Reports Using EDGAR

The most authoritative and complete resource for all earnings reports is on using their EDGAR system, where you can search for any publicly-traded company and read quarterly, annual and 10-Q and 10-K reports.

Many people confuse the quarterly earnings report with the 10-Q because they are both based on quarterly data. However, the 10-Q is a much longer document, filled with black-and-white financial information. While this can make it tedious to read, investors can avoid the fluff of the official earnings report. The 10-K and annual earnings reports have a similar relationship.

Listening to Earnings Conference Calls

Earnings calls are generally available to the entire public. They can be accessed online and are often found in the investor relations section of the company’s website, or can be listened to using the telephone. These can provide an even better insight than quarterly earnings reports.

Many companies provide access to the earnings call on their corporate websites for a period of time after the actual call, making it possible for investors who could not listen in live a way to access this valuable corporate information for investors to analyze.

Wirehouse Broker

What is ‘Wirehouse Broker’

A wirehouse broker is a non-independent broker working for a wirehouse firm, or a firm with multiple branches such as a national brokerage house. The four largest and most well-known wirehouse full-service brokerage firms today are Morgan Stanley, Bank of America’s Merrill Lynch, UBS, and Wells Fargo. A wirehouse is an archaic term used to describe a broker-dealer. Modern-day wirehouses can range from small regional brokerages to giant institutions with offices around the world.

The term “wirehouse” owes its origins to the fact that, prior to the advent of modern wireless communications, brokerage firms were connected to their branches primarily through telephone and telegraph wires. This enabled branches to have access to the same market information as the head office, thus allowing their brokers to provide stock quotes and market news to their clients.

A wirehouse broker is typically a full-service broker, offering research, investment advice and order execution. By being affiliated with the wirehouse, the broker gains access to the firm’s proprietary investment products, research and technology.

BREAKING DOWN ‘Wirehouse Broker’

It was once thought that in order to provide top service to their clients, brokers had to be affiliated with a wirehouse firm. Independent brokers were often assumed to be sellers of prepackaged products and were viewed as second-class citizens in the financial world. Things have changed in this regard. However, as many of the big wirehouses experienced major shocks in the financial crisis of 2007/2008.

Wirehouses and the Financial Crisis

The global financial crisis led to unprecedented turmoil among wirehouses, primarily because of the very substantial exposure that many of them had to mortgage-backed securities. While a number of the smaller players were forced to close shop, some of the most prominent names in the industry (such as Merrill Lynch and Bear Stearns) were either acquired by bigger banks or disappeared altogether into bankruptcy (Lehman Brothers). These events served to level the playing field as wirehouse brokers looked for new options upon leaving the failed firms.

Most present-day wirehouses are full-service brokerages that provide the complete range of services to clients, from investment banking and research, to trading and wealth management. Although the proliferation of discount brokerages and online quotes has eroded the edge in market information that the wirehouses formerly possessed, their diversified activities in capital markets continue to make them very profitable entities.

Nevertheless, in recent years, a number of wirehouse brokers have moved to independent broker dealers. According to research by InvestmentNews, the three largest U.S. independent broker dealers — LPL Financial, Ameriprise Financial Inc. and Raymond James Financial Inc. — recruited 118 teams from the wirehouses in 2017, up 42% from a year earlier, when those same three firms gained 83 teams, according to data.

Multivariate Model

What is the ‘Multivariate Model’

The multivariate model is a popular statistical tool that uses multiple variables to forecast possible outcomes. Research analysts use multivariate models to forecast investment outcomes in different scenarios in order to understand the exposure that a portfolio has to particular risks. This allows portfolio managers to better mitigate the risks identified through the multivariate modeling analysis. The Monte Carlo simulation is a widely used multivariate model that creates a probability distribution that helps define a range of possible investment outcomes. Multivariate models are used in many fields of finance.

BREAKING DOWN ‘Multivariate Model’

Multivariate models assist with decision making by allowing the user to test out the different scenarios and their probable impact. For example, a particular investment can be run through scenario analysis in a multivariate model to see how it will impact the whole portfolio return in different market situations, such as a period of high inflation or low interest rates. This same approach can be used to evaluate a company’s likely performance, value stock options and even evaluate new product ideas. As firm data points are added to the model, such as same store sales data being released prior to earnings, the confidence in the model and its predicted ranges increase.

Multivariate Models and the Insurance Industry

Insurance companies are users of multivariate models. The pricing of an insurance policy is based on the probability of having to pay out a claim. Given only a few data points, such as the age of the applicant and the home address, insurers can add that into a multivariate model that pulls from additional databases that can narrow in on the appropriate policy pricing strategy. The model itself will be populated with confirmed data points (age, sex, current health status, other policies owned, etc.) and refined variables (average regional income, average regional lifespan, etc.) to assign predicted outcomes that will be used to price the policy.

Strengths and Weaknesses of Multivariate Modeling

The advantage of multivariate modeling is that it provides more detailed “what if” scenarios for decision makers to consider. For example, investment A is likely to have a future price within this range given these variables. As more solid data is put into the model, the predictive range gets tighter and confidence in the predictions grow. However, as with any model, the data coming out is only as good as the data going in. There is also a risk of black swan events rendering the model meaningless even if the data sets and variables being used are good. This is, of course, why the models themselves aren’t put in charge of trading. The predictions of multivariate models are simply another source of information for the ultimate decision makers to think about.



Net-net is a value investing technique developed by Benjamin Graham in which a company is valued based solely on its net current assets. The net-net investing method focuses on current assets, taking cash and cash equivalents at full value, then reducing accounts receivable for doubtful accounts, and reducing inventories to liquidation values. Total liabilities are deducted from the adjusted current assets to get the company’s “net-net” value.


Graham used this method at a time when financial information was not as readily available, and net-nets were more accepted as a company valuation model. When a viable company is identified as a net-net, the analysis focused only on the firm’s current assets and liabilities, without taking other tangible assets or long-term liabilities into account. Advances in financial data collection now allow analysts to quickly access a firm’s entire set of financial statements, ratios and other benchmarks.

How Value Investing Works

Value investing is an investing approach that strives to identify stocks that are selling at less than intrinsic value, and one measurement of intrinsic value is book value, or assets less liabilities on the balance sheet. If, for example, a firm sells all of its assets for cash and uses the cash to pay all liabilities, any remaining balance is entered as book value or equity. If a stock is selling at less than book value, the price is attractive to a value investor. This strategy also focuses on companies that generate increasing earnings each year.

The Differences Between Fundamental and Technical Analysis

The net-net approach uses information in the balance sheet to assess stock values, which is a fundamental investing technique. Technical analysis, on the other hand, is the study of stock price patterns and trading volume. Technical traders believe that they can identify buy and sell prices based on historical patterns.

Factoring in Current Assets

Current assets, which are used in the net-net approach, are defined as assets that are cash, and assets that are converted into cash within 12 months, including accounts receivable and inventory. As a business sells inventory, and customers submit payments, the firm reduces inventory levels and receivables. This ability to collect cash is the true value of a business, according to the net-net approach. Current assets are reduced by current liabilities, such as accounts payable, to calculate net current assets. Long-term assets and liabilities are excluded from this analysis, which only focuses on cash that the firm can generate within the next 12 months.

Chef’d Meal-Kit Maker Suspending Business

Chef’d, a national meal-kit operator serving major food brands and prominent chefs, has suspended operations after burning through investments and failing to secure more cash.

The development is a troubling sign for the meal-kit sector as venture capital-backed startups seek to become profitable in an increasingly competitive food segment, and startups seek to scale up into national operations that can provide customers with ever more choices.

Chef’d, a Los Angeles-based startup launched in 2015, operates a complex food manufacturing business that distributed meal kits to a growing list of retailers while also running an e-commerce site for home delivery with far greater options than most rivals. Chef’d was valued at around $160 million during its last fundraising round last year.

But in recent months, it has churned through tens of millions of dollars in cash from venture capitalists and big food companies such as Campbell Soup Co. and Smithfield Foods Inc., according to people familiar with the matter.

The company lost a number of executives, along with several junior employees in product development and sales, as finances grew shakier in the past several months, the people said. Executives scrambled to secure new financing from major banks and private investors, but talks didn’t progress, they said.

“Due to some unexpected circumstances with the funding and business, I regret to inform that Chef’d has ceased all operations until our investors and lenders decide the final fate of the company,” the company’s chief technology officer wrote in an email to a supplier Tuesday. “Consequently, please cease all work associated with Chef’d.”

Chef’d issued layoff notices to employees Monday and is informing suppliers that it is suspending business.

A spokeswoman for Chef’d said she was no longer retained by the company.

Many meal-kit companies have struggled as the sector has grown more crowded and retaining online customers increasingly expensive.

Companies such as Blue Apron Holdings Inc. and HelloFresh SE are expanding their online meal options and pushing into retail to try to push growth, but other meal-kit operators have sold or are seeking exits.

Chef’d was one of the earliest companies to simultaneously sell its boxes in stores and online. The company developed sophisticated operations that could assembly kits from a thousand different recipes, as opposed to a handful of weekly menus offered by most others. That flexibility helped Chef’d strike deals with major food companies and diet plans—including the Coca-Cola Co. , Hershey’s Co.  and Weight Watchers—to feature their products in boxes. Campbell Soup Co. and Smithfield Foods Inc., legacy manufacturers looking to pivot into fresh food, took $35 million stakes in the company to try to boost their brands. Wolfgang Puck and dozens of other chefs put their names behind meal-kits sold on Chef’d.

“Seven days a week, we offer thousands of choices anywhere in the country. It’s a logistic company in the end,” said  Kyle Ransford, Chef’d chief executive, in a recent interview.

Chef’d was also one of the first to feature its kits in grocery stores. Smithfield has Chef’d-made kits in 445 stores, one of the biggest national rollouts to date, with future expansion plans set for this year.

But running both operations has proven tricky, with the online service proving particularly difficult to generate profits given high shipping costs and managing so many recipes at once, the people familiar with the matter said. Some meal options went unsold or spoiled.

Chef’d’s e-commerce operation trailed subscription-based meal-kit rivals, and its sales have dropped sharply since March, according to an analysis of anonymized credit- and debit-card transactions by data firm Second Measure.

In recent months, the company began running behind on its accounts to produce, meat and other suppliers. “They are definitely having growing pains,” said Peter Testa, president of the Chicago-based Testa Produce Inc., a major wholesaler that has supplied Chef’d but has seen its accounts fall behind. “It is a tough business.”

Chef’d strategic investors have closely monitored the company’s problems. Officials sought to reassure employees and suppliers as finances worsened.

“Yes we still have jobs,” Mr. Ransford wrote in a companywide email in May. “I just want to let everyone know where we are at and what needs to happen to move things forward.”

Officials held talks with Bank of America to try to raise financing to keep operations going, but couldn’t agree on terms, the people familiar with the matter said.

Write to Heather Haddon at

Appeared in the July 18, 2018, print edition as ‘Chef’d Suspends Its Operations as Meal Kits Multiply.’

Corporate Charter

What is a ‘Corporate Charter’

A corporate charter — simply referred to as “charter” or “articles of incorporation” — is a written document filed with a U.S. state by the founders of a corporation detailing the major components of a company such as its objectives, its structure and its planned operations. If the charter is approved by the state government, the company becomes a legal corporation.

BREAKING DOWN ‘Corporate Charter’

The creation of corporate charters is the start to building a new corporation. Corporate charters signal the birth of a new company. Once filed and approved, a corporation becomes legitimate and legal. The document must be created and filed before the corporation starts business transactions. If the corporate charter is not created before the business starts business transactions, the owners of the corporation expose themselves to risk, including being personally liable for all the possible damages and debts created by the business during the period that the corporation transacted business without a legitimate corporate charter.

Parts of the Corporate Charter

At the most basic level, the corporate charter includes the corporation’s name, its purpose, whether the corporation is a for-profit or nonprofit institution, the location of the corporation, the number of shares that are authorized to be issued, and the names of the parties involved in the formation. Companies’ corporate charters are filed with the state secretary in which the corporation is located. Typically, the creation of corporate charters has no fees.

Some government websites provide templates for corporate charters. However, some businesses still opt to consult and hire business lawyers when creating and filing corporate charters to provide more legitimate and favorable legal business documents and environments.

The state in which the corporation is headquartered in has particular requirements pertaining to the parts of the corporate charter. Some states require the inclusion of “Inc.” or “Incorporated,” depending on the specific type of corporation. It also includes the name of the authorized agent. No matter where the business is located, a corporation must have a designated registered agent who serves as the authorized receiver of important legal documents for the corporation.

Corporations must provide the reasons why they were built. This part includes what the corporation does, what industry they are in and what type of products and services they provide.

Aside from providing a designated registered agent, the corporate charter must also include the names and addresses of the corporation’s founders, corporate officers, and initial directors.

Also, corporations that are designated as stock corporations must provide the specific number of stock shares and stock prices for its initial public offering.

What Can Cause a Negative Terminal Growth Rate?


Investors can use several different formulas when calculating terminal value for a firm, but all of them allow – at least in theory – for the growth rate to generate a negative terminal value. This would occur if the cost of future capital exceeded the assumed growth rate. In practice, however, negative terminal valuations don’t actually exist for very long. A company’s equity value can only realistically fall to zero and any remaining liabilities would be sorted out in a bankruptcy proceeding.

Since a company’s terminal value is calculated as a perpetuity (extended forever into time), it would have to be heavily subsidized by the government or have endless cash reserves for the equation to support a negative growth rate.

How Terminal Growth Rate Values Are Calculated

The terminal value of a company is a rough approximation of its future value at some date beyond which specific cash flows cannot be estimated. Several models exist to calculate terminal value, including the perpetuity growth method and the Gordon growth method.

The Gordon growth method has a unique terminal growth rate. Other terminal value calculations focus entirely on the firm’s revenue and ignore macroeconomic factors, but the Gordon growth method includes an entirely subjective terminal growth rate based on any criteria that the investor would like.

For example, the rate of cash flow growth might be tied to projected GDP growth or inflation. It could be arbitrarily set at three percent. This number is then added to earnings before interest, taxes, depreciation and amortization (EBITDA). Next, the resulting number is divided by the weighted average cost of capital (WACC) minus the same terminal growth rate.

Most academic interpretations of terminal value suggest that stable (terminal) growth rates need to be less than or equal to the growth rate of the economy as a whole. This is one of the reasons why GDP is used as an approximation for the Gordon growth model.

Again, there is no conceptual reason to believe that this growth rate could be negative. A negative growth rate implies that the firm would liquidate part of itself each year until finally disappearing – making the choice to liquidate more attractive. The only instance when this seems feasible is when a company is being replaced slowly by new technology.

Why It’s Hard to Value Declining Firms with Terminal Growth Models

Declining or distressed firms are not easy for investors to valuate with terminal growth models. It is very possible that such a firm will never make it to steady growth. Nevertheless, it doesn’t make sense for investors to make that assumption whenever current costs of capital exceed current earnings.

A negative growth rate is particularly tricky with young, complex or cyclical businesses. Investors can’t reasonably rely on using existing costs of capital or reinvestment rates, so they might have to make risky assumptions about future prospects.

Whenever an investor comes across a firm with negative net earnings relative to cost of capital, it is probably best to rely on other fundamental tools outside of terminal valuation.

Isoquant Curve

What is the ‘Isoquant Curve’

The isoquant curve is a graph, used in the study of microeconomics, that charts all inputs that produce a specified level of output. This graph is used as a metric for the influence that the inputs have on the level of output or production that can be obtained. The isoquant curve assists firms in making adjustments to inputs to maximize outputs, and thus profits.

Example of an isoquant curve.

BREAKING DOWN ‘Isoquant Curve’

The term “isoquant,” broken down in Latin, means “equal quantity,” with “iso” meaning equal and “quant” meaning quantity. The isoquant curve is a company’s counterpart to the consumer’s indifference curve. Essentially, the curve represents a consistent amount of output. The isoquant is known, alternatively, as an equal product curve or a production indifference curve. It may also be called an iso-product curve.

Isoquant Curve vs. Indifference Curve

The isoquant curve is a contoured line that is drawn through points that produce the same quantity of output, while the quantities of inputs – usually two or more – are changed. The mapping of the isoquant curve addresses cost minimization problems for producers. The indifference curve, on the other hand, helps to map out the utility maximization problem that consumers face.

The Properties of an Isoquant Curve

Property 1: An isoquant curve slopes downward, or is negatively sloped. This means that the same level of production only occurs when increasing units of input are offset with lesser units of another input factor. This property falls in line with the principal of the Marginal Rate of Technical Substitution (MRTS). As an example, the same level of output could be achieved by a company when capital inputs increase, but labor inputs decrease.

Property 2: An isoquant curve, because of the MRTS effect, is convex to its origin. This indicates that factors of production may be substituted with one another. The increase in one factor, however, must still be used in conjunction with the decrease of another input factor.

Property 3: Isoquant curves cannot be tangent or intersect one another. Curves that intersect are incorrect and produce results that are invalid, as a common factor combination on each of the curves will reveal the same level of output, which is not possible.

Property 4: Isoquant curves in the upper portions of the chart yield higher outputs. This is because, at a higher curve, factors of production are more heavily employed. Either more capital or more labor input factors result in a greater level of production.

Property 5: An isoquant curve should not touch the X or Y axis on the graph. If it does, the rate of technical substitution is void, as it will indicate that one factor is responsible for producing the given level of output without the involvement of any other input factors.

Property 6: Isoquant curves do not have to be parallel to one another; the rate of technical substitution between factors may have variations.

Property 7: Isoquant curves are oval shaped, allowing firms to determine the most efficient factors of production.

ODH, Inc. Releases New Article With Insights On How Data & Technology Can Be Used To Combat The Opioid Crisis

Gettysburg, PA, July 17, 2018 (GLOBE NEWSWIRE) — Statistics around the Opioid Crisis are staggering. Deaths from drug overdose are increasing in both men and women – regardless of race or age. More than 3 out of 5 drug overdose deaths involve an opioid. In 2015, opioids killed more than 33,000 people in the U.S. – the highest number in recorded history. As this crisis continues to alter the roadmap for healthcare, preparations for the future need to be made that include coordinated and integrated care delivery.

Care coordination is even more essential for patients with behavioral health conditions. When care for these patients is fragmented, outcomes decline, risks rise, and costs increase. Following a recent webinar, Lisa Strouss, PharmD, Field Medical Director, and Dr. Candace Saldarini, Director, Medical Affairs, of ODH, Inc. released a new article outlining the importance of integrating physical health, behavioral health, and social services data to achieve whole person care. The article, Technology and Opioid Crisis: Prescription for Breakthrough, offers critical statistics on opioid use disorder and details on how technology can be leveraged to make positive impacts.

“The health care landscape is in turmoil, and the rise of the Opioid Crisis continues to cause concern for all health care stakeholders. Providers are searching for a way to help combat this crisis,” said Monica E. Oss, Chief Executive Officer of OPEN MINDS, a market intelligence and management support firm specializing in the sectors of the health and human service field which include behavioral health. “A big part of dealing with consumers with opioid use disorder comes down to addressing their physical, behavioral, and social services needs. Organizations need technology capable of integrating all aspects of a consumer’s health record to ensure all their care needs are met. Without this technology, organizations across the country will continue to struggle to combat the Opioid Crisis.”

To learn more or download the article, visit



ODH, Inc. is a health technology company providing data aggregation and analytics solutions that help enable the delivery of integrated health care. Its proprietary technology and clinical expertise advance interoperability among legacy systems for better patient care and cost management. Its solutions focus on addressing behavioral and physical health comorbidities. ODH is a subsidiary of Otsuka America, Inc. and part of the Otsuka Group of companies, a $12 billion global conglomerate based in Japan. For additional information on ODH, Inc., visit



OPEN MINDS is a national market intelligence and strategic advisory firm focused on the sectors of the health and human service field serving consumers with chronic conditions and complex support needs. Founded in 1987 and based in Gettysburg, Pennsylvania, the 175+ associates provide market insights and innovative management solutions designed to improve operational and strategic performance. Learn more at

Tim Snyder

Rigrodsky & Long, P.A. Files Class Action Suit Against Abaxis, Inc.

WILMINGTON, Del., July 17, 2018 (GLOBE NEWSWIRE) — Rigrodsky & Long, P.A.:

Rigrodsky & Long, P.A. announces that it has filed a class action complaint in the United States District Court for the Northern District of California on behalf of holders of Abaxis, Inc. (“Abaxis”) (NasdaqGS:ABAX) common stock in connection with the proposed acquisition of Abaxis by Zoetis, Inc. and its affiliate (“Zoetis”) announced on May 16, 2018 (the “Complaint”).  The Complaint, which alleges violations of the Securities Exchange Act of 1934 against Abaxis and its Board of Directors (the “Board”), is captioned Kent v. Abaxis, Inc., Case No. 3:18-cv-03834 (N.D. Cal.).

If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Seth D. Rigrodsky or Gina M. Serra at Rigrodsky & Long, P.A., 300 Delaware Avenue, Suite 1220, Wilmington, DE 19801, by telephone at (888) 969-4242, by e-mail at, or at

On May 15, 2018, Abaxis entered into an agreement and plan of merger (the “Merger Agreement”) with Zoetis.  Pursuant to the terms of the Merger Agreement, shareholders of Abaxis will receive $83.00 in cash for each share of Abaxis stock they own (the “Proposed Transaction”).

Among other things, the Complaint alleges that, in an attempt to secure shareholder support for the Proposed Transaction, defendants issued materially incomplete disclosures in a proxy statement (the “Proxy Statement”) filed with the United States Securities and Exchange Commission.  The Complaint alleges that the Proxy Statement omits material information with respect to, among other things, Abaxis’s financial projections and the analyses performed by Abaxis’s financial advisor.  The Complaint seeks injunctive and equitable relief and damages on behalf of holders of Abaxis common stock. 

If you wish to serve as lead plaintiff, you must move the Court no later than September 17, 2018.  A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.  Any member of the proposed class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

Rigrodsky & Long, P.A., with offices in Wilmington, Delaware, Garden City, New York, and San Francisco, California, has recovered hundreds of millions of dollars on behalf of investors and achieved substantial corporate governance reforms in numerous cases nationwide, including federal securities fraud actions, shareholder class actions, and shareholder derivative actions.

Attorney advertising.  Prior results do not guarantee a similar outcome.

Rigrodsky & Long, P.A.
Seth D. Rigrodsky
Gina M. Serra
(888) 969-4242
(302) 295-5310
Fax: (302) 654-7530

Rigrodsky & Long, P.A. Files Class Action Suit Against Stewart Information Services Corporation

WILMINGTON, Del., July 17, 2018 (GLOBE NEWSWIRE) — Rigrodsky & Long, P.A.:

Rigrodsky & Long, P.A. announces that it has filed a class action complaint in the United States District Court for the District of Delaware on behalf of holders of Stewart Information Services Corporation (“Stewart Information”) (NYSE:STC) common stock in connection with the proposed acquisition of Stewart Information by Fidelity National Financial, Inc. and its affiliates (“Fidelity”) announced on March 19, 2018 (the “Complaint”).  The Complaint, which alleges violations of the Securities Exchange Act of 1934 against Stewart Information, its Board of Directors (the “Board”), and Fidelity, is captioned Franchi v. Stewart Information Services Corp., Case No. 1:18-cv-00951 (D. Del.).

If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Seth D. Rigrodsky or Gina M. Serra at Rigrodsky & Long, P.A., 300 Delaware Avenue, Suite 1220, Wilmington, DE 19801, by telephone at (888) 969-4242, by e-mail at, or at

On March 18, 2018, Stewart Information entered into an agreement and plan of merger (the “Merger Agreement”) with Fidelity.  Pursuant to the terms of the Merger Agreement, shareholders of Stewart Information will receive either $50.00 in cash, 1.2850 shares of Fidelity common stock, or $25.00 in cash and 0.6425 shares of Fidelity common stock (the “Proposed Transaction”).

Among other things, the Complaint alleges that, in an attempt to secure shareholder support for the Proposed Transaction, defendants issued materially incomplete disclosures in a registration statement (the “Registration Statement”) filed with the United States Securities and Exchange Commission.  The Complaint alleges that the Registration Statement omits material information with respect to, among other things, Stewart Information’s financial projections, the analyses performed by Stewart Information’s financial advisor, and the background of the Proposed Transaction.  The Complaint seeks injunctive and equitable relief and damages on behalf of holders of Stewart Information common stock. 

If you wish to serve as lead plaintiff, you must move the Court no later than September 17, 2018.  A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.  Any member of the proposed class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

Rigrodsky & Long, P.A., with offices in Wilmington, Delaware, Garden City, New York, and San Francisco, California, has recovered hundreds of millions of dollars on behalf of investors and achieved substantial corporate governance reforms in numerous cases nationwide, including federal securities fraud actions, shareholder class actions, and shareholder derivative actions.

Attorney advertising.  Prior results do not guarantee a similar outcome.


Rigrodsky & Long, P.A.
Seth D. Rigrodsky
Gina M. Serra
(888) 969-4242
(302) 295-5310
Fax: (302) 654-7530


What is an ‘Obligor’

An obligor, also known as a debtor, is a person or entity who is legally or contractually obliged to provide a benefit or payment to another. In a financial context, the term “obligor” refers to a bond issuer who is contractually bound to make all principal repayments and interest payments on outstanding debt. The recipient of the benefit or payment is known as the obligee.


An obligor is a person who is legally bound to another. Debt holders are the most common types of obligors. However, in addition to the required repayment of interest and principal, many holders of corporate debt are also contractually required to meet other requirements. For a bond holder, these are called covenants and are outlined in the initial bond issue between the obligor and obligee.

Obligor in a Corporate Setting

Covenants can be either affirmative or negative. An affirmative covenant is something that the obligor is required to do, such as the need to hit specific performance benchmarks. A negative covenant is restrictive in that it stops the obligor from doing something, such as restructuring the leadership of the organization. If a covenant is breached by an obligor, the bond may become invalid and require immediate repayment, or it can sometimes be converted to equity ownership.

Since these bond issues are contractual obligations, obligors have very little leeway in terms of deferring principal repayments, interest payments or circumventing covenants. Any delay in payment or non-payment of interest could be interpreted as a default for the bond issuer, an event that can have massive repercussions and long-term ramifications for the continuing viability of the business. As a result, most bond obligors take their debt obligations very seriously. Defaults by overleveraged obligors do occur from time to time.

Obligor in a Personal Setting

An obligor is not required to be a bond holder or a holder of some other form of debt. Someone can become an obligor in his personal life, too. In family law, there are certain cases when a court order is handed down – in a divorce settlement, for example – that requires one of the parents to pay child support to the other parent. If a working spouse is told by the courts to pay the non-working spouse $500 a month, the monthly payment will make him an obligor. In situations like this, if the there are changes to an obligor’s financial status or income, he may petition the court to reduce his monthly obligation.

Provision For Credit Losses – PCL

What is the ‘Provision For Credit Losses – PCL’

The provision for credit losses (PCL) is an estimation of potential losses that a company might experience due to credit risk. The provision for credit losses is treated as an expense on the company’s financial statements as expected losses from delinquent and bad debt or other credit that is likely to default or become unrecoverable. If, for example, the company calculates that accounts over 90 days past due have a recovery rate of 40%, it can make a provision for credit losses based on 40% of the balance of these accounts.

BREAKING DOWN ‘Provision For Credit Losses – PCL’

Because accounts receivable (AR) is expected to turn to cash within one year or an operating cycle, it is reported as a current asset on a company’s balance sheet. However, since accounts receivable may be overstated if a portion is not collectible, the company’s working capital and stockholders’ equity may be overstated as well.

To guard against overstatement, a business may estimate how much of its accounts receivable will most likely not be collected. The estimate is reported in a balance sheet contra asset account called provision for credit losses. Increases to the account are also recorded in the income statement account uncollectible accounts expense.

Example of Provision for Credit Losses

Company A’s AR has a debit balance of $100,000 on June 30. Approximately $2,000 is expected to not turn to cash. As a result, a credit balance of $2,000 is reported as a provision for credit losses. The accounting entry for adjusting the balance in the allowance account involves the income statement account uncollectible accounts expense.

Because June was Company A’s first month in business, its provision for credit losses account began the month with a zero balance. As of June 30, when it issues its first balance sheet and income statement, its provision for credit losses will have a credit balance of $2,000.

Because the provision for credit losses is reporting a credit balance of $2,000, and AR is reporting a debit balance of $100,000, the balance sheet reports a net amount of $98,000. Because the net amount will likely turn into cash, it is called the net realizable value of the AR.

Company A’s uncollectible accounts expense reports credit losses of $2,000 on its June income statement. The expense is reported even though none of the AR was due in June since terms are net 30 days. Company A is attempting to follow the matching principle by matching the bad debts expense to the accounting period in which the credit sales occurred.