Monday's Top News Headlines

Here are today's top news headlines from Fool.com. Check back throughout the day as this list is updated, and follow us on Twitter at TMFBreaking.

JPMorgan Explores Alternatives for Physical Commodities Business

NextEra and Spectra Team Up for $3 Billion Natural Gas Project

Honeywell Keeps Dividend Steady

Amazon.com Hiring More Than 7,000 in U.S.

BMW Pulls Wraps Off i3 Electric Car

Bank of Cyprus Depositors to Lose 47.5% of Savings Over Limit

Group: Apple Supplier Violates Labor Laws

Perrigo to Buy Elan for $8.6 Billion

Sony Gears Up for Next Iteration of Optical Data Storage

Alibaba Introduces Cross-Border Shipping Service

Sinclair to Buy Allbritton TV Stations

Best Bank Stocks To Own Right Now

Pending Home Sales Down 0.4% From 6-Year High

Bernanke to Give Deposition in AIG Bailout Lawsuit

"The Wolverine" Tops Weekend Box Office

Pfizer to Reorganize Into 3 Business Segments

Icahn Says Dell Can't Change Voting Rules

Lockheed Martin Has a New Spymaster

Hudson's Bay to Buy Saks

Texas Production Down From 2-Year High

Yandex Confirms Co-Founder's Demise

Weight Watchers Goes On A Diet--Time To Buy?

Weight Watchers (NYSE:WTW) stock hit a 52-week low August 2 on dismal second-quarter results. The weight-management company faces increased online competition. While the outlook for 2013 is getting gloomier by the day, it still expects to make at least $3.55 per share this year. This begs the question of whether you should you buy its stock?

The Bad News
When a stock drops 19% in just two hours of trading you know there's something not quite right. So let's go over the negatives of its second quarter report:

Weight Watchers announced that CEO Dave Kirchhoff was leaving the company to pursue other opportunities. Normally, when a CEO departs a company after having served in the position for almost seven years and in other positions for another seven before that it's not a problem. However, when the announcement comes after bad earnings you have to wonder about the timing.

Revenue in the second quarter declined 3.9% on a constant currency basis to $465.1 million. Most of the decline was a result of weakness in its North America and UK meetings business. This is something that's been happening over the past few quarters as more of its revenue is generated online. The company uses "paid weeks" as its key metric for assessing its business. In recent years Weight Watchers has transitioned from a pay-as-you-go weekly membership to a monthly pass. Over 75% of its meeting paid weeks are monthly passes. In Q2, its paid weeks from meetings declined by 10.4%.

SEE: How To Evaluate The Quality Of EPS

The decline in paid weeks for meetings goes hand-in-hand with a decline in attendance. In the second quarter its attendance dropped 14.7% year-over-year to 11.9 million. Like traffic in a retail store; lower numbers is not what you want to see. Paid weeks are what retailers call conversion.

One of the most disturbing numbers in the second quarter was actually positive. Its online paid weeks increased by 4.4% year-over-year to 31.8 million. In the same quarter last year its online paid weeks increased 30.2% to 30.4 million. Between 2008 and 2012, its online paid weeks increased at a compounded annual rate of 30.1%. Given the number of active online subscribers--which it converts into revenue through paid weeks--grew by just 1.1% in the quarter, it appears that its internet business has stalled and the online competition mentioned in the opening has something to do with it.

Its net income in the first half of 2013 declined 14% to $113.7 million. Included in the decline was a $21.7 million charge for the early extinguishment of debt. In April, Weight Watchers announced that it had consolidated its $2.4 billion in long-term debt into two loans and one revolver--$2.1 billion, $300 million and $250 million--down from six loans and two revolvers. To do this it's added approximately $18 million per annum in interest expense.

SEE: Asses Shareholder Wealth With EPS

Good News
The man taking over as CEO is Jim Chambers, a 30-year veteran in the food business, hired in January as COO. In the past Chambers has been a chief executive of both Kraft Foods' (Nasdaq:KRFT) U.S. snacks business as well as Mondelez International's (Nasdaq:MDLZ) North American Cadbury operations. In his job as COO for the last seven months, he'll be more than able to handle the new responsibilities.

In terms of paid weeks on the meetings side of the business it's important to look at the numbers more closely. They declined by 10.4% in the first quarter and 9.3% in the first half. Those aren't good to be sure. If you look at it from a revenue standpoint--it's not the end of the world. Its revenue from meeting fees in the second quarter was $231.2 million, down $17.3 million in the same quarter last year. However, the revenue per paid week was $9.55, 35 cents higher than a year earlier. It might be losing attendance and paid weeks but it's managing to keep the revenue flowing in the right direction. (L8)

Jim Chambers biggest task as CEO is to get its online business back on track. What that involves I haven't a clue. However, its internet business is still a gold mine. Its gross margin for its internet revenue in Q2 was 87.5%, only 50 basis points less than in Q2 2012. I'm sure there are cost control initiatives that can't recapture any lost margins. More important is reigniting its growth engine and the 30% year-over-year increases shareholders have become accustomed to. That's going to take time.

Bottom Line
In fiscal 2012 Weight Watchers repurchased 18.3 million shares of its stock for $82 each reducing the total count by 18% to 60.9 million. On $100 million in net earnings, the buyback adds 38 cents in additional profit per share. Unfortunately, if it had waited a year, it could have saved itself about $800 million. This should be considered outgoing CEO Dave Kirchhoff's biggest mistake while in the top job. It's incumbent upon Jim Chambers that he avoid the same mistake…for shareholder's sake.

As recently as March 2012, Weight Watchers stock was over $80. Only once in its 12-year history as a public company has its stock traded below $30 and that was for two years starting in October 2008 through October 2010. Otherwise, it's performed decently enough. (L11)

Weight Watchers expects to deliver at least $3.55 per share in 2013. That's a P/E around 11. Historically, it's never had a P/E below this bellwether number. When everyone else is fearful--you should be fearless. I don't know what Jim Chambers has up his sleeve to right the ship but I really don't see it being nearly as difficult as a 20% plunge would seem to suggest.

If you've got 18-24 months--I'd be a buyer of its stock. Obesity's not getting solved with a few free apps and an activity monitor. Weight Watchers definitely has its work cut out for it. Herbalife (NYSE:HLF) was dead in the water at the beginning of 2013--look how it's turned around. Weight Watchers is a much better company. Long-term it will do just fine.

10 Best Undervalued Stocks To Watch For 2014

There are very few if any financial institutions with the kind of power and influence over the market that Goldman Sachs enjoys. Not only does the company control trillions in capital, its research is also closely followed by millions of analysts and investors in an attempt to mimic one of the most powerful investment banks in the world.

So when Goldman Sachs speaks, the market doesn't just listen, it also follows. And last month, Goldman made a very big statement.

Strategist David Kostin compiled a list of the 40 most undervalued stocks in his US Monthly Chartbook. When the report was published in mid-August the list of stocks carried upside ranges between 22% and 63%.

That comprehensive list of undervalued stocks also came with a bullish forecast on the S&P 500, where Kostin called for the S&P 500 to hit 1750 by early 2014 and 1825 next fall. That call now looks spot on after the Fed chose to delay a taper and the S&P 500 surged to 1725.

10 Best Undervalued Stocks To Watch For 2014: Tupperware Corporation(TUP)

Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.

Advisors' Opinion:

• [By John Udovich]

  Everyone is familiar with�the Tupperware brand from�consumer products stock Tupperware Brands Corporation (NYSE: TUP) and you are probably familiar with the brands�of mid cap stock Jarden Corp (NYSE: JAH) along with small cap stocks Libbey Inc (NYSEMKT: LBY) and Lifetime Brands Inc (NASDAQ: LCUT); but what about the stocks themselves? Chances are, their brands or products are right under your nose at home and you probably don�� know anything about the mid cap or small cap stock behind them.

• [By Oliver Pursche]

  European large-cap pharmaceuticals like Novartis (NVS) �and Bristol Meyers Squibb (BMY) �count amongst some of our favorite stocks right now, as do U.S. multinationals that are growing revenue and margins in Asia ��Tupperware (TUP) �is a shining example. Stay away from utilities and energy stocks, as they are likely to be the laggards over the next year.

10 Best Undervalued Stocks To Watch For 2014: Schlumberger N.V.(SLB)

Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.

Advisors' Opinion:

• [By Tony Daltorio]

  The biggest oilfield service companies should get a big lift from the boom, Moors said. That includes Schlumberger Ltd. (NYSE: SLB), Halliburton Co. (NYSE: HAL), Weatherford International Ltd. (NYSE: WFT), and Baker Hughes Inc. (NYSE: BHI).

• [By Jonas Elmerraji]

  2013 has been a stellar year for shares of oil service giant Schlumberger (SLB). Since the calendar flipped over to January, SLB has rallied more than 25%, beating the broad market's impressive pace by double digits. As oil prices linger on the high end of their historic range, SLB is well positioned to keep ticking higher.

  Schlumberger provides must-have services to national and supermajor oil firms as well as smaller E&Ps, offering up niche services like seismic surveys and well drilling and positioning. In a nutshell, SLB's job is to pull oil out of the ground as efficiently as possible. Oil firms turn to Schlumberger because the tasks they need to accomplish are too nuanced or proprietary to pull off in-house. So as long as the company continues to pour cash into R&D for drilling technology and software, the firm should continue to score lucrative contracts.

  Some of Schlumberger's most attractive opportunities right now come from overseas. The firm is one of the largest oil servicers in Russia, a key growth market in the years ahead. It's also got an important presence in smaller oil markets, where it's a big fish in a small pond. A big scale and stellar reputation should guarantee Schlumberger an attractive piece of the oil pie for years to come.

• [By Stephen Leeb]

  The portfolio is concentrated, holding the 25 largest oil-service firms in the world by market capitalization. Indeed, the top five positions account for 44% of assets, led by a 20% position in oilfield giant Schlumberger (SLB).

• [By Lee Jackson]

  Energy: Schlumberger Ltd. (NYSE: SLB)�crushed earnings by an astonishing 50.9% last quarter. With Mexico changing its policy on oil exploration, the oil field services leader may see continued strong earnings growth in the years ahead. The consensus price target for the stock is posted at $96. Investors are paid a 1.5% dividend.

Top 5 Low Price Stocks To Buy For 2014: Caterpillar Inc.(CAT)

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.

Advisors' Opinion:

• [By Chris Hill]

  Molex (NASDAQ: MOLX  ) is up big after Koch Industries agreed to buy the company for $7.2 billion in cash. Yum! Brands' (NYSE: YUM  ) same-store sales in China fall 10% in August. Caterpillar (NYSE: CAT  ) shares are up on news that China's exports grew more than 7% in August. And Middleby (NASDAQ: MIDD  ) closes in on a new all-time high. In this segment, the guys discuss four stocks making big moves.

• [By E. Michael Greenberg]

  Blue Sphere is a small company with a big future and that future starts now. Over the last two weeks Blue Sphere Corp. (OTCQB: BLSP) has announced commitments for over $25 million dollars of financing for their Charlotte, North Carolina based 5.2 Mega Watt (Mw) anaerobic digestion facility. Blue Sphere, in two press releases, announced a commitment for $17.785 million in debt financing from Caterpillar Financial Services Corporation, the financial services arm of Caterpillar Inc. (NYSE: CAT) and $7.5 million in an equity commitment from a leading environmental finance fund.

10 Best Undervalued Stocks To Watch For 2014: Dollar Tree Inc.(DLTR)

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.

Advisors' Opinion:

• [By Rising Dividend Investing]

  Falling Stock Correlation: What It Says About Consumer Spending

  As we mentioned in the Take Aways from the August 26th Investment Policy Committee meeting, the correlation index has been steadily declining. In 2008-09, macroeconomic events drove nearly every stock downwards. Specific sectors and stocks moved in tandem with one another. Today, stocks and sub-industries within each sector are performing very differently – which indicates a return to a more normal stock market environment.
  The Consumer Discretionary (also known as Consumer Cyclicals) sector is an example of an industry that has been rewarded for its fundamental success over the past 12 months. As a whole, the sector grew sales 6.1% and earnings 9.2% in the second quarter - much better than the 1.4% sales and 3.3% earnings growth of the S&P 500. While the overall sector did well in the second quarter, the table below shows how differently the 5 sub-categories of Consumer Discretionary performed:
  
  (click to enlarge)
  As we drill down even further, sub-categories of sub-sectors differ even more dramatically. Below is a snapshot of the Retailing sub-sector and its notable components:
  
  (click to enlarge)
  Specific stocks within each sub-category are varying in performance as well. General Merchandise retailers were significantly differentiated in the second quarter. Target’s (TGT) adjusted EPS were up 6.1% from 2012, while Dollar General (DG) and Dollar Tree’s (DLTR) earnings were up nearly 12% and 9%, respectively.
  The differences in sales and earnings growth amongst these different industries tell a story. The economy is not improving enough that people feel like they can let go and spend money on pure pleasures, but it is improving enough that they can afford to replace their cars and fix the doors on their houses. As these items wear out and need to be replaced, we expect the pent up demand will drive increased economic activity from cons
• [By Paul Ausick]

  Dollar General�� share price is up less than 6% in the past 12 months, but since the beginning of the year shares have risen more than 22%. And even then, Dollar General�trails Dollar Tree Inc. (NASDAQ: DLTR) in share price growth since January 1. Dollar Tree stock is up 30%.

• [By Jon C. Ogg]

  Dollar Tree Inc. (NASDAQ: DLTR) was maintained as a Buy but was removed from the prized Conviction Buy list at Goldman Sachs.

  Duke Energy Corp. (NYSE: DUK) was raised to Buy from Hold with a $79 price target at Argus.

Is This as Good as It's Gonna Get for Cardiome Pharma? (CRME)

Back on March 13th I penned some less-than-well-received thoughts on Cardiome Pharma Corp. (NASDAQ:CRME). Basically, I was warning that CRME was just one stumble away from a fairly significant selloff. Given that so many traders were a fan of the biotech stock at the time, merely posing the possibility of a dip was something of a threat to my life and limb.

A week later, CRME has fallen from post-split-adjusted price of $2.09 to a low of $1.70, moving under the very floor at $1.99 that was under attack at the time.

I didn't chime in regarding on Cardiome Pharma on March 21st to gloat, however. Mostly a revisited CRME a week later to reverse my call on the stock after the pullback, pointing out that the company still had a compelling pipeline, and was still putting some things into place to keep its then-in-jeopardy NASDAQ listing. In fact, I specifically said the stock was almost a buy, explicitly saying "Though we may not have hit the bottom yet, speculators don't necessarily have to avoid Cardiome Pharma Corp. at all costs. Traders just need to look for clear signs that a bounce is forming (like a higher close and/or a higher trading range), as that bounce has a good chance of following through. The waiting for that sign is the hardest part."

That clear sign materialized by late April when CRME crossed back above its 20-day, 50-day, and 100-day moving average lines. Though it didn't immediately follow through following that reversal, it held the line right around $2.00, keeping it in position to finally make the rally that's taken shape this month. Since the end of August, Cardiome Pharma shares have advanced from $2.11 to the current price of $3.75... a 76% runup.

Once again, I'm not reprising my look at CRME to pat myself on the back (it 'only' took a mere six months for my prediction to pan out). I'm here again to once again say it's time to reversal the call - get out of Cardiome Pharma here if you stepped into it back in late March based on my bullish thoughts.

I know that's a tough idea to digest, with the stock skyrocketing here. But, it was no tougher to digest than my bearish call from March 13th, which proved to be right, and no tougher to buy into than my bullish call from March 21st, which also eventually panned out. This stock isn't one that's been willing and able to dole out long-lived moves in either direction, so I'd be very inclined here to be proactive rather than reactive with any trade, and take what you can get while you can get it. 

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Caterpillar Gains 3% on China Optimism, Leads Dow Higher

Is Caterpillar (CAT) really in the Dow? The beaten down industrial stock has gained 3.1% to $89.95 today, more than one percentage point more than Alcoa (AA), the next biggest winner with a 1.9% gain. The Travelers Companies (TRV) has gained 1.9% to $81.99, and 3M (MMM) has climbed 1.5% to $116.78. The Dow Jones Industrial Average has risen 0.9%.

To put Caterpillar’s gain in perspective, its the stock’s largest jump since May 3, when it rose 3.2%. And with time still remaining today, it could advance even higher.

We’ll chalk the big move up to the better economic news out of China last night, as well as sentiment that the global economy is picking up steam. The Caterpillar is also an industrial stock, and those are pretty popular right now.

I wouldn’t make too much of the move just yet, however. For starters, Caterpillar has been stuck in a range since March, as the following chart shows:

And, as Morgan Stanley reminded investors last week, the market might be expecting too much from Caterpillar. On Sept 5, analyst Nicole DeBlase and team wrote:

While we agree that Mining destocking activity should cease, we see risk to Construction restocking based on our survey work – 41% of both US and China Construction dealers still think inventory is too high, and plan to reduce throughout the remainder of 2013e. Should Construction activity not pick up materially in early 2014e, we see the potential for this to remain a headwind next year – but we do still give CAT credit for 5ppts of top-line Construction benefit from restock in 2014e. We are more bearish on Mining CapEx as we do not expect the second derivative of cuts to turn positive until 2016e.

Mogran Stanley initiated the stock as an Equal Weight with an $89 price target.

How to Save Money on Kids' Clothing

Raising kids is expensive. A middle-income family with a child born in 2012 can expect to spend about $241,080 over 18 years on food, shelter, child care, education and other necessities, according to the U.S. Department of Agriculture. That's why it's always important for families to be on the lookout for ways to cut costs.

SEE ALSO: What to Know About Outlet Store Shopping

One expenditure parents can keep under control with smart shopping strategies is clothing. Although clothing makes up only 6% of total child-rearing expenses, according to the Department of Agriculture study, purchases can add up to an average of $804 a year and $14,464 per child over 18 years. If I spent that much on all three of my kids, I'd shell out more than $43,000. But I spend closer to the annual average per child on all three kids.

Here are several ways I've managed to keep the cost of clothing for my children under control.

Infants and toddlers

Yes, baby clothing is cute, and it's easy to go overboard on purchases -- especially with your first child. But it's important to remember that children grow incredibly fast during their first few years and won't wear anything very long. So there's no need to spend a lot on clothing that will be worn only a few months before your kids move on to a larger size. Plus, once kids start eating on their own and walking (and falling down a lot), their clothing will get stained. So that's another reason not to fork over big bucks for fancy clothes.

Shop at discount retailers. Stores such as Target, Walmart, Kmart and T.J.Maxx are great sources of inexpensive onesies, pajamas, playwear, outerwear and shoes for infants and toddlers. I recently bought t-shirts for $5 at Target for my 1-year-old son. And the fact is, he could care less that he's not wearing name-brand clothing.

Buy name-brand clothing on consignment. When you need your little one to look nice for more formal occasions, you can find gently worn name-brand dresses and outfits at consignment stores at half the price you would pay if you purchased them new. I stock up on nicer clothing for my son at semi-annual consignment sales held by churches and charitable organizations where I live. These events tend to have a much larger selection and lower prices than consignment stores. You can find a large selection of consignment clothing for children of all ages online at thredUP.com. You also can find good deals on gently worn name-brand kids clothing on eBay. And you can borrow nearly new designer baby and toddler clothing for special occasions at 80% off the retail price at Borrow Baby Couture.

Don't be afraid to ask for hand-me-downs. Plenty of people are more than happy to pass on their kids' clothes to others. Just be sure to ask whether they want the clothes back after your child wears them. I hardly had to buy any clothes for my son's first few months because one of my friends passed on clothing her sons' had outgrown.

Young children

I can buy whatever I want for my son, and he'll wear it. The same doesn't hold true for my two daughters, who are in elementary school. I've learned the hard way that it's a mistake to purchase items without their input. Yes, you might as well be throwing money away when you buy things your kids won't wear. But you don't want to give them free reign to pick whatever they want. So I use the following strategies -- along with the ones listed above -- to save money on clothing for my daughters:

Wait for sales. I receive several children's clothing catalogs. I let my daughters see the ones with clothes in our price range and circle what they want (up to a certain limit and subject to my approval). Then I wait for those retailers to have sales before I make any purchases. Sign up for e-mail alerts from your favorite retailers so you'll know when they're having sales. You can usually expect markdowns of 30% or more over long holiday weekends, such as Labor Day and Memorial Day, and deep discounts of 50% or more at the end of each season.

Buy the next size up. I typically buy tops and dresses for my girls in sizes larger than they actually wear. Then they'll be able to wear them longer, and I won't have to spend money buying them an entirely new wardrobe every year -- just pants, shorts and skirts in their actual sizes so they won't fall off. I do the same with coats so they can usually wear them for two years.

Mix, match and layer. A friend of mine with three sons saves money on clothing for them by making sure everything can be mixed and matched. She sticks to a simple color palette of blue, white and khaki so that any of the items can be worn together. With girls, it can be a little trickier. But I make sure that when I buy a shirt, for example, for one of my girls, it matches with shorts she has so it can be worn in the summer and pants so it can be worn in the winter. You can easily get more wear out of lighter weight summer clothing by pairing it with sweaters, jackets and leggings (for dresses) -- thus eliminating the need to buy a new wardrobe each season.

Teenagers

By middle school and high school, most kids are paying more attention to brands and might be asking for higher-priced (sometimes outrageously priced) items. However, you don't have to go broke filling their closets with the name-brand clothes they want. In addition to buying items only when they go on sale, shopping at discount retailers for basics and consignment for designer jeans and purses, try this strategy:

Ask your kids to chip in. Kiplinger Editor and Money Smart Kids columnist Janet Bodnar recommends asking teens to use a portion of their allowance or income from part-time jobs to help pay for their clothing. Parents can set a limit on how much they'll pay for clothing, and kids will have to make up the difference. This can quickly put an end to requests for expensive clothing and footwear. See Janet's tips for giving teens more responsibility for buying their own clothing.

'Fast Money' Recap: Waiting for the Fed

NEW YORK (TheStreet) -- The broader market closed near the highs of the day ahead of the statement from the Federal Reserve at the end of the FOMC meeting Wednesday.

On CNBC's "Fast Money" TV show, Guy Adami said the Fed has to do something at this point. He is expecting $10 billion to $15 billion in bond tapering. He added that Caterpillar (CAT) looks like a good short.

Brian Kelly concurred on Caterpillar and added that the risk-to-reward for holding large positions into Wednesday's FOMC meeting are not favorable.

Jim Lebenthal is a Caterpillar bull, but said he wouldn't be surprised to see some profit-taking. Karen Finerman said she's not trying to trade around the Fed since it is too hard. She added that what she owns now she'll likely want to own in a month from now, regardless of the Fed. Mike Khouw said that with Fed Chairman Ben Bernanke stepping down soon, he would be surprised if some sort of tapering was not initiated. However, he did say the economic numbers have not been that good and inflation hasn't moved much. Jon Hilsenrath of the Wall Street Journal was a guest on the show and said the Fed is in a pickle because of its forecasts of both lower unemployment and low interest rates. In a healthy economy, the two do not typically coexist, he suggested. He added that the Fed doesn't want to upset the market, which may or may not cause the central bank to taper, since the market seems to expect about $10 billion per month in tapering efforts. Many Fed officials are on the fence. Adobe (ADBE) reported earnings and Adami said he would rather be taking profits than buying the stock. Even though Qualcomm (QCOM) is near a 52-week high, Adami said he still considers the stock a buy. Lebenthal called it a cash machine and thinks it will rip right through $70 to the upside. Kelly added that if that happens, $100 per share is not out of the question. General Motors (GM) announced it was working on a long-range electric car that is $50,000 less than Tesla Motors' (TSLA) Model S, making the former stock an ideal fit for the show's "Street Fight" segment.

Finerman defended General Motors, saying that she has seen a remarkable rebound in the auto market that hasn't ended yet. She added that the stock is cheap, Europe is rebounding and the K2XX platform should increase earnings.

Kelly argued that car buyers have been hanging on to their cars longer than they ever have before, over 11 years on average. He added that people don't have to buy cars anymore and car prices used to be cheap relative to income but are no longer. He also said the company's pricing power has peaked.

Lebenthal said there's no way that General Motors can compete with Tesla, but is bullish on auto sales and specifically, truck sales.

Aeropostale (ARO) was the first stock on the show's "Pops & Drops" segment and Finerman said she would wait before initiating a position. U.S. Steel Corp. (X) jumped higher on Tuesday. Adami said steel stocks will likely keep running. Pandora (P) jumped 5%. Lebenthal said it's a positive sign when a stock rallies after a secondary offering. Herbalife (HLF) popped 4% and Khouw said the proposed $2 billion leveraged share buyback could really squeeze the shorts. Mosaic (MOS) fell 1%. Kelly said he would avoid the fertilizer space. Adami said the price action in Microsoft (MSFT) was disappointing, considering the announced $40 billion buyback program and 22% increase to the dividend. Kelly added that short-term traders could look to short the stock and use Tuesday's high as the stop. Lebenthal said that with all the stock buybacks occurring, it tells him that a peak in the stock market is not around the corner. John Netto, president of M3 Capital, was a guest on the show and suggested that equity markets will likely sell off on Wednesday on the news of tapering. He added that the biggest part of Wednesday's action will be the market's interpretation of the Fed's actions. Netto said he is long the S&P 500, thinks gold is in trouble and views a selloff as a buying opportunity. Kelly said that if the Fed cuts any of the MBS (mortgage-backed securities) purchases, then the market will, without a doubt, react negatively. FedEx (FDX) will report earnings on Wednesday and Adami said he wants to stay long into the event. Oracle (ORCL) also reports earnings on Wednesday and Lebenthal said the stock should not disappoint this time around. For their final trades, Kelly was a buyer of United States Natural Gas ETF (UNG) and Finerman said to trim long positions in Disney (DIS). Adami was buying Apache (APA), Lebenthal liked BP PLC (BP) on the long side and Khouw said to sell covered calls if you've been long Herbalife. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell Follow TheStreet.com on Twitter and become a fan on Facebook.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

Surprise! Lehman Brothers is still big

Even though Lehman Brothers went bankrupt five years ago, there are still employees working in New York and elsewhere to unwind assets.

NEW YORK (CNNMoney) Five years after its implosion, Lehman Brothers, once the world's fourth largest bank, is still a giant corporation with roughly 300 employees working full-time in offices all over the world.

Most of its remaining employees work out of two floors of the Time-Life building not far from the bank's former headquarters in midtown Manhattan.

Lehman will eventually cease to exist. A bankruptcy court opted to liquidate Lehman Brothers.

But that unwinding is expected to take at least several more years. Lehman has more than $30 billion to recover, and several multi-billion dollar legal fights left over how much creditors will recoup from the remaining assets of Lehman's main U.S. operations.

Affiliates of other international units of Lehman are separately unwinding their stakes, making the overall headcount even higher.

The largest debt holders will only get back a fraction of what they're owed. Still, they have recovered much more than many, including Lehman, had expected.

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Shortly after Lehman declared bankruptcy, Barclays (BCS) paid $1.3 billion for most of the firm's North American operations, its Times Square headquarters, and about 9,000 employees. Nomura Holdings (NMR) paid roughly $200 million for Lehman's operations in Asia.

And that was just the beginning. Lawyers and bankers for the Lehman estate estimate that creditors will receive roughly $80 billion back against $309 billion in debts as of March 2013. Creditors have already received $47.2 billion in payments.

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The rising real estate market has helped Lehman lately. Earlier this year, the estate sold its stake in apartment building operator Archstone for $6.5 billion. The valuation was still a far cry from the $22 billion price tag that Archstone was valued at in 2007, but much higher than estimates since the credit crisis.

Lehman has more than $8 billion in real estate left.

It will continue to fight battles in court that could lead to higher recoveries for creditors. Among the big battles, Lehman is still fighting a multi-billion lawsuit against JPMorgan Chase (JPM, Fortune 500) saying that its investment bank forced the company into a rapid fire bankruptcy filing because of its collateral calls.

Lehman's bankruptcy caused pain for its employees and shareholders, but five years later, many players in the saga have found ways to score big payouts.

Some hedge funds, including John Paulson's, have scored big by purchasing Lehman's debt immediately after the bankruptcy filing.

Investment bankers and lawyers have already been well compensated for recovering funds for creditors too. Since 2008, bankers and lawyers working on the bankruptcy have earned $2.2 billion.

Market Roundup: Stocks Rise For Second Week, Fed Meeting Looms

Major indexes scored their second week of gains Friday, rebounding from Thursday's slump.

The Dow Jones Industrial Average gained 75.42 points, or 0.5%, to 15,376.06 and is up 3% for the week, its best week since January 4.

The Nasdaq rose 6.22 points, or 0.2%, to 3,722.18, and is up 1.7% for the week.

The S&P 500 climbed 4.57 points, or 0.3% to 1,687.99, and is up 2% for the week.

Although retails sales and wholesale price data came out this morning, investors are of course mostly looking toward what the Federal Reserve will do at its meeting on Wednesday. Goldman Sachs expects a "dovish" taper, skimming $10 billion off the top of the $85 billion per month bond buying program. The Wall Street Journal's Jon Hilsenrath says that it's a close call (video).

In company specific news, Tesla (TSLA) reversed earlier losses to rise 0.4%; Elon Musk remarked Thursday evening about those “crazy” short sellers while J.C. Penney (JCP) ended down 0.7% after news that VNO CEO Steven Roth is leaving its board.

Chevron (CVX) gave up some earlier gains to end up 0.2%; the company reached a settlement with the Brazilian government regarding a $20 billion lawsuit stemming from a 2011 offshore oil spill.

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In athletic apparel, lululemon (LULU) gained 4.7% and Under Armour (UA) lost 2.6% as Credit Suisse upgraded the former and downgraded the latter.

Disney (DIS) also ended strong, building on yesterday's gains on news it will meaningfully increase its share repurchase plan.

4 Stocks Rising on Unusual Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

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Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

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With that in mind, let's take a look at several stocks rising on unusual volume today.

Citi Trends

Citi Trends (CTRN) is a value-priced retailer of urban fashion apparel and accessories for the entire family. This stock closed up 3.1% at $17.31 in Friday's trading session.

Friday's Volume: 297,000

Three-Month Average Volume: 81,989

Volume % Change: 241%

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From a technical perspective, CTRN jumped higher here right off some near-term support at $16.50 with above-average volume. This move pushed shares of CTRN into breakout territory, since the stock took out some near-term overhead resistance and its former 52-week high at $17.29.

Traders should now look for long-biased trades in CTRN as long as it's trending above $16.50 or some more near-term support at $16.14, and then once it sustains a move or close above Friday's high of $17.35 with volume that hits near or above 81,989 shares. If we get that move soon, then CTRN will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $20 to $22.

Intercept Pharmaceuticals

Intercept Pharmaceuticals (ICPT) focused on the development and commercialization of novel therapeutics to treat chronic liver disease utilizing its proprietary bile acid chemistry. This stock closed up 2.8% at $48.14 in Friday's trading session.

Friday's Volume: 222,000

Three-Month Average Volume: 96,544

Volume % Change: 174%

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From a technical perspective, ICPT jumped higher here right off its 50-day moving average of $46.45 and it broke out above some near-term overhead resistance levels at $46.93 to $47.33 with heavy upside volume. This stock has been uptrending strong for the last month, with shares moving higher from its low of $42.41 to its intraday high of $48.59. During that move, shares of ICPT have been consistently making higher lows and higher highs, which is bullish technical price action.

Traders should now look for long-biased trades in ICPT as long as it's trending above its 50-day at $46.45 or above Friday's low of $45.55 and then once it sustains a move or close above Friday's high of $48.59 with volume that hits near or above 96,544 shares. If we get that move soon, then ICPT will set up to re-test or possibly take out its 52-week high at $52.47.

Cencosud

Cencosud (CNCO) is a multi-brand retailer that manages and operates a network of supermarkets, home centers, department stores, shopping malls and financial services. This stock closed up 3.3% at $12.46 in Friday's trading session.

Friday's Volume: 582,000

Three-Month Average Volume: 161,298

Volume % Change: 250%

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From a technical perspective, CNCO bounced higher here right above some near-term support at $11.63 with heavy upside volume. This stock has been downtrending badly for the last six months, with shares plunging from over $19 to its recent low of $11.63. During that downtrend, shares of CNCO have been mostly making lower highs and lower lows, which is bearish technical price action. That move has pushed shares of CNCO into oversold territory, since the stock recently saw its relative strength index reading hit 30. Oversold can always get more oversold, but it's also an area where a stock can experience a sharp bounce higher from.

Traders should now look for long-biased trades in CNCO as long as it's trending above Friday's low of $12.09 or above that support area at $11.63, and then once it sustains a move or close above Friday's high of $12.46 to $13 with volume that's near or above 161,298 shares. If we get that move soon, then CNCO will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day of $13.54 to around $15. Any high-volume move above $15 will then give CNCO a chance to tag its 200-day at $16.15.

WebMD Health

WebMD Health (WBMD) provides health information services to consumers, physicians and other health care professionals, employers and health plans through its public and private online portals and health-focused publications. This stock closed up 0.55% at $33.09 in Friday's trading session.

Friday's Volume: 1.76 million

Three-Month Average Volume: 764,370

Volume % Change: 125%

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From a technical perspective, WBMD jumped modestly higher here right above some near-term support at $32 and right above its 50-day moving average at $31.29 with above-average volume. This stock recently pulled right back to its 50-day moving average at $31.29, and since then it has started to uptrend towards its intraday high of $33.24. That move is quickly pushing shares of WBMD within range of triggering a major breakout trade. That trade will hit if WBMD manages to take out some near-term overhead resistance at $34.17 and then once it clears its 52-week high at $35.28 with high volume.

Traders should now look for long-biased trades in WBMD as long as it's trending above support at $32 or above its 50-day at $31.29 and then once it sustains a move or close above those breakout levels with volume that's near or above 764,370 shares. If that breakout hits soon, then WBMD will set up to enter news 52-week-high territory, which is bullish technical price action .Some possible upside targets off that breakout are $40 to $45.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>3 Stocks Rising on Big Volume

>>4 Tech Stocks Under $10 Moving Higher

>>5 Big Short-Squeeze Stocks Ready to Pop

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

PMI Recovers in China and Much of Europe

It would make sense that China’s economy might make some modest recovery because it has been such a powerful GDP engine for so long. Not so Europe, where the recession has lingered for a record period and unemployment remains near or above historic highs. No matter the effects of the past, PMI recovered across most of each region last month.

Markit reported, in China:

After adjusting for seasonal factors, the HSBC Purchasing Managers' Index (PMI) — a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy — posted at 50.1 in August, signalling that operating conditions were relatively unchanged from the previous month. This was up from an 11-month low of 47.7 in
July, and ended a three-month period of deterioration.

In Europe:

Final Eurozone Manufacturing PMI at 26-month high of 51.4 in August (July: 50.3).

Growth improves in Germany, the Netherlands, Italy, Austria and Ireland.

And:

Manufacturers in Germany indicated a further improvement in overall business conditions during August, largely reflecting stronger new order inflows and faster output growth than those registered in July. At 51.8 in August, up from 50.7, the seasonally adjusted Markit/BME Germany Manufacturing Purchasing Managers' Index (PMI) posted above the 50.0 no-change value for the second month running and signalled the strongest overall performance since July 2011. An upturn in operating conditions was recorded in all three market groups, with consumer goods producers posting the most marked improvement in August, followed closely by investment goods producers.

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And, in France, the economy continued near recession measurements:

Overall business conditions in the French manufacturing sector deteriorated slightly in August. The headline Purchasing Managers' Index (PMI) — a seasonally adjusted index designed to measure the performance of the manufacturing economy — posted 49.7. Unchanged from July's reading, the PMI remained below the neutral 50.0 mark for the eighteenth consecutive month.

Even Spain showed it was exiting a brutal downturn:

The Spanish manufacturing sector saw a return to output growth in August, helped by a sharp increase in new export orders. That said, data suggested that firms often opted to use existing stocks to help meet demand. Concurrently, employment was reduced at a faster pace, while further falls in the prices of some raw materials led input costs to decrease fractionally during the month.

The seasonally adjusted Markit Purchasing Managers' Index (PMI) — a composite indicator designed to measure the performance of the manufacturing economy — posted 51.1 in August, up from 49.8 in the previous month. This represented the first monthly improvement in operating conditions since April 2011.

Can Royal Bank of Scotland See a Recovery Without Its CEO?

With shares of Royal Bank of Scotland (NYSE:RBS) trading around $9, is RBS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Royal Bank of Scotland is a global banking and financial services group that operates in the United Kingdom, the United States, and internationally through its two principal subsidiaries: The Royal Bank of Scotland and National Westminster Bank. In the United States, a subsidiary of the Royal Bank of Scotland, Citizens Financial Group, is a commercial banking organization. The company includes business segments of UK Retail, UK Corporate, Wealth, Global Transaction Services, Ulster Bank, US Retail & Commercial, Global Banking & Markets, RBS Insurance, Central items, Non-Core Division and Business Services. Financial services are gaining traction once again around the world. However, the bank has been seeing some heat lately as the current CEO, who has helped restructure the company, is stepping down. Also, the U.K. Government is asking the bank to split itself into “good” and “bad” portions.

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T = Technicals on the Stock Chart are Mixed

Royal Bank of Scotland stock has been struggling since the 2008 Financial Crisis. The stock has been recovering in recent times but has just broken lower which may not be very positive for it. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Royal Bank of Scotland is trading slightly below its tangled key averages which signal neutral price action, at best, in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Royal Bank of Scotland options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Royal Bank of Scotland Options	37.98%	73%	70%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
July Options	Steep	Average
August Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Royal Bank of Scotland’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Royal Bank of Scotland look like and more importantly, how did the markets like these numbers?

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	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	123.48%	-47.56%	-216.31%	50.87%
Revenue Growth (Y-O-Y)	22.85%	61.81%	-41.14%	-28.28%
Earnings Reaction	-0.38%	0.00%	1.17%	-0.42%

Royal Bank of Scotland has seen improving earnings and revenue figures over the last four quarters. From these numbers, the markets have been expecting a little more from Royal Bank of Scotland’s recent earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

How has Royal Bank of Scotland stock done relative to its peers, Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and sector?

	Royal Bank of Scotland	Bank of America	JPMorgan Chase	Citigroup	Sector
Year-to-Date Return	-12.33%	10.85%	19.04%	21.97%	18.44%

Royal Bank of Scotland has been a poor relative performer, year-to-date.

Conclusion

Royal Bank of Scotland provides a wide range of banking services to consumers and companies in the United Kingdom, United States, and rest of the world. The stock has struggled over the last several years and is not seeing any positive catalysts. Over the last four quarters, earnings and revenue figures have improved a bit, however, investors have been expecting more from the company. Relative to its peers and sector, Royal Bank of Scotland has been a poor year-to-date performer. WAIT AND SEE what Royal Bank of Scotland does in coming quarters.

LinkedIn Hedges Its Success

LinkedIn offices. Source: LinkedIn.

Share dilution is always bad, right? Not necessarily.

Case in point, LinkedIn's (NYSE: LNKD  ) proposed follow-on offering of $1 billion of shares.

"But borrowed money is so cheap"
Why would LinkedIn sell shares and dilute ownership instead of selling debt -- especially given today's low interest rates? That's the question a Bloomberg host posed to Bloomberg technology editor Ari Levy.

Though the concern is certainly merited, the answer is easy. Levy explained: "If there was ever such a thing as free money, this is really free money for LinkedIn. If you talk about the fivefold increase in the stock price, you know, they're able to sell a fraction of the shares they sold in the IPO -- less than half -- and bring in twice the amount of money."

LinkedIn, near its all-time high of about $248, is on a tear. In the past 12 months alone, shares are up about 120%. This gives LinkedIn an opportunity to take advantage of money that is far cheaper than it was just a year ago.

Is it worth the share dilution?
A $1 billion offering would boost LinkedIn's share count by about 3%. Though the dilution wouldn't be huge -- it's still meaningful.

Is the dilution worth an extra $1 billion on the balance sheet? The social network already has $873 million in cash. Isn't that enough? What value does this extra cash bring?

Essentially, LinkedIn is hedging a portion of its lofty valuation with tangible cash. The market is a forward-looking mechanism. And in LinkedIn's case, it's very forward looking, with enormous growth already priced into the stock. LinkedIn's decision to sell $1 billion of shares is a way for management to secure a portion of this confidence and beef up its arsenal with cheap money.

LinkedIn shareholders who believe in the stock's growth story may be disappointed, thinking that shares will continue to rise and money will just get cheaper for the company. Maybe they're right. But nothing is wrong with hedging a portion of investors' ecstatic confidence in the company by converting that confidence to usable cash. In the case of a downturn, a sinking share price can't take away the company's cash. Even more, the company has an opportunity to employ that cash in lucrative opportunities.

LinkedIn fortifies its position
When it's all said and done, another offering for LinkedIn shares doesn't boost upside opportunity, but it does help to buffer the downside by doubling the company's cash position. Taking into consideration both sides of the coin, that makes for an incrementally higher total expected value for both the business and the stock.

Do you want to learn more about LinkedIn? Watch our jaw-dropping investor alert video today to find out why The Motley Fool's chief technology officer is putting $117,238 of his own money on the table, and why he's so confident LinkedIn will be a huge winner in 2013 and beyond. Just click here to watch!

401(k) Expenses Dropped in 2012: ICI

The expenses that 401(k) plan participants incurred for investing in long-term mutual funds—which include equity, bond and hybrid funds—declined in 2012, consistent with the downward trend of the past decade and a half, according to a just-released report by the Investment Company Institute.

The report, The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2012, found that plan participants holding mutual funds tend to invest in lower-cost funds. In 2012, the average expense ratio on equity funds offered for sale in the United States was 1.4%.

401(k) plan participants who invested in equity mutual funds paid less than half that amount, 0.63%, the study found. Expenses paid by 401(k) investors were also lower than the asset-weighted average expenses for all equity fund investors (0.77%).

“Our research bears out the fact that 401(k) plan participants investing in mutual funds tend to hold lower-cost funds,” said Sean Collins, ICI’s senior director of industry and financial analysis, in a statement. “As our study notes, this provides a market incentive for funds to offer their services at competitive prices. In addition, employers, as 401(k) plan sponsors, consider a range of factors when selecting investment options for the 401(k) plan, including performance, services, funds’ investment objectives, and, importantly, cost.”

Added Collins: “Plan sponsors are under competitive pressure to include in the plan menu funds that are responsive to participants’ desire for quality funds at a reasonable cost.”

For the last decade and a half, the ICI report notes that the costs 401(k) plan participants have incurred for investing in long-term mutual funds have declined.

Andrew Miller, director of retirement and investor services for the Principal Financial Group, told AdvisorOne in an email message that the ICI's report “validates one of the advantages of employer-sponsored plans: participants of all incomes have access to competitively priced mutual fund options they may not be able to access outside of the plan. There are no minimums for participants in 401(k) plans."

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Miller adds that "while fees are important, the most effective way to evaluate their reasonableness is in the context of all the services offered to the plan and participants. The report emphasizes the valuable role of plan sponsors as fiduciaries in selecting and monitoring investments as well as other plan services that meet the needs of their employee demographics. As fiduciaries, they are charged with making sure fees are reasonable, another key advantage to employer-sponsored plans.”  

In 1998, 401(k) plan participants incurred expenses of 0.74% of the 401(k) assets they held in equity funds, the ICI report states. By 2012, that had fallen to 0.63%--a 15% decline. The expenses 401(k) plan participants incurred for investing in hybrid and bond funds have fallen even more, by 19% and 23%, respectively, from 1998 to 2012.

In line with the trend in recent years, the average expense ratio 401(k) plan participants incurred for investing in equity funds declined from 0.65% in 2011 to 0.63% in 2012, the study found.

Similarly, expense ratios that 401(k) plan participants paid for investing in hybrid funds fell from 0.61% in 2011 to 0.59% in 2012. The average expense ratio 401(k) plan participants incurred for investing in bond mutual funds dropped from 0.52% in 2011 to 0.50% in 2012.

Moreover, the study found that more than half of the $3.6 trillion invested in 401(k) plans at year-end 2012—or $2.1 trillion—was invested in mutual funds. Of the $2.1 trillion in 401(k) assets invested in mutual funds, 55% was in equity funds, 26% in hybrid funds, 15% in bond funds and 5% in money-market funds.

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