TheChek News Flow

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La monnaie numérique bitcoin attire autant qu'elle inquiète. La banque centrale chinoise a officiellement interdit aux institutions financières, jeudi 5 décembre, d'utiliser cette monnaie non régulée, susceptible de mettre à mal le contrôle qu'exerce l'Etat sur les flux d'argent en Chine. D'autant que sa valeur fluctue fortement. La crainte qu'elle interfère avec les monnaies classiques, contre lesquelles elle peut être échangée, est grande. Elle l'est également à la Banque de France, qui a publié jeudi (PDF) une note mettant en garde contre l'utilisation de la monnaie, qualifiée de « hautement spéculative » et qui « représente un danger financier certain » pour sesdétenteurs. La Banque de France appelle aussi à une action des autorités contre les activités illicites permises par cette monnaie numérique. Récemment, pourtant, plusieurs entreprises ont annoncé accepter les paiements avec cette monnaie. Pêle-mêle, on retrouve des voyages dans l'espace proposés par Virgin, un outil de création de magasins en ligne – Shopify – ou l'achat de jeux vidéo à prix libre. Mais l'impact du bitcoin pour ces pionniers est difficile à évaluer.

UNE « COURSE À L'ARMEMENT » Le bitcoin est une monnaie numérique sécurisée, dont toutes les transactions sont publiques. Il n'y a pas d'autorité centrale ou de propriétaire : le réseau d'ordinateurs qui fait fonctionner bitcoin se gère lui-même. Si les transactions sont publiques, un internaute n'est pas identifié par son nom et peut avoir autant de comptes qu'il le souhaite. En fournissant de la puissance de calcul au réseau, c'est-à-dire en laissantfonctionner en continu sur son ordinateur le logiciel qui sécurise les transactions, un utilisateur acquiert de l'argent. Cette activité est appelée le « minage ». Seule grande règle : plus le temps passe, moins un calcul génère de bitcoins. Malgré cela, des disques durs donnant accès à de vieilles réserves de bitcoins peuvent désormais valoir plusieurs millions d'euros. Mais cette règle conduit à une « course à l'armement », comme l'expliqueBusiness Insider. En une journée, KnCMiner, un constructeur de matériel dédié au minage, a ainsi vendu pour 8 millions de dollars (5,9 millions d'euros) d'ordinateurs spécialisés, à 10 000 dollars (7 300 euros) pièce. Equipées de processeurs spécifiques, ces machines seraient capables de miner pour environ 2 bitcoins par jour, soit actuellement plus de 1 500 euros. RECRUDESCENCE DE « CASSES » Les sommes en jeu, souvent des millions d'euros, attisent les convoitises. Un moyen commun d'échanger des bitcoins est de les placer dans un point d'échange, qui permet de convertir la monnaie numérique en monnaies classiques, comme l'euro. Mais ces points centraux sont devenus la cible privilégiée de pirates en quête de devises. C'est le cas du Bitcoin Internet Payment Services (BIPS), un service danois qui se revendique comme le plus gros point d'échange européen. Comme le rapportait le site Infoworld le 26 novembre, les BIPS ont été visés par une attaque en « déni de service », destinée à les rendre inaccessibles. Une seconde attaque a permis aux assaillants de mettre à mal la sécurité du site et de voler 1 295 bitcoins, valant plus de 1 million d'euros. BIPS a alors décidé desupprimer son service de « porte-monnaie » (stockage en ligne de bitcoins) pour se concentrer sur les échanges. Au début de novembre, c'était le porte-monnaie Inputs.io qui était piraté. Le voleur s'est accaparé 4 100 bitcoins, pour une valeur de 1 million de dollars à l'époque… 4,4 millions de dollars (3,3 millions d'euros) aujourd'hui. Le site a depuis fermé. Plusieurs autres attaques ont eu lieu en novembre, concernant de plus petites sommes. A chaque fois, les utilisateurs lésés expriment leur mécontentement sur des forums spécialisés… eux aussi sujets aux attaques. L'un des forums les plus appréciés, Bitcointalk, a été hacké entre le dimanche 1er et le lundi 2 décembre. Un assaillant a détourné le nom de domaine du site (bitcointalk.org) et a puintercepter toutes les données transitant vers le site dans la nuit : mots de passe, messages envoyés, messages privés, informations techniques… « LA PLUS GRANDE ESCROQUERIE DE L'INTERNET CACHÉ » Ces nombreux incidents n'ont pas contribué à améliorer l'image de la monnaie, qui est déjà un outil de choix pour l'achat d'objets illicites (armes, drogue, faux papiers…). Elle est même l'unique moyen de paiement de certains magasins en ligne cachés de l'Internet (dark Web). C'est notamment le cas du premier d'entre eux, The Silk Road, fermé au début d'octobre et rouvert un mois plus tard. Ces sites, dont les gestionnaires sont anonymes, sont eux aussi l'objet de « coups » réguliers. Le plus récent a touché Sheep Marketplace, un équivalent d'eBay spécialisé dans la drogue et décrit comme le service le plus populaire après la fermeture de The Silk Road, au début d'octobre. Selon Computerworld, dimanche 1er décembre, la page d'accueil du site a été remplacée par le message« Sheep is down » (« Sheep est tombé ») et annonçait qu'un vendeur avait volé les 5 400 bitcoins des utilisateurs, représentant 4,3 millions d'euros. Certains utilisateurs soupçonnent les créateurs du site d'être partis avec la caisse en blâmant un pirate imaginaire. Avant l'incident, certains vendeurs réputés proches des gestionnaires auraient cassé les prix et réclamé un paiement immédiat… et les administrateurs auraient empêché les utilisateurs deretirer leur argent quelques jours avant le « vol ». Au total, plus de 36 millions d'euros auraient disparu. S'il ne s'agit pas de la première fermeture inopinée parmi les places de marché illicites, celle de Sheep Marketplace est déjà décrite comme « la plus grande escroquerie de l'Internet caché ». Les administrateurs du site ont dirigé les membres vers une seconde place de marché, qui nie actuellement tout lien. Une place concurrente, BlackMarket Reloaded, a décidé de fermer dans la foulée, en laissant ses membres retirer leur argent. Le site explique ne pluspouvoir garantir l'anonymat des internautes. RANÇONS ET VIRUS MINEURS D'autres activités illicites profitent du bitcoin, notamment des virus. Par exemple CryptoLocker, un ransomware, qui infecte un ordinateur et chiffre le contenu du disque dur, rendant les données inexploitables. Le logiciel affiche ensuite ses exigences : un paiement sous quelques jours, sous peine de voir les fichiers définitivement inaccessibles. La rançon pour retrouver les fichiers est payable en bitcoins. Une mise à jour récente a d'ailleurs modifié le montant demandé, pour intégrer les fluctuations de la monnaie : de 2 bitcoins, la dîme est passée à 0,5 bitcoin (400 euros). D'autres virus se sont spécialisés dans le minage à partir d'ordinateurs infectés. Plutôt que de laisser fonctionner le logiciel de minage sur leur propre ordinateur, certains utilisateurs créent des virus chargés de miner des bitcoins ailleurs en leur nom. Ils profitent notamment du fait que, pour se financer, de nombreux logiciels intègrent des « applications tierces non voulues » – par exemple des barres de recherche pour navigateurs Web – lors de leur installation, souvent grâce à une case laissée cochée par l'utilisateur. Certains y intègrent discrètement des outils de minage. Des utilisateurs de l'antivirus MalwareBytes en ont repéré, à la fin de novembre : un logiciel de la société Mutual Public avait téléchargé un mineur bitcoin, qui consommait la moitié des ressources des PC. Une pratique encore rare, qui pourrait segénéraliser si elle se révèle efficace.

Mexico Energy Bill to End Pemex's Monopoly on Oil Bill Aims to Open Energy Sector to Competition, Lift Output

MEXICO CITY—Mexico's government and the main opposition party sealed a historic deal Saturday to open up the energy sector to competition, ending a 75-year-old monopoly of state-owned oil firm Petróleos Mexicanos, according to the final draft of the energy bill agreed upon by the two sides.

Mexico's Congress is expected to pass the bill, which has been months in preparation, in the coming week.

The changes include amendments to three key articles of the Mexican constitution—25, 27 and 28—which form the legal core of the country's nationalistic oil laws. The ruling Institutional Revolutionary Party, or PRI, and the conservative National Action Party, or PAN, combined have sufficient votes in both houses of Congress to secure the two-thirds majority needed to change the constitution.

The bill breaks a long-standing taboo in a country that expropriated the oil industry in 1938 under former President Lázaro Cárdenas, making oil a symbol of national pride and sovereignty. Mexico is the world's ninth-largest oil exporter, and is thought by geologists to hold the fourth-largest reserves of shale gas.

The energy overhaul is the flagship economic proposal of President Enrique Peña Nieto as his administration aims to increase long-term economic growth and lift oil production that has stagnated in recent years around 2.5 million barrels a day.

The bill would end the restrictive laws that have kept private companies out of oil and gas production, except for service companies working under contract to Pemex. The changes allow the government to partner with private firms through different kinds of contracts, according to the final draft, sharing with them the risks of exploration activities.

Mexico will allow profit-sharing contracts, where oil firms are paid in cash; production-sharing contracts, where oil barrels are divided between the government and the companies; and licenses, through which the firms take control of oil at the well head, paying royalties and taxes to Mexico. Licenses mimic concessions, although formally concessions will continue to be forbidden.

Mexico will choose the most suitable contract for each specific project. Licenses would likely be used for more complex, riskier deposits such as shale gas or ultradeep-water oil. Pemex will have preferential rights to bid for blocks, and contracts for other firms will be awarded via public tenders.

The changes have the potential to transform not only the oil industry, but also the country. Pemex would cease to be the sole operator authorized to explore for, produce, and refine oil and gas.

The bill also creates a sovereign oil fund, modeled after a similar one in Norway, to channel part of the oil income into long-term savings and pensions. A trust controlled by Mexico's autonomous central bank will manage the fund, according to the final draft, as the opposition PAN demanded.

Oil and gas reserves will be owned by Mexico, but firms will be able to book them on their balance sheets as expected cash flow, which is critical for companies to secure project financing.

For Mexico, the overhaul could bring the billions of dollars required to develop deep-water hydrocarbon reserves and allow it to avoid becoming a net importer of oil, something Pemex officials have warned could happen as early as 2020 if nothing is done. They say Mexico needs investment of around $60 billion a year to exploit those resources, while Pemex is only investing around $25 billion a year.

The final draft of the energy bill is closer to the PAN's proposal than the initial plan presented in August by Mr. Peña Nieto. The pro-business PAN pushed for the creation of the oil fund and for greater flexibility for the private sector. The PAN tried several times when in power, from 2000 to 2012, to open energy to the private sector, but the PRI didn't support such moves.

The Party of the Democratic Revolution, or PRD, and other leftist groups, oppose the energy bill, which they regard as giving up state control of a strategic industry. Critics say the energy overhaul opens the door to a future sale of state firm Pemex, while transferring the nation's oil income to private interests. The government has repeatedly denied there are any plans to privatize Pemex.

Constitutional changes included in the energy bill were accompanied by several temporary dispositions detailing points that secondary legislation must contain. The secondary legislation is expected to be passed in the first half of next year.

Write to Juan Montes at juan.montes@wsj.com

Regulators look at Barnes & Noble books

Barnes & Noble shares plunged by 12 per cent on Friday as news of a regulatory probe into its accounting sparked investor worries over the book retailer’s ability to sell its digital business. The chain said that the US Securities and Exchange Commission had begun an investigation into an allegation by a former employee that it "improperly allocated" some technology expenses between its digital and bricks-and-mortar business. Analysts have said that Barnes & Noble’s Nook digital business – which includes ebooks, ereaders and tablet computers – could be divested from its bricks-and-mortar stores. That possibility had helped to prop up the company’s share price. Rather than becoming a standalone business, analysts say the more probable outcome is that the Nook business will be bought by a hardware or content company, but even before Friday’s disclosures the Nook business had deteriorated in recent months. David Schick, analyst at Stifel Nicolaus, said the ebook market was less attractive than it once was because sales growth has slowed and Apple and Google have increased their investments in the sector, alongside the market leader, Amazon. In the quarter to October 26, the Nook business reported a 32 per cent year-on-year fall in sales to $109m and a loss before interest, tax, depreciation and amortisation of $45m, although the loss was slightly smaller than in the previous year. Barnes & Noble said on Friday that the SEC had begun an investigation into "a former non-executive employee’s allegation that the company improperly allocated certain Information Technology expenses between its Nook and Retail segments for purposes of segment reporting". In addition, it said the probe concerned the company’s restatement of earnings announced on July 29 2013. A company spokeswoman said: "We are co-operating with the SEC, including responding to questions and requests for documents." The news sent its shares down to $14.43. Even though Barnes & Noble is now the US’s only national book chain following the demise of Borders in 2011, it is still struggling to secure its future in the era of ecommerce and digital media. Speculation about a company split was stoked in July by Barnes & Noble’s decision not to replace its outgoing chief executive, William Lynch, but instead to appoint two separate leaders for its book stores and digital business. Barnes & Noble had ploughed millions of dollars of capital into Nook. Mr Schick, the analyst, said the most logical buyer for the business would be a hardware company that already had some of the expertise it needed. "The real value would be in finding somebody to bring to the table all the things Nook had to invest in," he said. Barnes & Noble has not previously said that it wants to sell the business and it did not respond to a request for comment on its intentions.

Bob Diamond returns to banking

Bob Diamond is making a dramatic return to banking, launching a vehicle with Africa’s youngest billionaire that hopes to raise millions of dollars to invest in African banking. Mr Diamond is partnering with Ashish Thakkar, chief executive of Mara Group, a $1bn conglomerate with business in 19 African countries. The two financiers have approached investors hoping to raise $250m and aim to list the cash shell on the London Stock Exchange before the end of the year, according to people familiar with the initial public offer. The vehicle, known as Atlas Mara, plans to buy a stake in an African bank. "They plan to take control of an African bank and grow around it", one person with knowledge of the deal said. "It will be a multi-country operation, but not pan-African," the person added. Atlas Mara plans to list its shares on the London Stock Exchange in about 10-15 days if the roadshow and the capital raising goes as planned. The vehicle has yet to secure any funds, but its backers are confident of reaching the $250m target. Mr Diamond, through a spokesperson, declined to comment and Mr Thakkar could not be reached. Mr Diamond left Barclays last year after the bank was fined for manipulating the Libor interbank lending rate. The American banker had transformed the British bank, spending billions of dollars building an investment banking operation which he oversaw for years. Since his departure in 2012, he has kept a relatively low profile. Mr Diamond quietly set up Atlas Merchant Capital in New York several months ago. He sees the vehicle as akin to an old-style merchant bank that will engage in a series of deals in collaboration with partners. Although Mr Diamond has been involved in a couple of recent US deals, including a personal investment in asset management business Incapture, Atlas Mara is his first merchant bank deal. He has made no secret of his desire to focus his investment strategy on Africa, already the location for much of his family foundation’s work. He recently met senior officials in Nigeria, fuelling suggestions he may be seeking to buy one of the country’s troubled banks. The Atlas Mara acquisition vehicle resembles similar cash shell companies launched in 2010 and 2011 by financier Nathaniel Rothschild to buy mining and oil assets. Vallar and Vallares, as they were known, attracted $1bn and $2.2bn in their IPOs in London. But since then Vallar has been hit by controversy after it invested in Bumi, the Indonesia-based coal mining group. Vallares, on the other hand, has performed better with its bet in Iraq’s Kurdistan oil sector. Sub-Saharan Africa is attracting banks because most of the region’s 1bn population does not use banking services – only a quarter of the population holds a formal bank account. Fewer than five per cent of Africans have a credit card, according to industry estimates. Africa is largely dominated by a few regional groups – including South Africa’s Standard Bank, Ecobank, a Togo-based pan-African bank with business across the continent, and Nigeria’s United Bank for Africa, which is expanding outside its home base. International banks including Standard Chartered and Barclays have also invested heavily in the region, and Africa has also attracted the investment arms of the likes of JPMorgan, Deutsche Bank, Credit Suisse and Citigroup. Sub-Sharan Africa is experiencing its strongest economic growth in decades, supported by higher-than-historical commodities prices, political stability, strong foreign direct investment flows and better governance. The International Monetary Fund estimates the region will grow next year at a rate of 6 per cent, second only to developing Asia’s growth rate of 6.5 per cent, and well above the global rate of 3.6 per cent. Mr Diamond, who lives is New York, still has a home in London’s Belgravia district and is a frequent visitor to the city. Last week it emerged that he would be appearing in court to give evidence in a case brought against Barclays by Guardian Care Homes following the Libor interest rate scandal.

Coach's New Bag of Tricks

--> Coach's stock could climb 25% in two years, to $70, as new CEO Victor Luis transforms the firm.

The fabled leather maker has a new boss and a tough competitor. How it could regain its cachet—and fatten investors' wallets.

The new buzzwords at Coach these days are "magic and logic"—the blending of ideas, design, and creativity with rigorous knowledge-based decision making. That duality is personified by the company's leaders, old and new: Chairman and CEO Lew Frankfort and President and Chief Commercial Officer Victor Luis, who is set to take the baton from Frankfort in January. A 34-year veteran at Coach (ticker: COH), Frankfort built the company into a $16 billion global retailer of handbags and accessories.

Seated in a small, white conference room at Coach's New York headquarters, Frankfort, 67, dressed in slacks, vest, and an open-collar shirt, fairly crackles with charisma and energy. Luis, 47, in his familiar jeans, is more pensive, fingers to his lips, speaking of design and data with equal passion and precision. Luis joined the company eight years ago as the head of Coach Japan and directed Coach's very successful expansion into China.

"My new role," says Frankfort, "is to partner with Victor to drive the transformation; I'll provide counsel and strategy. I have every confidence that under our leadership, Coach will resume growth."

The handoff will take place in less than a month, with Frankfort becoming executive chairman. Coach has been selling Frankfort and Luis as a corporate duo, betting that their personalities and skill sets will complement each other enough to spark the 72-year-old company through one of the most crucial periods in its history. Consumer spending is pinched, as the economy still searches for its legs, and after several years of double-digit growth, sales are slumping, hurt by competition from the likes of Michael Kors (KORS). Indeed, concern about weakening sales amid competition has dropped the former growth stock into the bargain bin, where, at $56, it's selling for 16 times forward earnings estimates.

Some investors are snapping up the shares, betting that they can get to $70 in two years. These bulls figure that Luis is the right man to continue leading the company's transformation into a global lifestyles brand from mainly an accessories and handbag maker. "I like the fact that he recognizes the need for a change," says Ann Miletti, senior portfolio analyst with Wells Fargo Asset Management. "Clearly, the brand needed to be refreshed and expanded into lifestyle, and he has the capability," based on his record at the company.

Luis is also expected to keep expanding into promising growth areas, such as ready-to-wear and men's accessories, seen as a $5 billion global opportunity. Coach, which got its start as a leather-goods maker in a Manhattan loft in 1941, says it has a leading 29% share of the $10.3 billion U.S. premium handbags and women's accessories market. The company now offers all manner of accessories—including belts, handbags, wallets, and watches—in more than 1,000 retail locations, mostly in the U.S. and Asia. Women's handbags generate 58% of sales. Frankfort helped create the accessible luxury market, with classic, well-made handbags that now average slightly less than $300, though some go for well above $1,000. Coach shares have soared more than 25-fold since the company went public in 2001.

Coach's success, not surprisingly, has spawned challengers, lured by its industry-leading gross profit margins of more than 70%. In the past three years, Michael Kors has captured an estimated 16% of the market, up from the mid-single digits.

LUIS HAS REPEATEDLY said that expanding Coach overseas—especially in China, where sales increased over 35% in the September quarter—is one of the key pillars of growth for the retailer. Japan, where the company expanded aggressively and now operates 190 stores, also strikes Coach as a long-term growth market, thanks to its effective economic policies. In the short term, however, sales declined 2% in constant currency in the September quarter, and Luis says that the pending increase in the consumption tax in Japan to 8% from 5% is causing the company some "anxiety." Still, Coach plans to open five to 10 stores—mostly men's—in Japan in fiscal 2014.

Born in Portugal and raised in Rhode Island, Luis points out that his personal experience "gives me broad strategic vision" in building brands globally. Most analysts agree. "Luis brings an abundance of experience running an international business to the CEO position, which we view as critical to the company's future," John D. Morris, senior retail analyst with BMO Capital Markets, wrote in a recent report.

For now, international is a mixed bag. In the recent quarter, Coach reported that sales declined slightly in international business, from which it gets 32% of revenue, or $365 million, mostly due to weak yen. The segment grew 9% in constant currency, thanks to China, which enjoyed double-digit comparable-store sales. Coach plans to open 30 new stores in China this fiscal year, bringing total locations to 156. The company expects China sales to reach $530 million this year, or roughly 10% of total sales, from $430 million in fiscal 2013, which ended in June.

One of the key people that Luis will turn to in the transition is Stuart Vevers, the former creative director at Spanish retailer Loewe. Recently hired as executive creative director, Vevers replaces long-time designer Reed Krakoff, who resigned this summer after he and a group of investors bought back the Reed Krakoff brand from Coach. That's a good thing, according to Morris of BMO. Vevers will focus exclusively on Coach, he explains, "whereas we believe Krakoff's balancing act between his namesake line and Coach proper" hurt new-product development.

In their interview with Barron's, Frankfort and Luis candidly admitted that Coach had been slow to react creatively to the rising competition, opening the door for rivals to nip at the company's market share. Most notably, Kors' edgy and fashion-forward bags and sexy black military-style dresses are helping drive 25% same-store gains at that company, even as Coach reported flat-to-negative sales in recent quarters.

The Coach "product and brand got too functional and lost the romance a luxury brand requires," explains independent retailing consultant Marie Driscoll. "In terms of product quality, Coach offers much more bang and bag for the buck, but the brand just isn't sexy now. Sizzle sells, and Michael Kors has it."

VEVERS DESIGNS WON'T hit the market until next fall, but the new products Coach is bringing into stores this spring, and which Barron's previewed, already represent a promising departure from some of the current items, which frankly look a bit stale. Upcoming bags, for example, will revert to classic, clean design with an understated logo and smart use of materials such as embossed ostrich leather. The Borough bag in pebbled leather, for instance, which Luis is especially excited about, is selling well at $548 and comes in various sizes, such as large and mini; the new version features tanned cowhide with stripes in muted colors.

Luis aims to continue Coach's focus on factory outlets, though some critics grouse that selling aggressively to outlets is denting the brand's cachet. The company is growing square footage at its factory, and for good reason. The 193 outlets account for up to 60% of the retailer's North American sales, according to analysts, and are very profitable. Rents are low, and the materials the company uses in the products are less expensive than those used for its core products.

All that sits well with Ariel Investments, which bought Coach shares earlier this year in the mid-$40s, betting that in the next three to five years, the retailer will regain its magic. In the nearer term, Ariel thinks that Coach could earn $4 a share in fiscal 2015. Affixing a 18-times multiple to that estimate, which is in line with the company's 10-year valuation average, Ariel analyst Jamil Soriano comes up with a $72 stock, about 30% upside from the current price. That is still below the $77 Coach hit last year. "It was a good opportunity to take a stake in a solid brand" going through short-term head winds, says Soriano, whose firm owns roughly one million shares. "I think they have a solid plan in place."

One part of the plan is likely lowering the bar so new management can leap over it. After reporting disappointing fiscal first-quarter results, including a 7% drop in North American same-store sales, due to weakness in handbags and slow store traffic, Coach guided results lower for the current year, saying it expects same-store sales to fall to high single digits and overall sales to drop to low single digits. Coach, which has 351 retail stores, is still planning to grow square footage globally about 9% and open 20 new stores in North America. Analysts now expect the retailer to earn $973 million, or $3.48 a share in fiscal 2014, down from $3.73 last year. Revenue is expected to come in almost flat, at $5.1 billion.

Coach generated $1.2 billion in free cash flow last year. It has little debt and $854 million in cash and equivalents on its balance sheet.

Coach has been aggressive at returning cash to shareholders. Since initiating its first dividend in 2010, it has raised it four times. The stock yields 2.4%. And over the past 5½ years, Coach has reduced shares outstanding by more than 25% through buybacks.

Along with a snappy Coach clutch, a few Coach shares might make great stocking stuffers. The smart bet is that under Luis, Coach will become fashionable again, on Main Street and Wall.

Not Done Yet

Even after the market's big runup, some shares look tempting.Why GM, Deere, Nestlé, MetLife, Citi, Intel, US Airways and others could climb.

It has obviously gotten tougher to find bargains in the stock market after the broad rally that has lifted the Standard & Poor's 500 by 27% in 2013.

But using screens, investor feedback, and Wall Street research, we've come up with our 10 favorite stocks for 2014. This is the fourth year in a row that we've predicted the coming year's winners in a cover story. The 2014 list includes well-known companies likeGeneral Motors (ticker: GM), Citigroup (C), Nestlé (NSRGY), Intel (INTC), andDeere (DE).

It's unlikely that this bunch will do as well as the 10 stocks we selected a year ago ("Where to Invest," Dec. 10). That group, led by Western Digital (WDC),BlackRock (BLK), and Viacom (VIA.B), was up, on average, 35.2% through Thursday, nine percentage points better than the S&P 500.

The success of last year's list shows the allure of stocks with low price/earnings ratios. Five of the 10 had single-digit P/Es, based on then-current projections of 2013 earnings, and only one, Barnes & Noble (BKS), had a multiple above 13. Buying low-P/E stocks lets investors benefit from both earnings growth and P/E-multiple expansion, which is what played out this year.

Based on predicted 2014 profits, six of the 10 stocks on our current list have multiples of 10 or lower -- Citi, GM, Deere, MetLife (MET), US Airways Group (LCC), andBarrick Gold (ABX). Buying cheap stocks looks like a good approach, given the market's elevated level.

For the record, our 2012 list beat the market, gaining 17% against a 12.6% rise in the S&P,while the 2011 list trailed the benchmark index, falling 7% as the S&P dropped 2%. We think that all 10 of our new selections can produce 15% total returns in 2014. Our picks, in alphabetical order:

Barrick Gold: Want a depressed play on a depressed commodity? With a year-to-date decline of 56%, to $15.50, Barrick trades below where it did a decade ago when gold was below $400 an ounce, versus $1,228 now.

Barrick's founder and longtime chairman, Peter Munk, a key architect of its disastrous expansion strategy of recent years, is stepping down at year end. And Barrick has stopped development of a huge mine in South America that faced political obstacles. It also has shored up its balance sheet with a $3 billion equity offering in October. Barrick trades for just seven times projected 2014 earnings. What it has lacked is free cash flow, because of heavy capital expenditures. Management is moving to generate more free cash, but it can do more.

Earlier this year, we estimated that Barrick would be worth $44 a share in a breakup scenario. That looks high now, given weaker gold prices and the dilutive equity offering. But Barrick still could be worth $35 or more. It wouldn't be surprising to see an activist try to mine gold from Barrick next year.

Canadian Natural Resources: This company has one of the best production outlooks among large North American energy outfits and could gush free cash flow after it completes an expansion of its oil-sands facility, scheduled for 2017.

Its shares (CNQ), now trading at $32, have risen just 11% in 2013, mostly because the company is getting a deeply discounted price for its Canadian heavy crude, which accounts for 45% of its output. That crude trades at a discount of $30 a barrel, relative to West Texas Intermediate, the U.S. benchmark. The gap could narrow next year, boosting cash flow, because of increased rail capacity and the potential go-ahead for the Keystone XL pipeline (see Follow-Up).

A 60% dividend boost in October has brought the stock's current yield to 2.4%. Energy output, heavily weighted toward oil, is likely to rise 7% in 2014. Free cash flow could hit $5 billion annually by 2018, from $1 billion next year, once the Horizon oil-sands facility expansion is done.

Citigroup: Well capitalized, Citi has the best international franchise among major banks. It also has a cheap stock. At $51, it trades for less than 10 times projected 2014 earnings of $5.41 a share and below its tangible book value of $54.52. No other big financial company trades below tangible book. And Citi's P/E is one of the lowest in the sector.

The bank has an unmatched global presence in 100 countries and gets almost 60% of its revenue outside of North America, triple the percentage at JPMorgan Chase (JPM). Citi's low-key CEO of the past year, Michael Corbat, actually is a banker -- Citi's first such leader in more than a decade -- and he's winning over Wall Street with his disciplined, no-nonsense approach. He aims to boost Citi's still-anemic returns, which could lead to $6-plus in profits in 2015.

Citi is expected to get the regulatory go-ahead for a big boost in its trivial penny-per-quarter dividend and to expand its share buybacks in 2014. The payout could be 30 cents or more per share next year, and the buybacks could total almost $5 billion, writes Bernstein analyst John McDonald. He rates the stock Outperform, with a $57 12-month price target. Deere: It's rare to find any industrial stock changing hands at 10 times earnings, let alone an industry leader like Deere, whose shares fetch about $84.Caterpillar (CAT) and the like have mid-teens multiples on 2014 earnings. Some smart investors own Deere, including Berkshire Hathaway (BRK.B) and Cascade Investments, Bill Gates' investment arm.

The knocks on Deere, the top producer of farm equipment, are that the U.S. farmers are being pinched by lower grain prices and that reduced government tax incentives might crimp sales. With Deere projecting a single-digit sales drop for its current fiscal year, ending next October, Wall Street views it as dead money. Yet, a low valuation can create its own catalyst, such as an activist investor.

The long-term outlook for Deere is good because a rising global population will need more food. Deere has a strong balance sheet, and it increased its stock-buyback program last week to $8 billion, about 25% of its market value. Deere is the kind of company that Warren Buffett probably would love to buy if it became available. Stranger things have happened.

General Motors: A profitable GM has revamped its vehicle lineup and looks poised to start paying a dividend in 2014 and buy back a large amount of stock.

Its shares are up 36% this year, to $39, but still trade at just eight times estimated 2014 profits. Analysts like Barclays' Brian Johnson see upside to about $50. GM holders include hedge-fund manager David Einhorn and Berkshire Hathaway.

Washington is likely to finish selling its remaining stake in the car maker by year end, and there's speculation that GM will buy back a $4 billion equity stake held by the Canadian government next year. GM has $15 billion of net cash (after subtracting debt and preferred) and is generating $8 billion of free cash flow annually. Initiation of a 1% to 2% dividend is a good bet for next year. GM could be a better play than Ford(F), which trades at a premium to it and isn't buying back stock.

Intel: The chip giant could surprise Wall Street in 2014 as concerns fade about its exposure to personal computers and limited inroads into tablets and smartphones.

At $24, Intel trades for 13 times projected 2014 earnings of $1.90 a share and yields 3.7%. Intel's dividend rate is the highest among major techs.

There are signs that the PC market is bottoming, and Intel is moving aggressively into tablets and smartphones, now dominated by chips using architecture from ARM Holdings (ARMH). Intel's manufacturing might could pay off with chips with faster processing speeds and lower power needs. Jefferies analyst Mark Lipacis writes that Intel "for the first time" is about to have a "manufacturing advantage in mobile."

Then there is Intel's high-growth group focused on the semiconductors for servers and other storage devices for cloud computing. Credit Suisse analyst John Pitzer sees Intel earning $2.50 a share in a few years. He has a $30 price target.

MetLife: Even after a 55% gain in its shares this year, to $51, MetLife is valued at less than 10 times projected 2014 profits of $5.76 a share and at a slight premium to a conservative calculation of book value of $48 a share.

MetLife could rise into the $60s in 2014 if earnings estimates pan out and it gets the regulatory OK to start buying back stock and to lift its dividend. Bulls think the payout could rise about 50%, lifting the yield to 3% from the current 2%.

Morgan Stanley analyst Nigel Dally likes MetLife's "improving returns, reasonable growth, and ongoing expense-reduction program." It has a respectable 11% return on equity. It's also a play on higher interest rates; life insurers could reinvest proceeds from maturing bonds at more attractive yields if rates rose.

Nestlé: The world's largest food outfit has one of its industry's best growth outlooks, thanks to a big presence in the developing world. The Swiss company aims for 5%-6% annual organic sales growth, and it should come close to hitting that target this year. Analysts believe that Nestlé is capable of high single-digit yearly gains in earnings per share.

Nestlé's U.S.-listed shares, at around $72, fetch about 17 times estimated 2014 profits. Listed in the Pink Sheets, they yield 2%.

Nestlé isn't cheap, but it rarely is a bargain, because of the strength of its global portfolio, which includes candy, coffee, bottled water, ice cream, infant formula, and pet food. It owns almost 30% of cosmetics maker L'Oréal, a stake worth $30 billion. Excluding that, Nestlé trades at only a small premium to slower-growing U.S. food outfits like General Mills (GIS) and Kellogg (K).

Simon Property Group: Despite the growth in online retailing, Americans still like shopping at malls; foot traffic was higher over the Thanksgiving weekend than it was a year earlier. Simon, the industry leader, owns 220 traditional malls and outlets, including the Copley Place in Boston and the Forum Shops in Las Vegas. Its shares are down 4% this year because of higher interest rates, a tough retail environment, and general weakness in real-estate investment trust stocks.

Simon (SPG) looks inexpensive, trading at about $151, down from a spring peak of $180. In October, it boosted its quarterly payout to $1.20 a share, 9% above the year-earlier level. Current yield: 3.2%.

Morgan Stanley analyst Haendel St. Juste recently upgraded Simon to Overweight from Equal Weight and boosted his price target to $186 from $180. Simon comfortably covers its dividend and generates an additional $1 billion of annual free cash for mall expansion and other growth initiatives. Funds from operations, a key REIT financial measure, are expected to rise 8% next year.

US Airways Group: This airline may be the latest beneficiary of industry consolidation, now that the government has cleared its controversial merger with American Airlines.

Shares of the carrier, which will emerge as the world's largest airline, trade at about $22, less than 10 times estimated 2014 profits of $2.45 a share (assuming a full tax rate). Four airlines -- US Air, Delta Air Lines (DAL), United Continental Holdings (UAL), andSouthwest Airlines (LUV) -- will soon control more than 80% of domestic air traffic, which could keep pricing rational and allow them to boost fares if oil prices rise. While US Air could encounter merger-integration problems, they probably won't last into 2015.

JPMorgan analyst Jamie Baker last week boosted his price target to $37 from $29, arguing the "earnings power of the new American [as the carrier will be known] appears sorely underappreciated." Baker sees the potential for $3.50 a share in fully taxed 2015 profits and notes that US Air trades at a sharp discount to Delta and United.

Weekly Market Update: Solid Economic Gains Promise Imminent Taper

- After data released this week, it is more than likely the Fed will taper QE spending at the Dec 17-18 or the Jan 28-29 meetings. The highlights of the week were the second reading of US Q3 GDP and the November jobs report. The GDP numbers were good and the jobs figures were very good, and taken with the already unambiguously positive housing data, it's hard not to see that the US economy is seeing substantial improvement. After Friday's jobs report, PIMCO's Bill Gross said that he believes there is a 50% chance of a December taper at this point, while Goldman Sachs Chief Economist Hatzius opined that the numbers were not a blockbuster and that the Fed would not taper in December. Retail names suffered all week thanks to a few bad quarterly reports and a rather tepid view of Thanksgiving holiday sales. ShopperTrack saw sales on Thanksgiving and Black Friday up just 2.3% y/y, while the National Retail Federation saw weekend spending falling to $57.4B from $59.1B y/y. Stock indices spent much of the week well into the red with tapper talk and profit booking identified as the likely catalysts, but Fridays jobs report opened to door for rally that recouped much of what had been lost. For the week, the DJIA declined 0.4%, while the S&P500 and NASDAQ were essentially unchanged.

- The second reading of US Q3 GDP looked very good on first glance, coming in at +3.6% versus the +2.8% advance reading seen back in early November, but there were real caveats to the strong reading. The gains were driven by upward revisions to inventories, which increased by one third over the initial estimate. Meanwhile, the key residential fixed investment and export components were both lower than the advance readings. These key distinctions take some of the shine off the headline figure.

- The November jobs report was unambiguously positive, with the 203K gain in NFPs well above the 180K expected. The unemployment rate fell to 7.0% from 7.3% in October and the labor force participation rate rose slightly to 63% from 62.8%. The WSJ's Hilsenrath pointed out that markets are much more well-disposed to a taper now than they were in September. The Fed's low rate pledge has sunken in, and fed fund futures suggest markets do not expect a rate hike until Q4 of 2015, whereas in September rate increases were expected by the end of 2014. Nevertheless the US benchmark 10-year yield backed up 14 basis points on the week towards 2.88% with many predicting another run at 3% likely.

- China's official PMI matched an 18-month high, topping expectations of a slight decline from last month's strong figures, with output, inventories, and employment components all hitting multi-month high levels. The HSBC final PMI was also better than expected, and the HSBC chief economist said new business gains were accelerating.

- Oil futures climbed to one-month highs in a big breakout early this week. WTI crude had fallen into the $92 handle late last week, while on Monday and Tuesday the front-month contract rose back to $97. Traders said strength came from news that TransCanada would initiate service on the new Cushing-to-Port Arthur pipeline in early January, helping to drain the surplus of US light sweet crude. There was a big 12M bbl drawdown seen in the weekly API crude inventories, which some suggested went to help fill the line. Additionally, OPEC oil ministers agreed in Vienna to sustain output at 30M bpd regardless of the fact both Iran and Libya are expect to ramp production in the near term.

- November auto sales reports from the big three US automakers all topped expectations. GM sales were up 19% y/y, Chrysler sales rose 16% y/y and Ford's were up only 7% y/y. A Ford sales executive November retail sales were the company's best going back to 2004. Toyota's sales momentum continues to be pretty tepid, up in the low single digits, while Nissan saw a respectable 10.7% y/y gain.

- The remaining firms that report monthly same-store sales disclosed tepid comps for the month of November. Note that the reports are for the four weeks ended Nov. 30th of this year, which compare to the four weeks ended Dec. 1st, 2012, so this year's comps did not include Thanksgiving Sunday or Cyber Monday, unlike the 2012 reports. JC Penny trumpeted what it called a strong Thanksgiving weekend comp gain of +10.1% y/y, but investors were looking for much better results coming off such an easy comp. Krispy Kreme, Big Lots and Abercrombie & Fitch all reported weak Q3 results, including terrible guidance statements and warnings that not much would improve in the retail environment in 2014.

- Once again, there were no unexpected developments seen in the BOE and ECB rate decisions. Both institutions left key rates unchanged, and the ECB press conference was low key. Note however that the ECB staff revisions were a point of interest: inflation forecasts were revised lower for both 2013 and 2014, but the revisions were much smaller than some expected and analysts saw little prospect of deflation in the new forecasts. EUR/USD saw four-week highs around 1.3700 by week's end.

- The Japanese government approved a $182B package of stimulus spending to supplement its huge 'Three Arrows' campaign launched back in April. Initial reports of a smaller package helped knock USD/JPY down from the six-months highs seen on Monday, strengthening the yen. In addition, it emerged that the bulk of the package includes loans from government-backed lenders and spending by local governments that was already scheduled. USD/JPY dropped to around 101.65 on Thrusday, before fresh yen weakness in the face of the better US jobs report helped push USD/JPY to just shy of 103.

Gilead Sciences Inc FDA Approves Gilead’s Sovaldi™ (Sofosbuvir) for the Treatment of Chronic Hepatitis C - FDA has approved Sovaldi(sofosbuvir) 400 mg tablets, a once-daily oral nucleotide analog polymerase inhibitor for the treatment of chronic hepatitis C (CHC) infection as a component of a combination antiviral treatment regimen. Sovaldis efficacy has been established in subjects with hepatitis C virus (HCV) genotypes 1, 2, 3 or 4 infection, including those with hepatocellular carcinoma meeting Milan criteria (awaiting liver transplantation) and those with HCV/HIV-1 co-infection.

Closing Summary - Stock Market Rallies Around Jobs Data A solid November employment report translated into a solid day of gains for the major averages. While there was some talk that the encouraging job growth raised the odds of the Fed announcing a tapering at its December meeting, the message of the markets today was either that it didn't believe there would be a tapering this month or that it doesn't fear a tapering this month.

It was just one day, yet there was ample meaning wrapped up in the connection that the 10-yr Treasury note (+3/32, 2.87%) and the stock market both pushed higher. Gold prices and the US Dollar Index, meanwhile, were little changed.

The headlines for the employment data were reassuring on just about every front. • Nonfarm payrolls increased by 203,000 (consensus 188,000) and were revised up for September (to 175,000 from 163,000) and down slightly for October (to 200,000 from 204,000) • Nonfarm private payrolls increased by 196,000 (consensus 200,000) • The unemployment rate fell to 7.0% from 7.3% • Average hourly earnings increased by 0.2% (consensus 0.2%) while aggregate earnings increased 0.6% (a good portent for consumer spending) • The average workweek edged up 0.1 to 34.5 hours (consensus 34.5) and factory overtime increased 0.1 to 3.5 hours The employment report drowned out the Personal Income and Personal Spending report for October, which was released at the same time. That report was mixed with personal income declining 0.1% (consensus 0.3%) and personal spending rising 0.3% (consensus 0.3%).

There was nothing mixed, however, about the stock market action. It was decidedly positive throughout the day and featured broad-based participation that saw every S&P sector finish higher, every Dow component finish higher, and all major indices gain at least 0.7%.

Remarkably, the S&P 500 made up almost the entirety of the ground it lost in its five-session losing streak and came within a whisker of ending higher for the ninth straight week. The consumer staples (+1.5%), industrials (+1.5%), financial (+1.4%), materials (+1.4%), and health care sectors (+1.4%) led today's winners. The energy sector, which gained 0.5%, was the weakest performer -- but it wasn't weak.

Weak areas were few and far between today. A number of retailers, though, were caught in the selling crosshairs after issuing disappointing guidance. Big Lots (BIG 32.50, -4.63), American Eagle Outfitters (AEO 14.85, -1.55), and Five Below (FIVE 45.30, -2.45) were such offenders. J.C. Penney (JCP 8.09, -0.76), meanwhile, got hit hit hard after a 10Q filing revealed an SEC request for information regarding the company's liquidity, cash position, and debt and equity financing.

Another area of notable weakness was the CBOE Volatility Index (VIX 13.84, -1.24). It dropped 8.2% as portfolio protection bets were taken off in the risk-on advance.

Today's gains came on lighter-than-expected volume. To that point, NYSE volume totaled 671 mln shares versus 700 mln on Thursday. • Nasdaq +34.5% YTD • Russell 2000 +32.9% YTD • S&P 500 +26.6% YTD • DJIA +22.1% YTD

Jobs Report Tees Up a Taper

Market Reaction Shows Investors Believe 'Tapering' Won't Presage Rate Rise

The strong jobs report was seen as good news by investors. For the Federal Reserve, that is good news in itself.

The economy added 203,000 jobs in November, the Labor Department said Friday, about matching the previous month's gain of 200,000 jobs, while the unemployment rate slipped to a five-year low of 7%. The index of aggregate earnings—an early read on income trends—rose 0.7%. Suddenly, any compunction Fed policy makers might have felt over reducing the central bank's bond purchases seems likely to have been swept away.

They will probably still opt to leave the bond-buying program untouched when they meet later this month, but the jobs report clearly sets the stage for them to start tapering at their January meeting—earlier than many economists had been forecasting.

To judge from the action in the Treasury and stock markets, the possibility of any earlier taper wasn't weighing too heavily on investors' minds Friday. The 10-year note barely budged, with the yield rising slightly but staying below 2.9%. Meanwhile, the Dow Jones Industrial Average registered a triple-digit gain.

That is an indication investors have taken to heart the Fed's message that reducing bond purchases shouldn't be taken as a prelude to raising its target on overnight rates. Contrast that to the summer, when investors' fits over tapering led to a rapid rise in interest rates that ended up weighing on the economy.

Considering the inflation backdrop, the date the Fed finally raises its overnight target seems farther away than ever. In a separate report Friday, the Commerce Department said consumer prices were up just 0.7% in October from a year ago. Prices excluding food and energy—the core measure of inflation the Fed watches closely—were up 1.1%. That is well below the central bank's 2% target.

The low pace of inflation is a bit of a puzzle for Fed policy makers, especially in light of the recent improvement in the jobs market. Last December, they predicted core inflation would be up 1.6% to 1.9% in the fourth quarter of 2013 from a year earlier and the unemployment rate would average 7.4% to 7.7%—forecasts that were too high on both counts.

That is probably a sign employment still has a lot more room to grow before the Fed has to worry about inflation pressures and that the threshold of 6.5% it has said the unemployment rate must pass through before it starts raising short-term rates is far too high. Indeed, whenever the Fed decides to scale back its bond purchases, it may also lower the unemployment-rate threshold as a way of further distinguishing tapering from tightening.

Even so, faith in the Fed's commitment to keeping short-term rates low may not have a very long shelf life.

A string of heartening data this week, including the Institute for Supply Management's manufacturing-activity index, November car sales and the Reuters/University of Michigan consumer-sentiment index, as well as the jobs figures, suggest the pace of the economy may be quickening. With the effects of this year's government spending cuts and tax increases waning, that sets the stage for a stronger 2014.

Convincing investors that it won't tighten until it sees the whites of inflation's eyes may soon be harder for the Fed.