The Hidden Beneficiary of the Electric Car Revolution

Ask the average investor the biggest beneficiary of the move around the world toward electric vehicles and the likely answer will be Tesla (Nasdaq: TSLA). I only wish I could press a very loud buzzer informing them they are wrong. Tesla is just one ‘horse’ in a very crowded field of automakers.

I know that you know better, or else you wouldn’t be reading this right now. Surging demand for the technology metals that I bring to your attention promises to overturn the balance of power between mining companies and their customers. So says the billionaire mining entrepreneur and legend Robert Friedland that I introduced to you in the very first issue of Growth Stock Confidential.

I am total agreement with Friedland… electric vehicles are an extremely good long-term growth story for both the technology and industrial metals.

However, that doesn’t mean there still aren’t overlooked winners, hiding in plain sight that will be among the beneficiaries of the electric car revolution. Here’s a clue from an Elon Musk quote, “Our lithium-ion batteries should be called nickel-graphite.”

Yes, the industrial metal nickel is poised to be a big winner in the electric car revolution. Most people think nickel is just used in the making of stainless steel. But there is one particular form of nickel (more on that later) though that is crucial to the lithium-ion batteries that power electric cars.

Related: 3 Electric Car Winners That Don’t Sell Electric Cars… Or Batteries Either

And while stainless steel still accounts for 85% of nickel consumption and batteries only 3%, demand from battery makers for nickel this year has soared 44% this year. Demand from battery makers is where nickel’s future growth will come from.

Nickel and Electric Cars

Nickel has been a terrible investment for the past few years, as it has been weighed down by excess mine supplies and bulging inventories. Nickel collapsed from its high in 2007 of $51,600 a ton to around $8,000 a ton in 2015. Just look at this 15-year chart.

This is all about to change and in a major way, thanks to electric vehicles. We are already seeing hints of this as in early November nickel had rallied to a two-year high.

The excitement is building for nickel among metals industry insiders. In fact, the biggest buzz at this year’s annual LME (London Metal Exchange) week in London in early October was surrounding stodgy nickel. It emerging as one of the favored ways to play the electric vehicle supply chain. The expectation is that nickel-manganese-cobalt batteries may gain a lot of market share because of their ability to allow motorists to drive further on a single charge.

Among the topics at the conference was a very conservative forecast for the number of electric vehicles on the road by 2025 is 14.2 million from the consultancy Wood Mackenzie. In 2016, there were 2.4 million electric vehicles on the road.

If this happens, Wood Mackenzie forecasts that demand from the auto industry will rise from 40,000 metric tons in 2016 to 220,000 tons in 2025. The global nickel market is only 2.1 million tons in size. And when you consider other components needed by electric cars outside of the battery, the Wood Mackenzie figure climbs to 275,000 tons – 12% of global supply.

This is an eye-opening in the light of the fact that nickel inventories are finally shrinking. Most of that is due to high demand coming from China. Estimates are that demand there is up 3.8% to 1.1 million tons through the first 10 months of 2017.

Analysts at the investment bank UBS say that there will be a 71,000 ton deficit this year, while others say the nickel deficit is as high as 150,000 tons. Whatever the correct amount of the deficit is, one thing is certain – it is eating into the amount of inventory overhang.

Mining companies will just be able to crank up the amount of nickel they mine, so it’s no problem, right? That’s what some Wall Street analysts say that really don’t know what they’re talking about.

Nickel Sulphate

You see, the majority of nickel production coming onstream through 2025 is of the low-quality variety – ferronickel or nickel pig iron. Both of which cannot supply the much-needed nickel sulphate for electric car batteries.

Nickel sulphate is produced by dissolving pure high-grade nickel metal, called Class 1, in sulphuric acid. That is why nickel sulphate prices this year have traded at a premium of up to 35% over the LME price of nickel.

To bring home the point about the importance of nickel sulphate, I turned to one of the many contacts I have in the technology metals industry, Simon Moores. He founded Benchmark Mineral Intelligence in the U.K. a few years as a source of information on the technology metals markets. He and his firm have quickly become the source for such information for Bloomberg, CNBC, and all the other financial media outlets.

When I asked him about the importance of nickel sulfate, Simon wanted me to pass this on to you:

“Nickel sulphate is the second largest input into a cathode after lithium and is set to become even more important with the advent of high nickel lower cobalt containing chemistries. While nickel is mined in the millions of tonnes, only 75,000 tonnes of nickel chemical was consumed in batteries in 2016. The industry will need to restructure to produce anywhere from four to five times this in the next seven years to meet lithium ion battery demand. We expect 2018 to be the year major nickel metal suppliers start enacting this battery pivot to their business models.”

Other experts are pretty much in agreement in agreement with Simon…

The chief economist at commodities trading firm Trafigura, Saad Rahim, told Bloomberg that demand for nickel sulfate will soar 50% to 3 million metric tons by 2030. Portfolio member Glencore is largely in agreement – it forecast a need to boost nickel output by 1.2 million tons by 2030 in order to meet demand. That is more than half of current global production.

And keep in mind that most of this increase in nickel output needs to be of the high-quality ore.

That demand for higher-grade ores is already being reflected in the marketplace. The spread between high-grade and low-grade iron ore has widened to more than $20 a ton this year, from only $5 to $8 a ton 18 months ago.

The consultancy McKinsey was quoted in the Financial Times as saying, “The global nickel industry may enter a period of change driven by a shift in end-use demand and the emergence of two distant markets.”

Since only about half the world’s nickel is suitable for batteries, we need to stock to that part of the nickel market with our investment selection. And we want to stick with the major players, not some speculative exploration company.

That leaves us with the two largest nickel miners in the world – Russia’s Norilsk Nickel (OTC: NILSY) and Brazil’s Vale SA (NYSE: VALE). You may recall that Vale got into nickel in a big way when it purchased Canada’s Inco in 2006 for C$19 billion.

Vale SA – the Broad Picture

While there are political and geopolitical concerns with both countries, I’m opting for the slightly safer choice and going with Vale. In addition to being a powerhouse in nickel, Vale is the world’s largest producer of iron ore, most of which is of the highest quality.

But like its Brazilian peers, Vale was a company in a lot of trouble, not only because of falling commodity prices, but also because of direct interference in its operations from the prior Dilma Rousseff (who was impeached) government.

The first step out of the wilderness was taken by Vale in March when it named 63-year old Fabio Schvartsman as its new CEO. He is a commodities industry veteran, having run companies for four decades, with the latest being Brazilian paper giant Klabin.

In late June, the first phase of a restructuring plan to reduce government influence was put into place. As part of that process, the plan is to list Vale on Brazil’s Novo Mercado, which has higher corporate governance requirements.

But most importantly, Schvartsman is tackling the company’s debt problem. Vale’s debt hit a peak of $25 billion – a lot for a company with a market capitalization of less than $60 billion. He is targeting a halving of Vale’s current debt of about $21.1 billion to less than $10 billion in order to become a “results-orientated” company. Net debt at the end of the third quarter of 2017 came in at $21.066 million, down 18.9% year-over-year.

Schvartsman is also ‘running the slide rule’ over all projects. For example, he is looking for a partner to invest in one of the world’s biggest nickel mines, which is located on the remote South Pacific island of New Caledonia. Discussions are underway with a number of possible Chinese partners that are in the battery industry. If he doesn’t fund a partner, Schvartsman will shutter the mine.

Vale SA – the Numbers

Now let me show you a closer at Vale’s numbers.

The majority of its business – about 75% – is centered around iron ore. Vale operates two world-class integrated systems (the Northern System and the Southern System) in Brazil for mining and distributing iron ore, which consists of mines, railroads, port and terminal facilities.

But roughly 20% (and growing) of Vale’s business consists of non-ferrous metals like nickel and copper (it is Brazil’s biggest producer). It is also the country’s sole producer of potash and the world’s third largest producer of kaolin (a clay industrial mineral).

The remaining 5% or so are scattered around assets like coal. In a presentation to shareholders in November, Vale said it will unload $1.5 billion worth of non-core assets from 2018 to 2020.

The rally in metals prices in 2017 (iron ore is soaring again in China) gave a huge boost to the efforts of Schvartsman to turn the company around. Just look at Vale’s latest results…

I fully expect these positives will continue to boost the company’s results in the quarters ahead. And once you add in the promise of an electric vehicle future for nickel, Vale should make a nice addition to any wealth creation portfolio.

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Source: Investors Alley 

10 Safe Dividend Stocks for the Second Quarter

Source: Shutterstock

With the U.S. stock market fresh off its first quarterly loss since 2015, many conservative  investors are in need of dividend stock ideas that can provide safe income and preserve their capital over the long term.

Using Dividend Safety Scores, a system created by Simply Safe Dividends to help investors avoid dividend cuts in their portfolios, we identified 10 high-quality dividend stocks from traditionally defensive sectors like telecom, healthcare and consumer staples.

These stocks have an impeccable record of paying continuous dividends over the years given their durable business models, strong cash flows and disciplined approach to capital allocation.

Many of these companies are also in Simply Safe Dividends’ list of the best high dividend stocks here and trade at yields above their five-year averages, providing an attractive combination of current income and growth.

Let’s take a look at 10 of the best safe dividend stocks for the second quarter.

Safe Dividend Stocks: AT&T (T)

Sector: Telecom Services
Industry: Integrated Telecommunication Services
Dividend Yield: 5.6%
5-Year Average Yield: 5.2%

AT&T Inc. (NYSE:T) is a global leader in telecommunications, media and technology. The company provides wireless and wireline communications services, including data, broadband and voice, digital video services, telecommunications equipment and other services.

AT&T has a huge customer base consisting of 157 million wireless subscribers, over 12 million internet subscribers and around 25 million video customers.

Few companies can compete with AT&T’s massive scale, which allows it to invest heavily in the quality and coverage of its cable, wireless, and satellite networks. In fact, AT&T is planning to deploy the next generation 5G wireless technology in 12 U.S. markets by late 2018.

Should AT&T’s acquisition of Time Warner be completed, the deal has potential to create value for shareholders and customers by combining its strong distribution capabilities with Time Warner’s large content portfolio.

While this deal will increase AT&T’s debt burden, Simply Safe Dividends estimates that the combined company’s free cash flow payout ratio will sit around 70% to 80%, which is sustainable for a cash cow with recession-resistant services like AT&T. Investors can read the firm’s in-depth dividend stock analysis on AT&T here.

AT&T has recorded 34 consecutive years of quarterly dividend growth and last raised its payout by 2% in late 2017. An improving balance sheet and moderately growing demand for faster delivery of video and data services should enable the company to continue raising its dividend at a low single-digit pace.

Safe Dividend Stocks: Pfizer (PFE)

Safe Dividend Stocks: Pfizer (PFE)

Source: Shutterstock

Sector: Healthcare
Industry: Pharmaceuticals
Dividend Yield: 3.8%
5-Year Average Yield: 3.5%

Pfizer Inc. (NYSE:PFE) is a global biopharmaceutical giant engaged in the development and manufacture of healthcare products. It is one of the largest global pharmaceuticals companies, with 2017 revenues exceeding $52 billion.

Founded in 1849, Pfizer has come a long way to become a leading healthcare company, with manufacturing sites in 63 locations and sales in 125 countries. The company has a wide portfolio of medicines, vaccines and consumer healthcare products and is known for popular drugs like Prevnar and Viagra, among others.

The company’s business can be divided into two distinct business segments — Pfizer Innovative Health (focusing on six therapeutic areas like oncology) which accounted for 60% of 2017 revenues and Pfizer Essential Health (legacy drugs that have lost patent protection) comprising the remaining 40%.

A relatively recession-proof business model, diversified portfolio of R&D intensive products, and global scale create a competitive moat around the company.

Pfizer is also benefiting from U.S. tax reform, which has driven the firm to repatriate most of its cash held overseas and aggressively return cash to shareholders.

The company last raised its dividend by 6.3% in December 2017, and mid-single-digit growth is likely to continue. In fact, management expects 11% earnings growth in 2018, and rising global demand for healthcare should continue to serve as a long-term tailwind.

Income investors can read Simply Safe Dividends’ comprehensive analysis on Pfizer’s business here.

Safe Dividend Stocks: Procter & Gamble (PG)

Sector: Consumer Staples
Industry: Household Products
Dividend Yield: 3.5%
5-Year Average Yield: 3.1%

Procter & Gamble Co (NYSE:PG) is a leading global consumer goods company. With more than 180 years of existence, the company is today an international household name, selling products in more than 175 countries.

Accounting for 32% of total sales in 2017, fabric and home care is Procter & Gamble’s biggest segment, followed by baby, feminine and family care (28%), beauty (18%), grooming (11%) and health (11%) segments.

By geography, North America is P&G’s largest market (45% of sales) while developing economies account for 35% of its total sales.

A diverse portfolio of iconic brands (Ariel, Bounty, Braun, Olay, Pantene etc.),  strong consumer loyalty, and a global sales network have made P&G one of strongest consumer goods companies in the world.

In recent years the company has restructured its brand portfolio (from 170 in 2013 to 65 today) to focus more on stronger product lines with faster growth and greater profitability. The company also has targeted to save $10 billion in operating costs between fiscal year 2017 and 2021.

Despite its modest growth profile, Procter & Gamble has an impeccable record of paying consecutive dividends over the last 127 years. It last raised its dividend by 3% in 2017, marking it the 61st consecutive dividend increase and reinforcing its status as a dividend king (see all the dividend kings here).

The company is targeting up to $70 billion in capital returns through fiscal 2019 and 5% to 7% in core earnings per share growth. This should enable the company to comfortably continue its dividend growth streak.

Safe Dividend Stocks: United Parcel Services (UPS)

Sector: Industrials
Industry: Air Freight and Logistics
Dividend Yield: 3.4%
5-Year Average Yield: 2.9%

United Parcel Service, Inc. (NYSE:UPS) is a holding in Warren Buffett’s dividend portfolio hereand is the world’s largest package delivery and logistics company. It is also a premier provider of global supply chain management solutions.

The company operates through three segments: U.S. Domestic Package (62% of 2017 revenue), International Package (20%) and Supply Chain & Freight (18%).

UPS has a balanced presence globally delivering 20 million packages and documents each day in more than 220 countries. The US is its largest market with 79% of sales while Europe is the largest among international markets (21%).

The company has an extensive global logistics and distribution system consisting of 2,500 worldwide operating facilities, 119,000 vehicles and over 500 aircraft. Upstarts and smaller rivals cannot afford to invest in such a transportation network, and they lack UPS’s package volumes which help the company achieve meaningful cost efficiencies.

Thanks to its advantages, UPS has been paying generous cash dividends for the last 50 years. The company’s recent payout boost in late 2017 represented a 10% increase over the prior year, and analysts expect 2018 adjusted diluted earnings per share to grow by 20% thanks largely to tax reform.

Given the continued surge in global online shopping trends and long-term growth in global trade, the company should be able to continue  increasing its dividend comfortably in the high single to low double-digit range.

Safe Dividend Stocks: Verizon Communications (VZ)

Sector: Telecom Services
Industry: Integrated Telecommunication Services
Dividend Yield: 4.9%
5-Year Average Yield: 4.5%

Verizon Communications Inc (NYSE:VZ) is the biggest provider of wireless service in the U.S. with 116.3 million retail customers and enjoys a duopoly position with AT&T, Sprint Corp (NYSE:S) and T-Mobile US Inc (NASDAQ:TMUS).

The company has the largest 4G LTE network (with 97.9 million retail postpaid connections) and is available to over 98% of the U.S. population. Although wireless operations generate over 80% of the company’s cash flow, Verizon’s superior fiber-optic technology also enables high speed broadband internet and has been ranked No.1 for internet speed ten years in a row by PC Magazine.

Customers prefer Verizon for its highly reliable wireless services, which are made possible by substantial investments in its network each year. The company also owns highly valuable and scarce telecom spectrum licenses, which form a strong entry barrier for new entrants.

Verizon is also leading the 5G wireless technology development over the last few years to reinforce its strong position, and it has plans to launch 5G wireless residential broadband services in three to five U.S. markets this year.

With tax reform freeing up several billion dollars more of cash flow this year, and management’s plans to cut $10 billion in costs by 2022, Verizon’s dividend remains on solid ground.

Verizon recorded its 11th consecutive dividend increase in 2017 with a 2.2% raise, and low-single-digit growth is likely to continue in the years ahead as the company trims its cost base and benefits from growing demand for high speed data and internet.

Safe Dividend Stocks: Coca-Cola (KO)

Sector: Consumer Staples
Industry: Soft Drinks
Dividend Yield: 3.5%
5-Year Average Yield: 3.2%

The Coca-Cola Co (NYSE:KO) is one of the largest beverage companies in the world, manufacturing and distributing more than 500 non-alcoholic drink brands. It owns four of the world’s top five sparkling soft drink brands — Coca-Cola, Diet Coke, Fanta and Sprite.

Coca-Cola’s activities can be grouped into five operating segments — Europe, Middle East and Africa (21% of 2017 revenues); Latin America (11%); North America (24%); Asia Pacific (14%); and Bottling Investments (30%).

Coca-Cola owns the world’s largest distribution system that enables seamless sales to 27 million customer outlets in more than 200 international markets. This distribution network serves as a major advantage as the company evolves its product mix.

As a result of increased customer health awareness, the company is focusing on constructing a healthier portfolio by introducing products like Coca-Cola zero sugar.

The Coca-Cola Company is a dividend aristocrat (see all the aristocrats here) that has increased dividends in each of the last 56 years and last raised its payout by 5%. The company has a target of a 75% payout ratio and 7% to 9% earnings growth over the long term.

Given its industry leading position, strong brands, and huge international presence, Coca-Cola should be able to continue delivering mid-single-digit dividend growth in future.

Safe Dividend Stocks: Merck (MRK)

Safe Dividend Stocks: Merck (MRK)

Source: Shutterstock

Sector: Healthcare
Industry: Pharmaceuticals
Dividend Yield: 3.6%
5-Year Average Yield: 3.1%

Merck & Co., Inc. (NYSE:MRK) is a global healthcare company with a rich operating history exceeding 120 years. The company provides a host of prescription medicines, vaccines, biologic therapies and animal health products.

Geographically, the U.S. is its largest market with 43% of 2017 revenues, followed by EMEA, Asia Pacific, Japan, Latin America and others.

Merck’s core product categories include drugs for diabetes and cancer as well as vaccines and hospital acute care. A few of Merck’s best-selling products are Januvia (industry leading diabetic drug), Keytruda (cancer drug), Zetia and Remicade. The company’s 12 main drugs accounted for 53% of total sales in 2017.

The company spends heavily on R&D (18% of sales in 2017) to continuously rebuild its drug pipeline and deliver innovative health solutions. As a result, Merck is in a solid position to benefit from the growing demand for oncology treatments. The company has also been restructuring its business to cut long-term costs.

Merck has a rich history of paying uninterrupted dividends for nearly three decades and has increased dividends for seven years in a row. Its last dividend was raised by 2%, which is in line with its 10-year annual dividend growth rate.

Given the company’s disciplined capital allocation and reasonable payout ratio below 50%, Merck is poised to continue growing its payout in the future.

Safe Dividend Stocks: Altria (MO)

Sector: Consumer Staples
Industry: Tobacco
Dividend Yield: 4.4%
5-Year Average Yield: 4.0%

Altria Group Inc (NYSE:MO) is the undisputed market leader in the U.S. tobacco industry. The company has exclusive rights to sell cigarettes under a handful of leading brands including Marlboro, Virginia Slims, Parliament and Benson & Hedges. Altria also sells cigars, chewing tobacco and wine.

Marlboro has been the leading U.S. cigarette brand for over 40 years, and Copenhagen and Skoal account for more than 50% of the smokeless products category. Cigarette brands tend to have a high degree of stickiness, with customers having a very low preference to switch to other brands and a greater tolerance to pay higher prices given the addictive nature of tobacco.

With a long history of manufacturing cigarettes dating back 180 years, Altria has built a dominant market position over the years, resulting in a steady and growing stream of cash flow that has funded solid dividend growth.

In fact, Altria’s latest dividend raise earlier this year was 6%, representing its 52nd dividend increase in the past 49 years. Altria has a target dividend payout ratio of 80% with annual earnings growth of 7% to 9% expected over the long term. This should  allow the company to keep growing dividends at a mid to high single-digit clip going forward.

Safe Dividend Stocks: AbbVie (ABBV)

AbbVie Inc (NYSE:ABBV) is a research-driven global healthcare company, focusing on developing and delivering drugs in therapeutic areas like immunology, oncology, neuroscience, virology and general medicine. The company generates over 60% of its revenue (and an even greater share of profits) from its arthritis drug Humira.Sector: Healthcare
Industry: Biotechnology
Dividend Yield: 4.2%
5-Year Average Yield: 3.5%

Humira’s revenue stream in the U.S. is expected to be largely protected from competition through 2022 thanks to a number of patents owned by AbbVie. Meanwhile, AbbVie’s R&D expertise has helped the company develop a strong late-stage pipeline of promising medicines across several therapeutic areas which could potentially be converted into successful products in the near future.

The company recently experienced a setback as Rova-T, a lung cancer drug that was a key part of AbbVie’s plans to diversify its future profits, experienced achieved disappointing trial results, suggesting its overall impact on the company’s future results would be somewhat muted.

However, the company remains a cash cow with a handful of growth drivers and a reasonable payout ratio near 50%. Management continues cranking up the dividend, most recently announcing a 35% boost earlier this year.

New product launches and increasing demand for medicines both from developed and developing economies should help AbbVie grow its dividends at a solid rate going forward, but investors considering the stock do need to have a stomach for volatility given AbbVie’s drug concentration.

Safe Dividend Stocks: Cisco (CSCO)

Sector: Information Technology
Industry: Communications Equipment
Dividend Yield: 3.2%
5-Year Average Yield: 3.2%

Cisco Systems, Inc. (NASDAQ:CSCO) is a leading global technology company inventing new technologies and products that have been powering the internet for more than three decades.

Product sales account for approximately 75% of total sales while services comprise the remainder of the business. Switching and routing are the most prominent product categories followed by collaboration, data center, wireless, security and service provider video.

The company’s service revenue is composed of software, subscriptions, and technical support offered across its different segments. Cisco’s customers are highly diversified and include businesses of all sizes, public institutions, governments and service providers.

Cisco has a large worldwide sales and marketing network with field offices in 95 countries, strong R&D capabilities, and a massive patent portfolio. Market leadership, breadth of portfolio, global scale and customer loyalty are its key competitive advantages. Investors can read in-depth analysis of Cisco’s business here.

Cisco is also shifting its business towards a software and subscriptions model which will lead to a higher visibility of its cash flows. Currently, recurring revenue accounts for 33% of total sales, and more than half of software revenue is subscription based revenue.

Cisco recently increased its dividend by 14% and has targeted to return at least half of its free cash flow to shareholders annually. The company’s solid cash flow and sub-50% payout ratio should allow for continued dividend growth in the years ahead.

Get up to 14 dividend paychecks per month from safe, reliable stocks with The Monthly Dividend Paycheck Calendar, an easy-to-use system that shows you which dividend stocks to pick, when to buy them, when you get paid your dividends, and how much.  All you have to do is buy the stocks you like and tell them where to send your dividend payments. For more information Click Here.


Source: Investors Alley 

The Last Time I Saw This Chart, It Was 2007

I recall the presentation vividly.

It was November 2007 and I was standing in front of a packed room at a really swank resort along the Mexican Riviera. Money Map Press was in its infancy, and I was making my first public appearance as its chief investment strategist.

The markets were rocketing higher, the money was easy, and investors were greedy.

Until I got on stage.

I dropped a financial bomb of epic proportions by telling my audience two things: 1) the rally they were counting on was about to come screeching to a halt; and, 2) they’d best shift their attention to harvesting profits.

You could have heard a pin drop.

I made my case as simply as I knew how… a “compressed range since 2005 shows [the] market ready to snap just like [it did] in early 2000.”

Then, I threw the following chart up on the projector, knowing full well that a picture is worth a thousand words… or at least a few million dollars in the hands of savvy folks.

Pay particular attention to the yellow circle.

My analysis suggested that the S&P 500 would fall to 1,329.26 by March 1, 2008, before making a brief stand and collapsing further.

It was tough stuff made doubly so because conventional Wall Street analysts would have sugarcoated the news… that is, if they had even seen it coming in the first place. Most, as you know, did not… which is why the financial carnage that followed was so very painful for many.

In my capacity as chief investment strategist, though, I had no choice but to tell investors three things, even if they were unexpected and uncomfortable: 1) exactly what my analysis showed, 2) why it was happening, and most importantly, 3) how to profit from a market collapse that I believed was going to catch millions of unsuspecting investors by surprise.

You see, my success is derived directly from your success, not Wall Street’s special interests or corporate sponsors. That’s why I take the trust you place in me and in my team very, very seriously and why, today, we are the No. 1 independent financial research firm in the world.

But, getting back to the point, you know how the story ends just as well as I do.

The S&P 500 actually closed at 1330.45 on Feb. 29, 2008… before falling off a cliff as the Global Financial Crisis hit. Ultimately, the S&P 500 would tumble 56.4% from the peak it set on Oct. 9, 2007, and shave a staggering $15 trillion from global markets.

Investors who went to the sidelines – as I advocated – made “bank” by harvesting profits. More aggressive readers did even better by purchasing inverse funds like the Rydex Inverse S&P 500 Strategy – Investor Class (RYURX) and put options.

Critically, they also began redeploying those gains into rock-solid companies almost immediately. Choices I recommended like SPDR Gold Shares (NYSE Arca: GLD), Monsanto Co. (NYSE: MON), and ABB Ltd. (NYSE: ABB) would go on to triple-digit returns before subscribers were done with ’em.

Those who didn’t and who struggled to “buy the dips” may as well have been rearranging the deck chairs on the Titanic because their portfolios still got decimated.

You Must Act Now: America is headed for an economic disaster bigger than anything since the Great Depression. If you lost out when the markets crashed in 2008, then you are going to want to see this special presentation…

Could I have been wrong?

Absolutely.

I am NOT telling you this today to make myself look smart, nor to create the opinion that I am the greatest financial analyst since sliced bread. I am not – I put my shoes on one foot at a time, every day, just like you do.

The advantage I have is one drawn from 35 years of experience in global markets as a consultant, analyst, and trader and tens of thousands of hours studying the worldwide financial markets.

I could care less about being “right” (which is how most amateurs approach the markets). What I do care deeply about, though, is helping you find the world’s best investment opportunities and showing you how to profit handsomely in all kinds of market conditions (which is how legendary investors like Warren Buffett and Jim Rogers do things).

I’m telling you all this for a reason.

I recently updated that same chart I showed my audience more than a decade ago and, once again, I see a potentially very nasty turn of events ahead.

The compression that was present back in 2007 has reared its ugly head again. Technically speaking, prices have fallen off since January and are now trading just above a critical line of “last resort,” which I’ve highlighted in yellow.

At the same time, emotions are running high, which confirms a change in sentiment I noted during an appearance on “Varney & Co.” this past Monday morning, where I made the same point in response to anchor Stuart Varney’s question about the possibility of a correction.

The next stop is 2,476.79 in May if the markets cannot hold at the lows set Feb. 9, 2018. Or, sooner.

From there, chances are good it’ll be another white-knuckle ride… a “Great Reckoning,” if you will.

The vast majority of folks don’t see this coming, and those few who do are not preparing properly… nor profitably.

If you’re like me, you’ve felt a sense of market turmoil ahead. This chart should be all the proof you need to take action. The last time it looked like this it was just months before the epic 2008 crash that pushed our financial system to the brink.

Ask yourself, right now, in light of what I’ve just laid out: Are you where you want to be financially?

If the answer is yes, that’s great.

If the answer is no, then you are NOT alone, and you need to click here.

So, Now What?

As always, a little perspective is in order.

Millions of investors fear information like that which I’ve just shared with you because they have no idea what to make of it nor how to handle the fact that what I’m telling you is just around the proverbial bend.

Thankfully, you’re not in that crowd.

As a member of the Total Wealth family, you’ve got a number of significant advantages – not the least of which is a very different perspective from traditional investors who risk having their 401(k)s turned into 201(k)s for the third time in less than 20 years.

As we have discussed many times, the right perspective is also the most profitable perspective. Here’s what that means…

Right now, it means you’re still after profits, but you want to take a moment to don the psychological armor needed to protect your money against the emotional inputs that will destroy other investors as conditions deteriorate in the face of a trade war, increasingly tense international relations, and disjointed politics on both sides of the aisle.

This makes sense when you think about.

When the markets are running higher, our emphasis is on loss prevention because we want to make money with every stock we own, every day we own it. When they’re running lower or losing gas, as is the case now, your primary focus becomes harvesting profits – a subtle distinction lost on most investors.

To be clear, I am not suggesting you time the markets – doing so never works out the way people think, despite their best intentions.

A rules-based approach, like the one I advocate, is always more effective, which is why it’s at the heart of every investing service I offer and a crucial part of the Total Wealth investing process.

I want you to start taking profits as fast as the markets want to hand them to you by doing three things. Chances are good that you will have a bunch – of profits, that is – if you’ve been following along for any length of time:

  • Use Total Wealth tactics like trailing stops and profit targets to calmly and systematically harvest profits like clockwork without the emotional interference that cripples most investors who sell in a panic when the you know what hits the fan. This guarantees that you are constantly raising cash you can put to work later, even as other unsuspecting investors burn theirs. Again, this is how legends like Warren Buffett and Jim Rogers approach markets and how Sir John Templeton, one of the greatest market masters in history, did.
  • Buy a short-term 1:1 inverse fund like the Rydex Inverse S&P 500 Strategy – Investor Class (RYURX) or an ETF like the ProShares Short S&P500 (NYSE Arca: SH). Both will rise as the S&P 500 falls, which means you can profit from the sting that will devastate other investors. Buying put options is also a great way to go if you’re options-savvy, but what I’m talking about today is protecting your core investments, not speculating.
  • Put new money to work in ONLY those holdings like the Triple Compounders we’ve talked about recently, or the world’s best Global Growth and Income plays like NextEra Energy Inc. (NYSE: NEE), Baidu Inc. (Nasdaq: BIDU), and Visa Inc. (NYSE: V), which still have solid business cases and even more solid profits ahead.

In closing, I know a column like this one can be scary.

Believe me, I certainly think twice every time I have to write one, which thankfully isn’t very often.

But, don’t let that stop you from investing.

Growth may slow but it will not stop.

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Source: Money Morning

7 Best Platform Stocks to Buy Now

Source: Shutterstock

What are platform stocks? Which are the best platform stocks to buy and how can they make you rich?

Uber is a platform business. So is Airbnb. At its core, a platform businesses connect consumers of products and services with producers of those products and services through a marketplace created and managed by the platform company.

The general idea is to build something so useful that you create a platform that turns into a quasi-monopoly.

CEO Alex Moazed of Platform consultant Applico defines a platform company as follows:

Successful platforms facilitate exchanges by reducing transaction costs and/or by enabling externalized innovation. With the advent of connected technology, these ecosystems enable platforms to scale in ways that traditional businesses cannot.”

Moazed points out that S&P 500 pure-play platform businesses are valued at an average of 8.9 times revenue, significantly higher than traditional companies at 2-4 times sales.

It’s this reality that makes the Applico Platform Index (API) — a group of 27 platform companies that each have a market cap higher than $2 billion — so successful.

Over the past ten years, the API generated an annualized total return of 15.6%, 510 basis points higher than the tech-heavy NASDAQ, and a testament to the success of platform businesses.

Here are the 7 best platform stocks to buy right now.

7 Platform Stocks to Buy: Ritchie Bros. (RBA)

Source: Shutterstock

Before I get into the more obvious platform stocks, I thought I’d go with a couple of index constituents that most investors wouldn’t name when rattling off platform companies.

Ritchie Bros. Auctioneers Inc (NYSE:RBA) is a Canadian company that got its start in the auction business in 1958 and has grown to annual revenues of $611 million by bringing buyers and sellers together to carry out transactions. In 2017, RBA transacted $4.5 billion in business by connecting these buyers and sellers, online and in person.

In the company’s fourth quarter, it saw revenues increase by 22% to $178.8 million as a result of its May 2017 acquisition for $777 million of IronPlanet, a California company that specializes in the sale of used heavy construction equipment.

On March 27, it launched Marketplace-E, a user-friendly digital platform that will make it easier for businesses to dispose of their assets.

Up 7.4% year to date through April 4, Ritchie Bros. platform solutions should continue to grow the business for years to come.

7 Platform Stocks to Buy: American Express (AXP)

American Express stock

Source: Shutterstock

American Express Company (NYSE:AXP), along with Apple Inc. (NASDAQ:AAPL), were the APIs first two platform companies back in 1984, the date of the index’s inception.

American Express qualifies as a platform company because it operates a closed-loop networkwhere it acts as both card issuer and bank cutting out the middleman.

Additionally, AXP launched Serve in 2011, a platform that enabled its customers to make person-to-person payments using their phone. In 2017, American Express announced that it was selling the U.S. distribution rights and technology of its prepaid reloadable and gift card products — including Serve —  to InComm Holdings.

The platform technology was useful to AXP’s prepaid business. But it turns out the low-end customer didn’t generate enough revenue for it to keep distributing the Serve prepaid cards.

2017 was a transformative year for American Express for two reasons.

First, Ken Chenault retired as CEO of the company in October after 16 years in the job, passing the reins to Stephen Squeri. Secondly, it grew its business at a nice pace over the past year. Highlights include growing the total number of cards in force by 2.9 million and increasing the number of cardmember loans by 12% while adding 1.5 million new merchant locations.

All of that added up to total revenues of $33.5 billion and $7.4 billion in pretax income. Both numbers decent, if not spectacular results. As it continues to work on generating more revenue from each cardholder, I’d expect both the top- and bottom-line to improve in 2018 and beyond.

7 Platform Stocks to Buy: Apple (AAPL)

How Apple Inc. (AAPL) Stock Could Benefit by Being More Like IBM

Source: Shutterstock

Apple is the other original platform stock in the index. It operates a number of different platforms that connect the Apple user to the iOS ecosystem. If you own an iPhone, you know what I’m talking about. Whether it be the App Store, iTunes, Apple Music, iCloud or any of its other services, Apple products are tied into all of these.

I’ve recently considered buying a laptop. Most likely, I’ll buy an Apple product because of the iOS platform. It might be more expensive, but already owning an iPhone and iPad mini, I’m committed to it.

To get me off the Apple platforms the company either has to mess up the ecosystem and products colossally, or the competition delivers something so unbelievably useful I want to switch.

Personally, I don’t think either of those is going to happen. I’m not saying the competition is bad; just that they’re not lights out great. Tim Cook’s job is to deliver new products that are solid, if not spectacular, to feed the platforms, which continue to grow by double digits in terms of revenue.

People like myself will always be okay with just good, and that’s why Apple has the highest market cap in the world. Of all the platform stocks to buy, Apple is the one I’d recommend to buy-and-hold investors.

7 Platform Stocks to Buy: Microsoft (MSFT)

You can’t include Apple in a discussion about platform stocks without also talking about Microsoft Corporation (NASDAQ:MSFT). When it comes to platforms, they’re tied at the hip.

With Microsoft’s cloud and AI initiatives taking center stage at the company, the original Windows platform is looking like a tiny fraction of its overall business. It’s still an essential component through Office 365, but less so than a decade or even five years ago.

Microsoft just announced that it’s spending $5 billion over the next four years on the Internet of Things (IoT) devices. The key to any good platform is the level of connectedness it provides its customers and Microsoft knows it.

In an April 4 blog post, Microsoft Corporate Vice President Julia White  wrote .

“Microsoft’s IoT offerings today include what businesses need to get started, ranging from operating systems for devices, cloud services to control and secure them, advanced analytics to gain insights, and business applications to enable intelligent action. We’ve seen great traction with customers and partners who continue to come up with new ideas and execute them on our platform.”

7 Platform Stocks to Buy: Redfin (RDFN)

Redfin (RDFN)

Source: Shutterstock

In November 2013, I recommended Zillow Group Inc (NASDAQ:ZG), suggesting “if you want to make a lot of money in 3 to 5 years, buying Zillow stock is a smart move.”

Over the past five years, its stock price has doubled, a good, if not spectacular return. Now considered relatively pricey, I thought I’d turn my attention to another real-estate stock on the index — Redfin Corp (NASDAQ:RDFN).

The company’s business model is simple.

It offers real estate agents a technology-enabled, vertically integrated real estate brokerage. It provides buyers and sellers a better experience for less. According to Redfin’s latest March presentation, if you sell a $500,000 home through them and then buy a $500,000 house through them, you’ll save $12,000 assuming the traditional listing-agent and buying agent fees are both 3%.

Houses sell faster through Redfin and for a better price. It’s technology disruption to the max.

“We expect the competitively compelling value prop and simplicity of the ‘1 percent’ product to resonate with consumers this year and potentially accelerate RDFN share gains,” D.A. Davidson analyst Tom White recently told clients in a note.

A good business always makes or saves people money. Redfin does both making it a winner in my books.

7 Platform Stocks to Buy: Amazon (AMZN)

Amazon Stock Is a Raging Bull You Don’t Want to Mess With!

Source: Shutterstock

Despite President Trump’s assertion that Amazon.com, Inc. (NASDAQ:AMZN) is scamming the Post Office out of billions and cheating the Treasury Department out of significant taxes, it’s hard not to appreciate the platform Jeff Bezos has built since its founding in 1994.

People think Jeff Bezos wants to own online retail. And Amazon certainly has a big chunk of the market — the company generated 44% of the U.S. e-commerce sales in 2017. But that’s just a small part of a bigger picture.

Amazon doesn’t want to own online retail; it wants to own your home — figuratively, not literally.

wrote March 2:

“Costco’s business model allows it to survive on razor-thin margins because of its annual membership. Through Prime, Amazon could do the same. Instead of offering just speakers, video streaming, doorbell cameras and all the other things it sells online, why not provide everything a homeowner (and renter) could need to keep the household functioning.

“Amazon could provide insurance, mortgages, wealth management, travel, legal advice, healthcare insurance (it’s on that), actual healthcare, the list goes on.”

Amazon’s biggest platform is Prime. That single membership will take the company much farther than merely focusing on e-commerce. Soon, Prime members are said to be getting a 10% discount when they shop at Whole Foods.

It’s not about online sales. It’s about total sales to the homeowner or renter. That’s exponentially larger.

7 Platform Stocks to Buy: Alibaba (BABA)

What to Expect From BABA Stock Earnings

Source: Shutterstock

 Amazon is all about the home, but Alibaba Group Holding Ltd (NYSE:BABA) goes at this from a slightly different angle. It wants to provide all the platforms and big data necessary for small businesses to compete and thrive — both in its home country of China and around the world.

I neglected to mention AWS in the section about Amazon, the highly profitable piece of its business that helps businesses compete more effectively. I did so, in part, because I believe AWS got its start to provide the infrastructure necessary for AMZN to be a big player in e-commerce retail and moved beyond its walls when it realized it had more capacity at its data centers than it needed in-house.

Suffice to say, Amazon hasn’t forgotten about its business clients, but I digress.

Last May, I called Ma the next Jeff Bezos. Like Bezos, he wants to reinvent retail by owning the consumer, but he knows he can’t do that without successful small businesses.  So, he’s building the same infrastructure that Amazon has such as the cloud, AI, data analytics, whatever it takes to understand what the consumer wants and needs and get it to them.

Eventually, the two companies could be only dominant global players in the business-to-consumer space. Amazon’s well ahead of Alibaba, but Jack Ma’s closing the gap. The next ten years should be exciting.

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Source: Investors Alley 

FAANG Stocks: Two to Dump Now and Two to Buy

In what was a very poor April Fool’s joke, the stock market took a tumble on Monday, closing below its 200-day moving average for the first time since June 2016. U.S. stocks had their worst start to an April in many decades as measured by the S&P index. The 2.2% plunge was exceeded by only the 2.5% dive in 1929 when the index only consisted of 90 stocks. This drop followed the worst three month period for global stocks in more than two years.

This selloff was once again led by technology stocks – the Nasdaq 100 index lost 2.9% – as more reasons to sell tech outweighed expected stellar earnings reports (average gains of 22%) later this month. The so-called FAANG stocks extended their recent fall. On Monday, they lost $78.7 billion in market value, bringing the total decline in value to $397 billion just from March 12.

The reasons behind the tech selloff were many and included: the continuing worries over regulation of social media, thanks to Facebook; a stupid April Fool tweet from Tesla’s Elon Musk joking about bankruptcy; tweets from President Trump continuing his rants about Amazon; further tweets from the President threatening the future of NAFTA, reigniting the market’s worries about a global trade war; and finally a report that Apple may use chips of its own design in Macs rather than Intel’s chips.

Hopefully, the political worries coming from the White House will eventually fade: if so, then that means the main long-term worry surrounds the social media stocks and in particular, Facebook.

The Anti-Social Network

There are now clever articles being written calling Facebook the anti-social network. And with good reason.

A June 2016 internal memo written by Facebook vice-president and long-time employee Andrew Bosworth entitled “The Ugly” was an eye-opener. It said that the company must pursue its aim of connecting people using “questionable” means even if it costs lives. In other words, anything and everything Facebook does in pursuit of growth was “justified”. What hubris!

Bosworth said this justified “questionable contact importing practices” where users give up their friends’ data, and implied that the privacy policy language was meant to deceive with “the subtle language that helps people stay searchable by friends”. He also suggested Facebook was prepared to use even more “questionable” practices in order to break in to the Chinese market.

This is what happens when only dollars matter. As the author of The Facebook Effect, David Kirkpatrick, told the Financial Times, “They simply allowed an advertising based system to get out of control. “You could use the word greed if you wanted to be uncharitable. They clearly prioritized growing profits over cautionary controls [over users’ privacy].”

The Consequences

As a result of these Facebook failures, lawmakers and regulators in both Europe and the U.S., where Facebook signed a privacy deal with the Federal Trade Commission in 2011, are now scrutinizing the problems posed by data-hungry businesses. The question is how to regulate these fast-changing technologies without ruining their business model.

The underlying problem is that Facebook’s business model, like Google’s, is based on constant commercial surveillance. These companies have massive amounts of personal data on users… in effect, they have a psychological profile on each user. Think about how Google is a ‘data miner’ too. When you search using Google or use Google’s Chrome browser, all that data goes to Google so it can target ads to you. In effect, like Facebook it has a profile on you based on your searches and location.

Related: Facebook, We Have a Problem

Beginning in May, Europe’s GPDR (General Data Protection Regulation) will limit how companies store, process and share personal data. The consent to collect and use personal data will have to be specific and unambiguous, not buried inside many pages of legalese and a user must consent every time. This law alone caused Google to warn its shareholders the reforms could “cause us to change our business practices”. The EU I believe will also pass an e-privacy directive, which if passed, would likely have an impact on both firms’ business, because it would significantly restrict the tracking of users’ behavior online.

Go With Microsoft and Apple Instead

As for the investment implications of all this, I would steer clear of both Alphabet and Facebook as well as other social media stocks even though I suspect Congress will punt on imposing regulation on them. Instead of investing into these companies, I would opt for other blue chip technology companies – Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL).

Of course, Apple also collects data on its customers, perhaps even more than Facebook. But it has a much better track record of respecting its customers’ privacy than Facebook. Apple has imposed some voluntary restrictions on itself. For example, it makes location data anonymous (unless you’re using the “Find My iPhone” feature) and generally employs “differential privacy” — a cryptography-based practice of obtaining usage and preference data without linking it to specific users.

And there are more differences between the two pairs of companies. Neither Google nor Facebook will make the same commitment as Microsoft that no ads will be targeted based on a user’s email and chat contents. Nor will they make it as easy as Apple and Microsoft make to shut off ad personalization. That’s because their business model won’t work without vast data collection and then ad targeting.

To put it bluntly, the business models of Microsoft and Apple are quite different from Google and Facebook and not reliant on ads. Apple is a hardware company that also sells content and software on commission or subscription basis. And Microsoft, with its cloud, software licensing and subscription businesses, is even less likely to be interested in your data since it no longer has a mobile platform to speak of.

These are the companies to buy on any market weakness, while Facebook and Alphabet should be sold on any rallies.

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Source: Investors Alley 

Warren Buffett Loves the Industry of this Beaten Down High-Yield Stock. You Should Too.

Last year at the Berkshire Hathaway annual shareholder meeting, billionaire Warren Buffett stated: “We have got a big appetite for wind or solar.” This high-yield stock is a pure play wind and solar energy producer that was just upgraded by Goldman Sachs. View the recent share price decline as an opportunity to invest in the renewable energy sector at a great buy-in price.

Pattern Energy Group (Nasdaq: PEGI) is an owner/operator of 20 wind power facilities, including one project it has agreed to acquire, with a total owned interest of 2,736 MW in the United States, Canada and Chile. Each power facility is contracted to sell all its energy output, or a majority, on a long-term, fixed-price power sale agreement. Ninety-two percent of the electricity to be generated by the facilities will be sold under these power sale agreements, which have a weighted average remaining contract life of approximately 14 years.

The company has been focused on growing its portfolio since the 2013 IPO. At that time the company owned 1,041 MW of energy production capacity. The added and future acquisitions for Pattern Energy Group are sourced and developed by a related private investment company called Pattern Development. Pattern Development is more like an investment fund that searches out renewable energy production projects to fund. Management has a stated goal of reaching 5,000 MW of owned capacity by 2020. At this time the company already has over 1,000 MW of new projects where PEGI has the right of first offer to purchase the projects when they are ready to come on line. In its long-term development pipeline, management claims visibility on up to 10,000 MW.

Related: Sell This Popular High-Yield Clean Energy Stock ASAP

Investors have participated in the growth, with the PEGI dividend increasing every quarter until the most recent announcement. From 2014 through the end of 2017 the dividend grew by 35%. On March 1, 2018 the company chose for the first time to not increase the dividend. It was kept level with the previous rate. While the market did not like the lack of dividend increase, it was a prudent move by the Board of Directors to not announce an increase. Cash flow from recent acquisitions had not kicked in to boost free cash flow to pay a higher dividend. In February the company announced the purchase of a 206 MW portfolio of wind and solar projects in Japan. The portfolio has three operating facilities and two under construction. It is an almost certainty that PEGI will soon resume dividend growth.

The PEGI share price peaked above $24 in September 2017. The shares now trade at $17 and change with a 9.75% current yield. This is a dividend growth stock, in the growing renewable energy sector. The current sell-off of the stock is not justified by fundamentals. When the dividend again starts to grow this stock could be bid up again into the mid-$20’s.

Get up to 14 dividend paychecks per month from safe, reliable stocks with The Monthly Dividend Paycheck Calendar, an easy-to-use system that shows you which dividend stocks to pick, when to buy them, when you get paid your dividends, and how much.  All you have to do is buy the stocks you like and tell them where to send your dividend payments. For more information Click Here.


Source: Investors Alley

Is this the Best High Yield Stock?

What is likely the best performing high-yield stock just went ex-dividend. I recommend adding to big dividend stock positions after the ex-dividend dates, to usually pick up shares at a cheaper price. While I highly encourage income-focused investors to make sure they diversify into at least 20 dividend stocks, there is one that is a must-own, 11% yielding REIT that is also growing its dividend payments.

New Residential Investment Corp. (NYSE: NRZ) is a finance REIT that invests in products that are on the financial fringe of the residential mortgage industry. The largest investment is in mortgage servicing rights –MSRs. These are the contractual fees the mortgage servicing company receives out of the interest paid on a home mortgage. MSRs are typically 25 basis points (0.25%) per year. The cost to service a mortgage is typically less than 10 bp. The rest is profit to the company that owns the MSRs. New Residential owns full or excess MSRs on over half a trillion dollars of unpaid mortgage balances. 25 basis points of that much loan balance is a lot of cash flow!

Recently NRZ has been buying up call rights on non-agency mortgage backed securities. Currently the company owns rights on $145 billion of unpaid balance MBS. This is 30% of the entire non-agency MBS market. New Residential executes what it calls “clean up” calls on the MBS, repackaging the loans into new securities. It is a profitable business.

The company owns a portfolio of opportunistic residential mortgage and consumer loan portfolios. New Residential has been very successful at finding opportunities for great returns from loan portfolios that don’t fit into the needs of traditional buyers of these products. For example, the company has earned an 89% annual internal rate of return on a portfolio of consumer loans purchased in 2013. Target returns are 15% to 20%, and the results have often exceeded the targets.

In 2017, NRZ became an approved mortgage servicing company in all 50 states. On November 29, 2017, New Residential announced definitive agreements to acquire Shellpoint, a non-bank mortgage originator and servicer. These moves allow the company to keep MSR servicing internal or contract it out, depending on what makes the most sense financially and profitably.

As an investment, NRZ has been a great dividend paying stock. Over the last three-and-a-half years, the quarterly payout has grown from $0.35 per share to the current $0.50 per share. Last year the dividend was increased twice, and the stock produced a 27% total return. For the 2017 fourth quarter, the company reported core earnings of $0.61 per share. This was the third consecutive with earnings above $0.60 and it has been three quarters since the last dividend boost. Each quarter of outstanding earnings makes the next increase more likely.

The danger for New Residential, and the likely reason why it yields over 11%, is that all the different investments in the portfolio are depleting assets. Mortgages get paid down or off. Clean up call transactions are one-time events. This means that the management and investment team must find a continuous stream of investment opportunities that will generate the company’s target 15% to 18% returns on equity. This requires a high level of expertise. So far in its five years as a public company, NRZ has surpassed all expectations and continues to do so. Investors do need to be aware that the company needs to be monitored to make sure it keeps the pipeline of investments full.

Get up to 14 dividend paychecks per month from safe, reliable stocks with The Monthly Dividend Paycheck Calendar, an easy-to-use system that shows you which dividend stocks to pick, when to buy them, when you get paid your dividends, and how much.  All you have to do is buy the stocks you like and tell them where to send your dividend payments. For more information Click Here.


Source: Investors Alley 

How To Generate Income On Tesla’s (TSLA) Plunge

Of all the selling going on in the stock market these days, no sector has been hit harder than tech. Although I believe the overall selling has been too harsh, the tech sector was certainly overvalued relative to other sectors.

Keep in mind, the tech sector has almost always been the biggest area of growth, so it does make sense to some extent that its companies would have the highest valuations. However, there were certainly some companies whose valuations were very difficult to justify.

Of all the ultra-pricey stocks out there, probably none was frothier than Tesla (NASDAQ: TSLA). Of course, Tesla has been a cult stock for some time, and its CEO Elon Musk could basically do no wrong. By the way, some people call TSLA an automotive stock, others an energy stock, but above all else, it’s a technology company.

Take a look at the chart of TSLA over the last 3 years. You can see the huge jump last year and the big selloff over the past week.

The selloff was sparked by production concerns over the company’s Model 3 automobile. The highly sought-after $35,000 electric vehicle is not being produced as fast as expected. There is real concern that buyers will walk away as they become frustrated with the wait time. TSLA has simply not been able to keep to their ambitious production schedule.

Between the tech selloff, the sky-high valuation, and the production issues, TSLA certainly has plenty of short-term bearish catalysts. Could we see a drop all the way to $200 or below in the next six months? At least one big options trader thinks it may be possible, but also is prepared if the stock goes right back up.

This trader sold a massive September straddle in TSLA at the 265 strike. Selling a straddle is when a trader sells a call and a put at the same strike in the same expiration. It’s a strategy used when the strategist believes a stock is going to be range-bound, or settle at or near a certain price at expiration.

In this case, the trader believes TSLA won’t be too far from $265 in September (right about the current price as of this writing). How can he or she be so sure? Well, in this case, the trader has a huge range to work with because the straddle was so expensive.

Selling the straddle generated a credit of $78! That means the stock would have to close lower than $187 or higher than $343 at September expiration to lose money. That’s a gigantic range, and any price in between those strikes means the trade is profitable. At max gain of $265 at expiration, the straddle seller – who sold 800 straddles – would make over $6 million.

So is this sort of trade you and I should do? Definitely not. We don’t want that kind of risk, or more importantly, the kind of margin necessary to hold a short straddle in our portfolio. Instead, we can generate decent income by selling put spreads in TSLA.

While TSLA has its share of problems, the company’s products are also extremely popular (and typically high quality). Elon Musk has always been successful at whatever large company he’s been behind (PayPal (NASDAQ: PYPL)Space X, SolarCity). As such, I believe there’s a floor on TSLA’s stock price, at least for the next several months.

The straddle seller is protected down to $187 and until September. Let’s say we wanted to cut some time off that and look at June options. Selling the 180-190 put spread in June (selling the 190 put, buying the 180 put to cap risk) would generate about $1.00 in income.

Now, you’d risk $900 for every $100 you generate with this type of trade, so you would only do this strategy if you feel TSLA isn’t going below $200 or so. Also, if TSLA does continue to drop, you’d want to roll or close your positon pretty quickly. However, if you are believer in TSLA, this is the sort of strategy you could use every 3 months to generate additional income in your portfolio.

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Source: Investors Alley 

The 10 Worst Stocks to Buy for Q2

After a 14-month bull run, the stock market has seen a return in volatility of late — and a few big sell-offs. It’s clearly a more nervous market, and that means investors have to be more careful in choosing what stocks to buy.

That means sticking with quality stocks and avoiding those that can blow a hole in your portfolio. These 10 stocks all continue that level of risk.

In a bull market, in some cases those risks are worth taking. Ahead of what looks like a potentially dangerous second quarter, however, investors should steer clear of these 10 stocks.

Worst Stocks to Buy: Blue Apron (APRN)

Worst Stocks to Buy: Blue Apron (APRN)

Source: Shutterstock

Blue Apron Holdings Inc (NYSE:APRN) has been one of the worst IPOs in recent memory. At $2, APRN stock has lost 80% of its value from its IPO price in June. And bear in mind that the $10 price was well below the original range of $15-$17 per share.

All the way down, APRN has attracted buyers. The stock even posted a short-lived rally in December. But the fact remains that there’s basically no price where Blue Apron stock is cheap enough.

2018 numbers should be better in terms of both profitability and cash flow. But Blue Apron still expects to lose money even at the EBITDA line — and to burn cash. With debt coming due in August 2019, there’s a possibility that APRN could go to zero within eighteen months, as I argued last month.

Even if that worst-case scenario doesn’t play out, there’s little reason to chase APRN at these levels. Q1 results don’t look likely to be notably better, as the company still is working through the addition of a new distribution center in New Jersey. Competition is intense, with Walmart Inc(NYSE:WMT), Kroger Co (NYSE:KR) and even Weight Watchers International, Inc.(NYSE:WTW), among many others, entering the meal kit space.

$2-per-share might sound cheap, but APRN still is valued at nearly $400 million. And with a mid-term path toward zero, there’s no price cheap enough for Blue Apron stock.

Worst Stocks to Buy: Chipotle (CMG)

Worst Stocks to Buy: Chipotle (CMG)

Source: Shutterstock

There is a case to buy Chipotle Mexican Grill, Inc. (NYSE:CMG) at these levels. The impact of the company’s food safety issues is receding. A new CEO has sparked optimism, as Luke Lango argued last month. The company expects positive same-restaurant sales in 2018, and new stores will add to revenue growth.

But I’m not buying CMG, particularly with a quick and steep rebound after a disappointing Q4 earnings report in February. A new CEO can help, but his impact isn’t going to be seen in Q1. The entire restaurant industry looks rather weak, particularly for operators like CMG as opposed to franchisors like McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM).

And CMG already is pricing in quite a bit of turnaround. The stock trades at over 50x 2017 EPS and 38x 2018 consensus. Those are huge multiples for a still-struggling company in this kind of market. And after the past few quarters, I certainly wouldn’t enjoy being long CMG ahead of Q1 earnings this month.

Worst Stocks to Buy: Fossil (FOSL)

Fossil Group Inc (NASDAQ:FOSL) had one of the best first quarters in the entire market. A blowout Q4 report in February sent the stock up a stunning 88% in a single session.

But the optimism seen in February already has started to fade. FOSL stock has pulled back over 20% from post-earnings levels. And a short squeeze no doubt drove at least some of the gains: FOSL was the most heavily-shorted stock in the Russell 3000 ahead of earnings, according to Bloomberg.

There is some good news here. Strength in wearables led to the surprising Q4 results, as it offset weakness in traditional watches. FOSL stock still isn’t that expensive, trading at ~5x FY18 EV/EBITDA guidance and ~13x implied non-GAAP EPS.

Still, long-term challenges persist. Even with the strong Q4, full-year same-store sales still fell 6%. The optimism toward the wearables business may be premature. Apple Inc. (NASDAQ:AAPL) has had some success, but Fitbit Inc (NYSE:FIT) has struggled mightily.

Meanwhile, earnings multiples aren’t out of line for brick-and-mortar retail — and suggest a stabilization in profits. With Fossil still guiding for profits to decline in fiscal 2018, that seems premature. FOSL did squeeze the shorts, but lightning isn’t likely to strike twice in Q2.

Worst Stocks to Buy: Barrick Gold (ABX)

Worst Stocks to Buy: Barrick Gold (ABX)

Source: Shutterstock

Heading into Q2, I can see the case for Barrick Gold Corp (USA) (NYSE:ABX). Barrick was the world’s largest gold producer in 2017. Gold has risen for three straight quarters, and could rise more in Q2. More market volatility, geopolitical tension, or any macro concerns could stoke demand for gold as a “safe haven”. Meanwhile, ABX is bouncing off a multi-year low, and looks cheap at under 17x forward EPS.

But that’s kind of the point. Barrick hasn’t benefited from the recent spike. Gold is up 16% since the beginning of 2017. ABX is down 22%. Gold has risen nearly 50% over the past decade; ABX has declined 72%.

That problem isn’t going to change in 2018. Barrick’s disappointing production guidance helped send Barrick stock to that multi-year low. Goldcorp Inc. (USA) (NYSE:GG) is likely to take Barrick’s crown as the top gold producer. Issues in Zambia and a settlement in Tanzania provide further pressure.

Gold indeed may rise again in Q2 — and ABX may follow. But given the long history here and the slow pace of Barrick’s turnaround make it a poor choice to play a higher gold thesis. Investors would be much better off buying GG, Newmont Mining Corp (NYSE:MEM) — or gold itself.

Worst Stocks to Buy: Deutsche Bank (DB)

The long-running turnaround at Deutsche Bank AG (ADR) (NYSE:DB) simply hasn’t taken. DB shares have bounced off a three-decade low reached in 2016. But a recent sell-off has pushed DB back below $14, with returns even from those lows barely over 20%. In the meantime, fellow investment banks like Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) have soared.

The case for a long-term turnaround isn’t dead. There is some potential value in Deutsche Bank stock. But it’s highly unlikely investors will enjoy the next couple of months. The company already admitted that planned cost cuts would be delayed. Rumors are swirling around the future of CEO John Cryan — with reports suggesting multiple candidates already have turned the job down.

Deustche Bank looks like a mess, plain and simple. And with speculation likely to swirl throughout the quarter, and further hurt morale and the company’s competitive position, that mess isn’t getting fixed in the next three months.

Worst Stocks to Buy: Walt Disney Co (DIS)

The long-term case for Walt Disney Co (NYSE:DIS) remains up for debate. I remain skeptical toward DIS, largely due to the long-running (and very real) concerns surrounding the key ESPN unit.

The short-term case, however, looks outright bearish. Disney is trying to acquire assets from Twenty-First Century Fox Inc (NASDAQ:FOX, NASDAQ:FOXA) — a deal the market sees as necessary for Disney to build out its content empire. But Comcast Corporation(NASDAQ:CMCSA) is stepping in to bid for Sky PLC (ADR) (OTCMKTS:SKYAY), which Fox itself is trying to buy. And that deal potentially could wind up scuttling the entire Disney-Fox tie-up — or push Disney to up its bid.

There’s going to be a lot of speculation, and a lot of uncertainty, over Disney’s M&A over the next few months. And in this market, that’s probably not going to be a great thing for DIS stock. DIS already fell 6.6% in Q1, and between Fox and what looks like an accelerating trend toward cost-cutting, Q2 would be worse. There is value here, and the company’s new streaming service could drive growth in the future. But until then, and without a lower price, DIS looks likely to at best continue its range-bound trading of the last three years.

Worst Stocks to Buy: Under Armour (UA)

Worst Stocks to Buy: Under Armour (UA)

Source: Shutterstock

Under Armour Inc (NYSE:UAA, NYSE:UA) shareholders have received some good news of late. UAA stock has rallied 43% after hitting a four-year low in November.

But I continue to be skeptical about Under Armour’s prospects, even after a better Q4 result. And there’s a good chance that UAA could revisit the lows in the second quarter.

UAA stock remains dearly valued, at 57x-forward-earnings. Margin pressure continues. Analysts aren’t backing the stock, with the average target price of $14.28, 13% below the current price. Meanwhile, Nike Inc (NYSE:NKE) just posted a strong quarter and projected an inflection point in its North American business — the same business from which Under Armour is trying to take market share.

More broadly, UAA has teased investors before during its long decline from above $50 to under $12. The recent gains look like another head-fake that could reverse after the Q1 report a few weeks from now.

Worst Stocks to Buy: Box

Worst Stocks to Buy: Box

As far as high-growth tech stocks go, Box Inc (NYSE:BOX) doesn’t look that out of line from a valuation standpoint. FY19 (ending January) guidance suggests a 5x EV/revenue multiple. With high-flyers like Workday Inc (NASDAQ:WDAY) and Shopify Inc (NYSE:SHOP), among many others, trading at 8x-10x or higher, Box’s valuation isn’t that onerous.

Still, there’s an awful lot of reason for caution. The recent IPO of Dropbox Inc. (NASDAQ:DBX) could potentially steal investor attention, even though Dropbox is far more consumer-focused than business-centric Box. Q4 earnings in early March sent BOX stock plummeting, but the stock quickly reversed.

BOX stock doesn’t necessarily look like a short — less than 4% of shares outstanding are sold short at the moment — but it does look potentially dangerous ahead entering into Q2. Growth is solid, but not particularly impressive, with guidance suggesting a ~20% increase in FY19. Box isn’t close to profitability. Dropbox could soak up some of the attention and investor enthusiasm for the business model. If the market heads further south, BOX would seem to be a likely loser.

Worst Stocks to Buy: tronc (TRNC)

Newspaper stocks like tronc Inc (NASDAQ:TRNC) actually haven’t done that badly of late. Certainly, they’ve performed better than investors might think given the clear secular pressure on print sales, and the difficulty in monetizing content.

Indeed, TRNC has gained 14% over the last year. Gannett Co Inc (NYSE:GCI) has risen 21%, plus 6% in dividends; New Media Investment Group Inc (NYSE:NEWM) has risen the same amount, with an even larger dividend.

But the gains in the sector seem likely to reverse — and TRNC might be most at risk. Here, too, Q4 earnings disappointed badly. Chairman Michael Ferro recently retired ahead of sexual harassment allegations. The sale of the Los Angeles Times brought in much-needed cash, but profits continue to decline even with tronc spending on additional acquisitions.

There is a case that newspaper companies can be classic “cigar butt” stocks, generating enough cash flow to make even a declining business worth buying. But tronc’s lack of shareholder returns undercuts that case, as does the loss of Ferro, who had driven the company’s strategy. TRNC has performed well of late, but its run may be coming to an end.

Worst Stocks to Buy: General Mills (GIS)

Worst Stocks to Buy: General Mills (GIS)

Source: Shutterstock

Some investors no doubt are going to take a chance on General Mills, Inc. (NYSE:GIS) after the company’s post-earnings plunge last month. GIS trades at a five-year low. It yields 4.3%. It’s a 90-year-old company with well-known brands and a long, profitable history. From a distance, General Mills stock at $45 might look like an opportunity.

However, I don’t think that’s the case, and I think it’s highly likely it gets worse for GIS before it gets better. I wrote after fiscal first-quarter earnings back in September that General Mills had lost investor trust when it came to both revenue and margins. Two quarters later, those problems are only more pressing — and General Mills has proven that it has little in the way of answers.

In a somewhat odd way, GIS is reminiscent of General Electric Company (NYSE:GE). In both cases, bulls focused on the history and the dividend, while glossing over near-term problems and reasonably significant debt levels.

I’m not sure GIS’ trend will be quite as bad as that of GE, which has lost half of its value in less than two years, or that a General Mills dividend cut is on the way. But the case of GE, the underlying problems in the business led to a long, slow decline as investors adjusted to the new reality. That’s a very real risk that a similar process will play out at GIS over the next few months.

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Source: Investors Alley

Getting Light Speed Returns from One of the Best Technology Sectors

One of the best technology sectors right now has nothing to do with Apple, Google, or Facebook. It’s in the area of photonics. In simplest terms, photonics is the science of light.

I want you to think about it for a moment – think about how, since almost the birth of humankind, light and optics have been there. From primitive people’s fires to whale oil lamps to the electric light bulb to lasers – humankind’s progression has been marked by advancements in the harnessing of light.

Fleshing out the definition a bit, photonics is the technology of generating and harnessing light and other forms of radiant energy whose unit is the photon. Photonics involves cutting edge uses of lasers, optics, fiber optics, and electro-optical devices in a wide range of applications.

Photonics has taken its place alongside electronics as a critical and rapidly growing technology of the 21st century. The global photonics market is forecast to be a $720 billion market by 2020, growing at a compound annual growth rate of 35%.

Welcome to the Photonics Century

Photonics-based applications are today used in a wide range of industries from industrial automation to medical diagnostics to scientific research.

Lasers in particular are displacing conventional technologies because they can do many jobs faster, better and more economically. Finding ways to make products more efficiently is an absolute must for today’s manufacturers. That’s why I strongly believe photonics and lasers are a must own sector for you and all my other readers.

One sector where photonics has become crucial is communications. Coherent light beams (lasers) have a high bandwidth and can carry far more information than radio or microwave frequencies. Fiber optics allow light carrying data to be piped through cables, replacing old copper cables: an absolute necessity in today’s world of big data, cloud computing and video streaming.

Another way photonics has entered our everyday lives is solid state lighting. Light-emitting diodes (LEDs) are a high performance, low-cost, green alternative to incandescent light bulbs.

Then there is LiDAR (laser radar systems), which is used in the aerospace industry and is crucial for the future success of autonomous vehicles, those self-driving cars that are frequently in the news these days.

Photonics technology has become ubiquitous.

Photonics has also become a key component in many manufacturing processes. Think laser welding, drilling and cutting as well as all the precision measurements needed by manufacturers that is provided by lasers.

Lasers Evolution

That leads directly to my recommendation – IPG Photonics (Nasdaq: IPGP), a leading developer and manufacturer of high-performance fiber & diode lasers and amplifiers for a vast range of industries and applications. Its products are used in industries such as materials processing, communications, medical and biotechnology, science and entertainment. IPG Photonics has been in the Growth Stock Advisor portfolio since late last summer and it’s up nearly 60% for us and a wide path in front of it.

The evolution of lasers in manufacturing is a journey of over half a century. Its ready adoption by manufacturers is largely due to the fact that lasers convert common sources of energy into concentrated, directed beams of energy. To do this, a laser must have an energy source, a way of coupling that energy into the laser cavity, and a method of delivering the resulting laser beam to the workpiece.

The new fiber lasers developed by IPG are vastly superior to the old legacy industrial lasers in every facet of the process:

  • Energy Source: Instead of using energy sources like lamps or even chemical reactions, fiber lasers use long-lived semiconductor diode lasers that efficiently convert electricity into light. Not only is the energy conversion efficiency raised, but frequent servicing and sometimes environmentally-unfriendly consumables are eliminated.
  • Energy Coupling: Conventional laser optical cavities have bulky air or gas-filled spaces. Large cavities are necessary due to the inefficiency of gas lasing or the need to insert bulk optical elements within the cavity. Fiber lasers are very compact because they convert semiconductor diode energy into useful laser beams within a fiber no thicker than a human hair.
  • Laser Beam Delivery: Legacy lasers utilize complex optics to extract the laser beam and deliver it to the workpiece. External steering optics are often needed to deflect the laser output onto its target. In contrast, flexible optical fiber provides a built-in, ideal beam delivery system.
  • Mass Production Possible: Both key fiber laser elements – semiconductor diodes and optical fiber – can easily be mass produced. Quite a contrast from legacy lasers with their bulky hermetic laser cavities, their need for precision optical alignments and ultra-flat optical surfaces.

The change is, as the company says, akin to the replacement of vacuum tubes by transistors.

IPG offers, I believe, the best-in-class laser-based systems for high-precision welding, cutting, marking, drilling, cladding, and other processing of metal, ceramic, semiconductor and thin films for customers in automotive, aerospace, railway, energy, electronics, consumer and other industries.

Its range of laser products includes ytterbium, erbium, thulium as well as Raman and hybrid fiber-crystal lasers. All wattage ranges are there too: low (1 to 99 watts), medium (100 to 999 watts) and high (1,000+ watts) output power lasers in wavelengths from 0.3 to 4.5 microns. The lasers can be continuous wave (CW), quasi-continuous wave (QCW) or pulsed. The pulsed lasers are available in nanosecond, picosecond and femtosecond ranges.

Among the well-known companies using IPG products are: Boeing (NYSE: BA)Lockheed Martin (NYSE: LMT)KLA-Tencor (Nasdaq: KLAC)Toyota Motor (NYSE: TM)BMW AG (OTC: BMWYY) and Mitsubishi Electric (OTC: MIELY).

Additionally, the company recently purchased Innovative Laser Technologies (ILT). This firm has a proven track record producing leading-edge systems for medical device manufacturers, one of the fastest growing markets for fine welding and cutting applications. This will greatly aid IPG in its effort to penetrate the market for medical device applications.

Last May, IPG bought Menara Networks, which is an innovator in optical transmission modules and systems. This allows IPG to offer more integrated solutions for the telecommunications industry. In the first quarter of 2017, sales of its telecom products soared by 221% thanks to Menara.

IPG Growing Rapidly

Although both North American and European sales grew 20% in the quarter year-over-year fully 64% of IPG Photonics revenues come from the Asia-Pacific region, with another 25% coming from Europe, including Russia. Only 10.5% of its revenues come from North America.

China continues to be a driver of growth with year over year sales growth of 47% for the region and representing nearly 44% of total sales for the firm.

IPG Photonics Corporation reported Q4 2017 adjusted earnings of $1.86 per share beating the top end of estimates by $0.06. The figure was better than the guided range of $1.55-$1.80.

Management expects sales to come in a range of $330 to $355 million for the first quarter. Earnings are estimated for $1.62 to $1.87.

IPG’s Laser-Bright Future

Thanks to innovative product portfolio – last summer IPG unveiled the first 120 kilowatt industrial fiber laser – and large patent portfolio, I expect IPG Photonics to continue to outpace the other companies in the laser systems and components sector.

Another huge advantage over the competition is its vertically integrated business model, which allows it to control each and every part of its business from research and development to sales to after sales service. In this type of business, I want the company to continue to innovate.

So a purchase like that of OptiGrate, which help IPG develop new ultra-fast pulsed lasers, is what I want to see. I like the fact that IPG is moving into new end markets connected to 3D printing, defense electronics and micro-materials processing in addition to the aforementioned communications and medical sectors. This will only add to the momentum from trends such as the miniaturization of electronics and the move of the global auto industry toward the widespread adoption of fiber lasers.

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Source: Investors Alley