Whether you watched the State of the Union address by President Trump last week or not, you, like me, probably have no illusions that the two parties will accomplish much together in the foreseeable future. One area where they reportedly have common ground is infrastructure repair and maintenance. The numbers certainly argue for a new spending bill, but the need for common sense spending, and what Washington actually does with our tax dollars, don’t necessarily line up these days.

The American Society of Civil Engineers (ASCE) compiles an extensive report on the state of the infrastructure in the U.S., looking at roads, bridges, waterways, schools, airports, and a variety of other key infrastructure indicators. The news is not good, and hasn’t been for years. The total amount of infrastructure is massive, and much of it has not gotten needed attention for repair and maintenance. ASCE issues a “report card” every four years for the overall infrastructure, and as of 2017 the grade was a D+. It was the same in 2013.

The report details crumbling roads and bridges, inadequate school facilities, and airports and air traffic control systems that have failed to keep pace with an increasing number of aircraft and air travellers across the U.S. Dams are ever closer to failing, and our ports, which handle approximately 26% of all goods flowing through the U.S. economy, need deeper channels to handle larger ships, and new equipment landside to load and offload these new larger vessels.

So, if I look at infrastructure companies, ones that provide the material and logistics to build new roads, bridges and airports, I might expect to find a graveyard of broken stocks. But that’s simply not the case. Why?

Three factors are driving infrastructure spend, which, according to the companies selling the cement and asphalt, is getting increasingly stronger. First, we actually do have an infrastructure bill in place in the U.S already. The Fixing America’s Surface Transportation (FAST) Act was signed into law by President Obama in December 2015, and provides for over $305 billion of dedicated funding for U.S. infrastructure. The five year budget, running through 2020, is still being spent and driving business for infrastructure companies.

Second, a strong economy the last few years, as measured by unemployment numbers and jobs created, has meant more money for state coffers. State Departments of Transportation across the U.S. are starting to pick up the slack from federal funding and fix their infrastructure themselves. It appears this funding is in the early stages, with many states recently engaging in large long term projects.

And third, the companies I look at below, are working in states where the population is growing. This means more building as residents move in, more tax revenue, and then more infrastructure building. According to the latest U.S. census numbers the highest growth states include the Carolinas at 9 and 10, Texas at 8, Colorado at 7, and Florida at 5. Not surprisingly, these states represent the backyard of the infrastructure companies doing well. Let’s not hold you in suspense any longer, and get to the companies.

Martin Marietta Materials (NYSE: MLM)

Maybe my mention of Martin Marietta stirs your memory of the aerospace and electronics company it once was. When Martin Marietta merged with Lockheed in 1995, the companies formed Lockheed Martin (NYSE: LMT). But the new aerospace and defense company had no need for a provider of cement and concrete, and spun off Martin Marietta Materials the following year.

Today, Martin Marietta provides aggregates and heavy building materials. They sell the material necessary to build roads, sidewalks and the foundations of homes and commercial buildings. And they’re doing a good job of it. The company has taken advantage of a strong economy in the U.S. and grown earnings an average of 31% the past 5 years.

Operating in growing states such as Texas, North Carolina, Georgia and Florida, Martin Marietta is seeing an acceleration in public contracts let by the Departments of Transportation in these states. The company has made a focus on demographic trends a mainstay of their business strategy, and they are following the time tested tactic of going where the money is.

As CEO C. Howard Nye, who has been CEO since 2010 recently stated, “In fact, many of our most attractive areas, while growing, are still well below mid-cycle shipment levels. Further, it remains difficult to see an end to this recovery when the long-awaited arrival of increased infrastructure activity has only recently begun in earnest.” It doesn’t get much rosier than that.

Not only is the company seeing an uptick in business, they are raising prices at the same time. This is one of the reasons to get in the stock now. As Mr. Nye puts it, “Our optimism is further bolstered by favorable pricing trends, typically an indicator of underlying market strength.” Martin Marietta is projected to grow earnings per share next year 16.5%.

Finally, the company should benefit from unfavorable weather which adversely impacted the Carolinas last year in the form of Hurricane Florence. Causing an estimated $18 billion in damage to the Carolinas, the region will have to go through a long period of rebuilding damaged infrastructure. This rebuilding process generally takes several years, and results in an increased demand for the products Martin Marietta provides.

Vulcan Materials (NYSE: VMC)

A second supplier of building materials which should benefit from the same tailwinds as MLM, is Vulcan Materials. Echoing comments from Martin Marietta, Vulcan Materials CEO, J. Thomas Hill noted about their third quarter, which was marred by the inclement weather mentioned above, “Highway construction demand is strengthening across the country, but much more so in our markets. We’re now seeing the conversion of public funding in the shipments, and this showed up in 10% growth in our quarterly aggregates shipments and a 6% increase on a same-store basis.”

Supporting my thesis here, Mr. Hill added, “Prices continue to escalate. With improved flow-throughs, all of which is supported by growing demand.” And Vulcan isn’t content with just growing organically, they’re making acquisitions, something I like in an expanding market.

In 2018 the company bought Aggregates USA, a materials provider with operations in Georgia, South Carolina, and Florida. As Mr. Hill points out, the acquisition “adds to our product offering, expands our distribution network and service areas, and will help us better serve our customers.” Any merger kinks should be worked out by now, one year later.

Vulcan has grown earnings per share almost 49% per year on average the past 5 years, and is projected to grow earnings at a 24% clip next year. The company currently trades at a PE of 32, but that should drop to around 21 if earnings come in as projected.

NV5 Holdings (Nasdaq: NVEE)

If you’re looking for a smaller company, that has exposure to U.S. infrastructure, but has exposure to growth from infrastructure projects globally, look no further than NV5 Holdings. The company provides a wide array of technical services related to building projects, including providing water and electricity to buildings, and providing logistics services for waste water management.

NV5 is an innovative company looking for new ways to provide value to its customers at lower cost. You know I like companies that not only develop technology, but apply new technology and develop business models using emerging tech. A great example of this is the drone survey business, a quickly growing sector for construction, as well as safety and inspections.

COO Alexander Hockman, describes the new way in which NV5 is using drones to attack business problems. “Our drone survey service is providing a differentiating technology and was used to collect survey data on over 300 acres of the Brooklyn Navy Yard. Using conventional techniques, the task would have taken several weeks but was completed in approximately four hours using our drone-based photogrammetry technology.”

NV5, like Vulcan, is also acquiring companies and adding additional services to its lineup. The company recently acquired CHI Engineering, which gives it access to a client base of over 80% of the 140 Liquified Natural Gas (LNG) facilities in the U.S.

NV5 has extensive business globally, and importantly operates over a range of sectors within the building industry. The company is currently working on projects in Abu Dhabi, Cypress, Macau, Hong Kong, China and Taiwan. And, customers range from municipalities, to transportation hubs, to multinational hospitality companies.

NV5 has grown earnings an average of 34% over the past 5 years, and is projected to grow earnings over 80% this year. The company has a very small amount of debt, and trades at a PE of just over 26.

New infrastructure bill in the U.S. or not, federal funds are flowing and states are ponying up to fix their crumbling infrastructure. And, even with growth slowing internationally, new building projects are still being captured by innovative companies. Take a look at Martin Marietta, Vulcan Materials, or NV5, they may be just the foundation your portfolio needs.

Source: Investors Alley

I want to follow up on my renewable energy article from Monday with another look at the renewable energy sector. And later I will fill you in on three renewable energy stocks leading the way that hail from Europe.

First though, let’s look at some of the raw numbers on renewable energy investment worldwide.

Clean energy investment globally actually declined 8% in 2018, according to Bloomberg New Energy Finance, to reach $332.1 billion, because of two factors – a Chinese crackdown on solar subsidies and the falling cost of wind and solar projects.

This latest data from BloombergNEF, considered to be the most definitive account of clean energy spending worldwide, shows that the biggest drop came in China, where renewable energy investment fell by a third after a new government policy slashed subsidies for solar projects beginning in June.

However, this is a case where a cursory glance at the raw numbers does not give a valid picture of what is going on in the renewable energy space. Actual additions globally of new wind and solar projects still increased year on year despite the decline in investment, because the costs of solar and wind energy projects have seen steep falls.

Angus McCrone, chief editor of BNEF, explained: “It’s not really a slowdown at all. Every year investment in clean energy has to run faster to stand still, because of the reduction in costs.” Renewable energy investment will fall again in 2019, he predicts, even though the amount of new capacity added will increase slightly because the reduction in costs will continue.

Costs Continue to Fall

There is no doubt that the costs of renewables — led by solar and wind power — are now materially cheaper than they ever have been. These costs have fallen to the point at which the International Energy Agency, in its latest short term outlook, sees prices falling to between $20 and $50 per megawatt hour. That means wind and solar can compete with other fuels, even if some of the costs of providing back up to cover the intermittency of renewable supplies are included. In a growing number of markets, neither subsidies nor protected market shares will be necessary.

Even here in the U.S., the cost of new wind and solar power generation has fallen below the cost of running existing coal-fired plants in many parts of the country. New estimates published in November by the investment bank Lazard show that it can often be profitable for U.S. utilities to shut working coal plants and replace their output with wind and solar power.

According to Lazard, the all-in cost of electricity from a new wind farm in the U.S. is $29-$56 per megawatt hour (MWh) before any subsidies — such as the federal Production Tax Credit, which is being phased out by 2024. The marginal cost of operating a coal plant is $27-$45 per MWh.

So there are times and places where building a wind farm, even without any subsidy, would make sense. Add in the PTC, which can cut the cost of wind power to as little as $14 per MWh, and the case becomes even stronger. This turns into a win-win situation, with higher returns for the utility companies and lower bills for their customers.

Here in the U.S., the outlook for wind power is brighter than that for solar power at the moment because of tariffs placed on solar panels by the Trump Administration.

Installations of new solar power capacity in the U.S. slowed in the third quarter of 2018 to the weakest rate since 2015. The projects most affected were the large utility-scale projects, which are much more sensitive to the cost of solar panels.

These tariffs came into effect last February at an initial rate of 30% with the intent of protecting domestic panel manufacturers. But the Solar Energy Industries Association, which represents developers and installers as well as manufacturers, said the tariffs had put a brake on investment and had cost more than 20,000 jobs.

It is this apparent anti-renewable energy sentiment from the Trump Administration that has me looking to Europe for the best-performing companies and stocks in the sector. I particularly like the wind power-related companies in Europe. Here are just three of them…

Three European Wind Power Stocks You Can Buy Here in the U.S.

Europe is home to some of the world’s best wind turbine companies, which is good news since the prospects for the wind business remain sound. Installations worldwide are expected to reach 72 gigawatts per year by 2025 – a 5% compound annual growth rate. My two favorite are:

Vestas Wind Systems (OTC: VWDRY) and Siemens Gamesa Renewable Energy (OTC: GCTAY). Vestas’ stock here in the U.S. is much more liquid than Gamesa’s, but both companies are doing very well.

Gamesa was an independent Spanish wind company that combined its wind assets with Germany’s industrial powerhouse Siemens to form a top-notch company.

In its recently reported quarter, results were much better than expected, sending the stock soaring from a beaten-down low (there were doubters as to the wisdom of the merger). Revenue increased in the quarter by 6% year-on-year, to 2.26 billion euros, driven by the offshore wind business and by its services business. Wind turbine volume increased by 7%, to 2,129 megawatts of energy, due to the strong contribution by the offshore segment, which sold 609 megawatts (+76% year-on-year).

Net profit amounted to 18 million euros, contrasting with the 35 million euro loss reported in the same period of the previous fiscal year.

Siemens Gamesa logged orders worth 11.5 billion euros in the last twelve months (+3% year-on-year), driven particularly by a 28% increase in onshore orders (6.8 billion euros). Order intake in the first quarter amounted to 2.5 billion euros, with solid performance by onshore wind turbines (1.8 billion euros, +7% year-on-year).

The order book stands at 23 billion euros (+8% year-on-year), of which 15.7 billion euros worth are orders to be filled after the 2019 fiscal year. This lends greater visibility to its future growth and covers 92% of the revenue target for the current year. The offshore wind business is projected to attain 27% annual growth, from 2 gigawatts of installations in 2018 to 12 gigawatts in 2025.

Vestas will announce earnings on February 7th, but it has already pre-announced good news. Based on preliminary reporting, Vestas upgraded its expectations for 2018 free cash flow to approximately 400 million euros. That compares to its prior expectation of a minimum of 100 million euros.

The company said the marked improvement was primarily driven by a strong order intake and indeed the company’s order book is at a record high, with over 10 gigawatts of orders in 2018. One example of a major order it won here in the U.S. was announced in December to supply 100 of its V120-2.2 megawatt turbines for a wind project.

Another major wind power-related company is Denmark’s Orsted A/S (OTC: DNNGY), which has transformed itself from a hydrocarbon energy company into a renewable energy company.

It last earnings report, in November, blew away analysts estimates (pardon the pun) with a 31% rise in earnings from offshore wind generation. And the company raised its guidance for 2019.

Orsted also said its green energy generation had increased substantially, with renewables now accounting for 71% of its heat and power output, up from 60% in the year ago period. It recently expanded its reach into onshore wind in the U.S. with the purchase of Lincoln Clean Energy and it also bought a U.S. offshore wind developer, Deepwater Wind.

Most of these stocks have done well, despite 2018 being a very poor year for stocks. The returns over the past year for these three companies’ ADRs are: Siemens Gamesa – 1%, Vestas – 25% and Orsted – 25%. The only laggard has been Gamesa, but it is up 35% over the past three months.

I expect the outperformance from these stocks to continue in 2019.

With much of the U.S having just gone through what has been described by some media outlets as the coldest temperatures EVER in the Midwest, let’s talk about something on everyone’s mind, air conditioning. No, I’m not crazy. The World Economic Forum, in the midst of this major cold snap in the U.S., just published a piece on one of the predicted major drivers of energy demand growth in coming years. Yes, it’s air conditioning.

Of course, air conditioning itself isn’t suddenly en vogue when it wasn’t before. It’s a byproduct of economic growth and a rising global standard of living. While 90% of homes in the U.S. and Japan have air conditioning, that number drops to a staggering 8% for people who live in some of the hottest regions of the world. The number of air conditioners, driven mainly by populations in China, India, and Indonesia, is expected to increase over 250% in the next 30 years, to something around 5.6 billion.

And, that demand for space cooling, is expected to be one of the major drivers of electricity demand moving forward. An International Energy Agency (IEA) report predicts that peak electricity demand in India, which is currently comprised of 10% air conditioning demand, has air conditioning becoming 45% of peak demand in 2050. As the report states, “Growing demand for air conditioners is one of the most critical blind spots in today’s energy debates.”

Now, my use of the predicted rise in demand for air conditioning, in the midst of a major cold snap in the U.S., is somewhat tongue in cheek. But, the global rise in energy demand, which the IEA puts at between 30 and 40% by 2040, is real. And, the need to address this rising demand, be it for air conditioners, data centers, increased usage of electronic devices, or simply a rise in the standard of living, has companies and governments turning to renewable energy to solve some of the problem.

The result, the renewable energy market is growing. Driven by both this rising demand, and fairly recent advances in technology, which have renewable energy sources rapidly approaching the cost of old school fossil fuels. Companies are increasingly profitable and projecting long-term growth in this area. Here are a few of the names I like, and recommend you take a look at, in the renewable energy sector.

NextEra Energy (NYSE: NEE)

When you think of NextEra it’s highly unlikely you think of renewable energy. Most investors who know NextEra recognize them as the owner of Florida Power and Light (FPL) and one of the largest regulated utilities in the U.S. But they are much more than your average utility company.

NextEra Energy Resources, the renewable energy arm of NextEra, counts solar, wind, natural gas, and nuclear properties among its holdings. The company is rapidly moving forward on the renewable energy front, and CEO James Robo believes the cost of solar and wind generated energy will be the same as that of power generated by coal, and oil and gas fired power generation units very soon.

Robo has said that combining new energy production technology in wind and solar, combined with new technology being developed in power storage, will drive prices of renewables to the point that they will “…be massively disruptive to the nation’s generation fleet and create significant opportunities for renewable growth well into the next decade.”

NextEra has done a great job of moving from a staid electrical utility to quickly becoming the face of renewable energy on a large scale, while at the same time maintaining profitability for its shareholders.

Robo points out that by NextEra executing well on its business operations, “…FPL’s typical residential bill is more than 30% below the national average, the lowest of all 54 electric providers in the State of Florida and nearly 10% below the level it was in 2006.” And, this has been achieved, while bringing record amounts of renewable energy online in both 2017 and 2018. One of the main reasons I like the company here.

Since 2005 NextEra has delivered compounded annual growth in earnings of over 8.5%. It is expected to grow earnings this year 18.5% and pays a dividend just over 2.5%. The company’s profit margins are just over 50%, and it has a PE of just over 13.5. The company looks well positioned among the major utilities to continue expanding profitably into the renewable energy space for years to come.

Renewable Energy Group (Nasdaq: REGI)

Renewable Energy Group is focused on turning your fast food remains, specifically the oil used to cook that food, into energy and profits. Using its proprietary BioSynfining technology, in the first 9 months of 2018, REGI prevented 2.9 million metric tons of carbon dioxide from release into the atmosphere. That is akin to removing 600,000 cars from U.S. highways for one year.

Renewable Energy has 14 refineries that turn vegetable oil, greases and sugars into biomass-based diesel fuel. One reason I like the company is the possibility of a new joint venture with Phillips 66 (NYSE: PSX) in which the two companies will build a large west coast biodiesel refining facility. California is one of REGI’s major customer states, and a new facility, currently planned for Washington state, alongside a Phillips 66 facility, would add valuable capacity to the Renewable Energy biodiesel offering.

Demand for biodiesel has risen 30% over the past two years, and REGI has been increasing production numbers to keep pace. They produced 11% more biodiesel in the first nine months of 2018 than 2017, and have increased production by 16% in the third quarter of 2018 alone.

REGI is also operating in a favorable regulatory environment. Despite tweets from the Commander-in-Chief negatively referencing global warming, that may have you thinking otherwise, the EPA is set to release updated regulations on biomass-diesel that would increase demand for the product. As Renewable Energy CEO Randolph Howard states, the new rules should “…ensure meaningful growth in both the biomass-based diesel and advanced biofuels category.”

In addition to these rules, and one of the reasons the company should be bought now, is a pending long term extension of the Biofuel Tax Credit (BTC). Howard says, “We’re pleased that participants across the various industries associated with biomass-based diesel remain united in the desire for a long-term extension of the BTC. This support is broad-based from feedstock suppliers, including farmers and ranchers, to producers, to blenders and, ultimately, to the end users represented largely by the trucking industry.”

REGI is projected to grow earnings 15% annually over the next five years, and has profit margins just north of 19%. Renewable Energy is well positioned as the major player in an industry that is seeing increasing demand, favorable tax and regulatory treatment, and a growing desire on the part of major players in the space to be seen as environmentally friendly. The company should continue to be the top player in biodiesel for the foreseeable future.

TPI Composites (Nasdaq: TPIC)

With origins in building sailboats, TPI Composites is a manufacturer of composite wind blades for wind power generation. The company has manufacturing facilities in the U.S., four cities in China, Denmark, India, Mexico and Turkey. The wind power generation business is projected to reach $100 billion by 2025, with much of that growth coming from China, where TPI has a strong footprint.

2018 was an investment and transitioning year for the company, as they invested in a large number of start-up blade lines and moved a large amount of production to larger blades. The company is on track to complete, and begin reaping the benefits of, this investment in 2019. This is one reason I believe now is a good time to buy TPIC.

Management is already seeing an above projection interest in its new lines, and CEO Steve Lockard addressed the transition year in their latest conference call stating, “While we’ve had some execution challenges and delays relating to both start-ups and transitions this year, we’re getting better with our customer support at both start-ups and transitions making them happen faster and therefore, less costly.”

It appears the company has learned from this process and is projecting more incremental changes to its products moving forward. This should reduce cost, while still improving the efficiency of its blades. Management also believes the size of current blades is close to the maximum size practicable, and that future blades will be more modular in nature, which should point to increasing profit margins at TPIC.

TPI Composites has averaged 49% earnings growth the past 5 years and is projected to grow earnings 35% annually over the next 5 years. And with this growth profile, the company trades at a PE multiple of only 11. I would like to see a higher profit margin than the current 2%, but I believe the end of the transition period in 2018, along with a move to more modular products, will address that issue.

The demand for renewable energy is rising. Whether in the form of a large utility like NextEra, a biodiesel play like Renewable Energy, or a global wind energy company like TPI Composites, you should take advantage of this rising tide, and place a renewable energy stock in your portfolio.

Source: Investors Alley

I’ll be the first to admit, when I went looking for stocks that would not be impacted by the trade war between the U.S. and China, or a flip-flopping interest rate policy, I did not think I would end up in the for-profit education sector. I viewed the sector as plagued by shaky financials and remember clearly the bubble and relatively recent collapse of many stocks in the for-profit education space.

The U.S. government’s policy of an “education for everyone” brought out bad actors in the sector who were more than willing to take advantage of the government’s largesse, and enroll students that had very little chance of paying back their educational debt. The resultant shakeout, when the government realized what was happening and pulled back on the lending reigns, left the most aggressive companies, like Corinthian Colleges and ITT, bankrupt.

So why look at these companies now? I found two catalysts as I began to research the companies. First, in the U.S., a more friendly government is in place after what I view as the correct crackdown of the previous administration. And second, the shakeout in the industry appears almost complete with several of the remaining companies touting solid financials and solid growth prospects due to economic and demographic changes.

In the U.S., Education Secretary Betsy DeVos has begun what NPR calls a “regulatory reset on Obama-era for-profit regulations”. One of the most onerous rules on the for-profit institutions in the U.S. is known as the “gainful employment” rule.

The rule in essence requires a for-profit institution to prove the students they enroll can be gainfully employed following graduation. The gainful employment policy is set to expire July 1, 2019, and Secretary DeVos has clearly indicated the Department of Education will not seek to extend the policy. This policy shift should benefit the for-profit education companies.

The companies I believe you should look at, which I list below, also have solid financials in place and are expected to grow substantially. There are two factors driving this growth. First, the companies are increasingly relying on technology, such as artificial intelligence, to educate more people using fewer and more efficient resources. And second, the move to a gig-economy means workers need more education throughout their career than they did even a few years ago. And, in countries like China, the gig-economy, combined with a move away from agriculture, is fueling rapid growth.

Karl McDonnell, CEO of Strategic Education (Nasdaq: STRA) (in early 2018 Strayer Education merged with Capella Education to form Strategic Education) recently said Strategic is, “using technologies like artificial intelligence and predictive analytics today to teach vastly more students with fewer humans and yet, better outcomes.” As this technology gets better, the efficiency should continue to drive cost out of the business model.

A few months ago Forbes reported that by 2020 fully half of U.S. employees will be engaged in freelance work. A McKinsey study examining the same issue, says that also by 2020, the U.S. will need 1.5 million more college educated workers than are available. And it’s not just a U.S. problem, as France is projected to have a shortfall of 2.2 million college educated workers with the European Union expected to have major shortfall issues due to both education and complicated hiring laws.

It’s my view that the for-profit educational institutions, with expertise in distance learning and educating adults who need to upgrade skills, will benefit from this changing job landscape and skills gap.

Here are a few of the companies I believe you should look at for your portfolio.

Grand Canyon Education (Nasdaq: LOPE)

The first thing to strike me about Grand Canyon is the positively sloping operating and profit margins the company has posted. In one year profit margins have risen to 23.6% in the latest reported quarter from 19.3%.

Grand Canyon is also very interesting because of a recent change in its business model. The company split off the “school” into a nonprofit and now Grand Canyon gives investors a services company that provides technology, counseling and a variety of other services to the school.

The services company receives 60% of the tuition from the nonprofit, and importantly can offer the services it provides to other institutions. This should allow the company to grow beyond the confines of being tied to one institution and provide substantially more market to address.

Grand Canyon is projected to grow earnings this year almost 27% and is projected to have a 17% growth rate over the next five years. The company has only a .05 debt to equity ratio and trading around $120 has a book value of almost $24 per share.

New Oriental Education & Technology Group (NYSE: EDU)

The for-profit education market is booming in China. In 2016 40% of the Chinese population was engaged in farming. In the U.S. and Germany, that number is 2% and 10% respectively. As China’s agriculture sector becomes more efficient, a major government initiative, it is projected that 250 million Chinese will leave agriculture and move to jobs requiring a higher education skill set.

As the education market grows in China for-profit institutions are also taking share from public schools. Revenue from 2012 through 2020 for private educational institutions is expected to grow at a compound annual growth rate of approximately 12%. New Oriental Education is poised to take advantage of these favorable demographics and growing market.

In October the company reported a 49% year-over-year revenue increase and a 13% year-over-year increase in student enrollments. The company has no long term debt and expects to increase earnings next year by over 34%.

What is impressive about the company is that it is both expanding rapidly, opening 18 new facilities last quarter, and is also earnings positive during this growth period. As CFO Stephen Yang described in the company’s latest earnings call, New Oriental uses a low cost promotional experiential course offering in the summer to bring in new students and then moves, as of the latest quarter, over 54% of those promotional students into full course offerings.

The stock has pulled back this year after becoming somewhat overheated and now trades at a PE of 36. But, based on the projected earnings growth, the forward PE is projected to be cut in half to just over 18.

Chegg, Inc. (Nasdaq: CHGG)

Chegg focuses on homework help, online tutoring, and scholarships and internship matching. The company is expanding rapidly, and is expected to grow earnings next year over 25%.

The company has been steadily increasing margins with gross margins coming in at just over 74% last quarter. The company appears to be on the cusp of profitability, and is just moving into a more efficient operating model through technology implementations.

CEO Dan Rosensweig discussed the company’s move to a chat-based platform, which allows fewer employees to service more students, in their last earnings call. Rosensweig stated, “With over 40% of college students requiring remediation in Math, English, or both, these are key subjects where we are starting to leverage A.I. and machine learning to expand our product offerings and provide greater support to a broader range of students.”

Employing a business model with a mix of human interaction provided by tutors, combined with a growing reliance on increasingly efficient technology, increases Chegg’s total addressable market as it expands its service offerings.

With a rapidly increasing market, due to the changing way people work and the increasing industrialization of growing economies, for-profit education companies like Grand Canyon, New Oriental and Chegg deserve a closer look. These companies have made it through the recent for-profit education shakeout and are rapidly earning their way back to a spot in your portfolio.

A Pizza Company More Profitable Than Amazon?
Forget Tesla, Amazon, Netflix and Google! A Pizza Company has beat every single one of these tech giants... and made its investors over 2,500% since 2010.
It's all thanks to a $100 Trillion ‘Digital Helix’ and it could make YOU 2,537% profits if you act before November 29.
Click here to find out more...

Source: Investors Alley 

I like to get a sense of what is going on in global markets to help me guide you through a path to profits.

And there is one item that caught my eye that I’m sure isn’t being reported by media outlets, such as CNBC. That is, after powering ahead of global rivals for much of the summer, the U.S. stock market has been struggling to continue outperforming since the peak in late September. The chart below illustrates that point.

Other markets, which have been beaten down, are starting to outperform. For example, in November, the Hang Seng index in Hong Kong soared by 6.1%. Such a rebound is not surprising when you consider the battering it took because of the U.S.-China trade war.

The recent relative outperformance of some foreign markets had me thinking again about those foreign stocks you can buy in the U.S. in the form of an ADR (American Depository Receipt) and how you can buy some of these through the Robinhood brokerage firm for zero commission!

Robinhood Revisited

Robinhood is still growing rapidly. It added about 3 million accounts over the past year, bringing its total number of customers to 5 million, which is more than twice the big three incumbent discount brokerage firms combined. And it remains the only venue that offers trading on stocks, options and cryptocurrencies all in one place.

I first told you about it adding ADRs back in September. At that time, Robinhood announced it was adding about 250 ADRs from Japan, China, Germany, the U.K. and elsewhere. ADRs of companies from France will be added in the coming months. A quick definition of ADRs is that they are stocks of foreign companies that trade and settle in the U.S. market in dollars, allowing investors to avoid having to transact in a foreign currency.

Robinhood co-founder and CEO Vlad Teney told CNBC at the time, “We looked at what customers were searching for and not getting. It [adding ADRs] allows customers to get some exposure outside of the U.S.”

The company found its users wanted access to global stocks by looking at its own search data. Robinhood’s staff has access to what people are typing into the app’s search and looking to trade. Names such as Nintendo, Adidas, BMW and Heineken continued to pop up. The company used similar reasoning in February when it decided to add cryptocurrency trading after users repeatedly searched for bitcoin.

As someone that owns a good number of foreign stocks personally, this was fantastic news. This move made investing in overseas blue chip stocks easy, safe, and cost-efficient. While there are hundreds of quality foreign companies to choose from on Robinhood’s platform, let me briefly highlight for you three of them…

Nintendo

If you have children, you no doubt have heard of the Japanese gaming company Nintendo (OTC: NTDOY). It is doing well and recently announced its best quarterly results in eight years! It reported operating profits of ¥30.9 billion ($27.2 million) for the July to September quarter, up 30% on the same period a year earlier.

Its recent success has been due in large part to the popularity of its Switch console. Nintendo said that over the April to September half it had sold 5.07 million units of the Switch console, adding that it would maintain its full-year sales target of 20 million units by the end of the financial year ending March 31, 2019.

And despite a visibly slower pipeline of blockbuster titles this year, sales of Switch games reached 42 million in the April to September period, almost double what was sold in the first half of the company’s previous fiscal year. And its next blockbuster – Super Smash Bros Ultimate – is only being released on December 7. Despite this, the highest ranked title in Amazon’s list of the best-selling games of 2018 is Super Smash Bros. That suggests there have been a lot of pre-orders and that means it could be a record-breaking hit.

With the games industry tilting towards the huge Asian market – UBS expects gaming revenues in Asia to grow 9.5% annually to $200 billion in 2030 – Nintendo seems well-positioned.

Naspers

One company that many U.S. investors have never heard of is South Africa’s Naspers (OTC: NSPNY). Yet, it is perhaps the savviest venture capital investor in the world. It is best known for taking a major stake in China’s tech giant Tencent (OTC: TCEHY) back in 2001 for a mere $31 million. That stake grew in value to $175 billion earlier this year!

If there is one thing I love as an investor, it is buying something on the cheap. And Naspers is that. The entire current valuation of Naspers is valued at about $25 billion less than just its stake in Tencent! And all its other investments in technology companies around the emerging world are valued at nothing – you’re getting them all for free!

It comes down to the same old Wall Street bugaboo – its analysts are either too lazy or not smart enough to understand Naspers business. Its business is very successful, posting a 39% rise in half-year earnings. The earnings of $1.7 billion in the six months ended in September were driven by Naspers’ classifieds business becoming profitable as well as Tencent generating stronger profits. The company touts a 22% internal rate of return on non-Tencent investments since 2008, including a stake in Flipkart of India which was sold to Walmart earlier this year.

Africa’s largest company has begun to tackle the steep discount in its share price to its net asset value. As part of tackling the discount, this year Naspers announced plans to spin off its African pay-TV arm and it did raise $10 billion from selling off some of its Tencent shares, reducing its stake to 31%.

I look forward to its spinoff of its very successful pay-TV arm Multichoice, which is Africa’s Netflix and more. Its services include sports broadcasting and South Africa’s Dstv, reaches 13.5 million households on the continent and generated profits of 6.1 billion rand ($409 million) during its latest fiscal year.

Nestlé

For more conservative investors, there is the world’s largest food and beverage company, Switzerland’s Nestlé (OOTC: NSRGY), which was founded as a baby food manufacturer in the 1860s. Today, Nestlé’s four priority markets are coffee, bottled water, pet food and baby food.

I suspect that someday the company will be making some large divestitures. One of these will likely be its frozen foods business, which controls a 29.6% share of the U.S. market. Another may be its consumer nutrition and consumer healthcare division.

Already, Nestlé has said it plans to spin off or sell its skin health business. In the latest streamlining measure by CEO Mark Schneider, Nestlé said it had decided the future of Nestlé Skin Health, which analysts said could be worth as much as 7 billion Swiss francs ($7 billion), laid “increasingly outside the group’s strategic scope”.

The division had sales of 2.7 billion Swiss francs last year and makes prescription items, anti-wrinkle creams and other consumer healthcare products. Nestle said it would “explore strategic options” for the business, which could include a sale, spin-off or even a stock market listing. Possible buyers could include consumer or pharmaceutical groups.

Nestlé said that the planned sale or spin-off would “sharpen its focus” on food, drinks and “nutritional health products”, led by its top brands including KitKat chocolate bars, Perrier bottled water and Purina pet food. The decision to abandon the skin health business I believe reduces still further the strategic case for Nestlé selling its 23% stake in the French cosmetics giant, L’Oreal (OTC: LRLCY).

There you go – three high-quality foreign stocks you can buy for zero commission at Robinhood.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Alley