All posts by Tony Daltorio

Dump These 3 Steel Stocks as Tariff’s Rip Up the Industry

The imposition of a 25% tariff on imported steel by President Trump has certainly been a headline grabber. But it obscures the long-term problems faced by the U.S. steel industry.

And it only addresses one side of the classic economic equation for any commodity – supply and the industry’s struggle against cheap imports. The share of the U.S. steel market taken by imports was only 26.9% in 2017, up slightly from 2016’s level of 25.4%.

The other part of the equation is demand and that remains a sore spot. There is a genuine long-term weakness in domestic demand for steel. The only bright spots on that front are the auto and the shale oil and gas industries.

Related: Trump’s Trade War Set to Cost This Automaker $1 Billion: Sell Now

The decline in U.S. steel output since the 1970s is clearly seen in this graph. 2017 estimated steel use in the U.S. was 110 million metric tons, which was far below the 136 million ton level in 2006, before the financial crisis. U.S. steel production was up 3% in 2017, but capacity utilization remains low at 74%. In other words, there is still overcapacity in the U.S. steel industry based on current demand.

And the situation could get worse. . . . .

Higher Prices = Lower Demand

A basic economic principle is that higher prices lead to lower demand. And the steel tariffs mean higher prices for manufacturers in the United States that use steel. So unless US steel-using manufacturers are also protected from imports by tariffs, they will end up being losers on the global stage because the higher steel cost will make them uncompetitive. That’s the slippery slope you get on when you begin imposing tariffs – you have to end up shielding more and more industries.

Before Trump acted to impose tariffs on steel, forecasters had been predicting a decent year for the steelmakers. Growth in steel demand, as forecast by the consultancy Wood Mackenzie and others, was expected to be in the 7% range. But if higher costs start pricing US manufacturers out of world markets, that expected rise in demand will quickly disappear and jobs could even be lost.

The solution – instead of tariffs – would have been to begin moving forward on President Trump’s dream of rebuilding America’s deteriorating infrastructure. For example, there are more than 54,000 bridges in the United States that need to be repaired or replaced, according to the American Road and Transportation Builders Association. Just think about how much steel would be needed to just tackle that problem.

And there’s a whole lot more in infrastructure that needs to be done… that’s why the American Society of Civil Engineers most recent report card gave U.S. infrastructure an overall grade of D+. The report also said that if our country’s investment gap is not addressed by 2025, the U.S. economy will lose nearly $4 trillion in GDP.

In simple terms, if you want to be competitive globally in the 21st century, you need a 21st century infrastructure and not one a hundred years old.

Stay Away From Steel Stocks

I do not expect the United States to seriously address its infrastructure problem. Therefore, I do not see additional demand coming online any time soon for U.S. steelmakers. And there is a related problem the U.S. steel companies have…

That is, some of their mills are simply inefficient and uncompetitive. This has been a decades-long problem for the U.S. steel industry, even going back to just after World War II. U.S. steel producers held on stubbornly to old technology – the so-called ‘open hearth’ steel production method. Meantime, the Europeans and everyone else adopted the more efficient ‘basic oxygen’ process.

Of course, other newer steelmaking technologies are in use today, but the roots of the decline of the American industry began then. By the time the U.S. steel industry modernized (after begging for protection against those darn foreigners), it had already lost its spot as the world’s steel kingpin.

As the famous quote attributed to Mark Twain says, “History doesn’t repeat itself, but it often rhymes.”

Therefore, I expect the benefits of the tariffs to the steel companies to disappear as quickly as a morning fog on a hot summer day.

This makes the stocks of the steel companies un-investable or, if you have a high risk tolerance, outright shorts. Especially at these elevated price levels, which seemed to have all the possible good news already factored in.

Related: Here’s Why You Need to Buy These 3 Metals Stocks Today

At the top of the list of steel stocks to avoid is U.S. Steel (NYSE: X), which saddens me because my grandfather used to work for the company.

Vertical Research Group analyst Gordon Johnson recently said on CNBC that the operating costs for the company are up, meaning the tariffs will offer little benefit.  Johnson specifically pointed to the soon-to-be-reopened Granite City mill in Illinois as “one of the least efficient steel mills in the world”.

U.S. Steel is also facing operational issues in its flat-rolled division with increased outage and plant maintenance costs rising. The company sees higher plant-related spending as it accelerates its efforts to revitalize this unit. Maintenance and outage expenses for the flat-rolled unit for 2017 increased by $341 million on a year over year basis. The company expects maintenance and outage spending for 2018 to be similar to 2017.

The second stock on the no-touch list is AK Steel Holding (NYSE: AKS). Like U.S. Steel, it faces planned maintenance outages in some facilities, affecting production. The company recorded outage costs of $85 million in 2017 and in 2018, it expects expenses associated with planned outages to be about $50 million.

But there are other, bigger problems for AK Steel. AK Steel’s cost structure is higher than its peers due to its greater reliance on external supplies of raw materials. It pays nearly double for iron ore pellets compared to its integrated competitors, who consume their own pellets. The company saw higher year over year costs for raw materials such as iron ore and other alloys in the fourth quarter and raw material cost inflation is expected to continue throughout the year.

Finally, a broad way to play the chronic overcapacity in the global steel industry is through an exchange traded fund – the VanEck Vectors Steel ETF (NYSE: SLX).

The top positions in the fund (27 stocks make up the fund) are the mining firms that produce the aforementioned raw materials needed for steel production like iron ore. However, it is still loaded with steel-producing companies from all over the world. About half the stocks in the portfolio are U.S. steel industry companies.

It would not surprise me to see this ETF slide from its current price near $50 into the $30s or even $20s.

Get Your Hands on Stocks Growing Revenues (and Stock Prices!) Faster than Google and Apple

I’d like to reveal to you the blue chip stocks – one in particular – that could literally be worth millions of dollars to you over the next decade.

Revenue for one firm in particular is growing faster than that of Google and Apple, the darlings of Wall Street. Investors have watched the stock price shoot up over 100% this past year and we’re just getting started.

You need to get in this stock before April 1st (it’s closer than you think!).

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Source: Investors Alley 

Buy These 3 Stocks for the Boom in American Oil Exports

Monthly oil output in the U.S. this year topped 10 million barrels a day for the first time since 1970, hitting all-time records. And the surge has just begun.

On March 5, the International Energy Agency (IEA) released its forecast that predicted U.S. shale output would rise by 2.7 million barrels a day to 12.1 million barrels per day by 2023. As the IEA’s executive director, Fatih Birol said in a statement, “The United States is set to put its stamp on global oil markets for the next five years.”

(Of that 16 million in 2023 the IEA projects that 12 million will come from shale)

U.S. Oil Exports

Importantly, Birol expects U.S. oil exporting capacity to more than double over the next five years from 1.9 million barrels late last year to 4.9 million barrels per day by 2023. That’s a good thing. Let me explain…

First, additional domestic demand for shale (mainly from the petrochemicals industry) will be around 900,000 barrels a day, according to an estimate from the energy research firm Wood Mackenzie. That’s not close to sopping up the extra oil produced.

An even bigger factor is the U.S. oil refining system, which was built many years ago. It runs much more efficiently on a steady diet of heavier, more sulfurous oil such as oil that comes from many OPEC countries. U.S. shale oil is mostly a light, ‘sweet’ crude oil variety.

Bottom line – a lot of the additional oil produced must find a market overseas, such as Europe or China. That’s just another reason a trade war is not a good idea. And why it was a good idea to remove the decades-old restriction on the export of U.S. crude oil in late 2015. U.S. exports of crude oil and petroleum products climbed more than 1.7 million barrels per day between December 2016 and December 2017 to a record 7.3 million barrels a day.

A key and often overlooked component to the expected surge of exports of U.S. shale oil is infrastructure. Important pieces of the needed infrastructure are our ports. One such facility is the Louisiana Offshore Oil Port (LOOP), which has been converted from a massive import facility. Just last month it test-loaded an oil supertanker for the first oil exports in its 37-year history.

Other pieces of our crucial energy infrastructure are our pipelines. It is this crucial infrastructure that gives U.S. oil exports a structural advantage by cutting the cost of moving oil from the oil fields to ports. For example, the price difference between oil sold at Midland, Texas, in the middle of the prolific Permian Basin, and equivalent grades of oil on the Gulf Coast have narrowed from more than $30 a barrel in 2012 to just $3 as new pipeline flows have come onstream.

Oil Pipelines Point South

The U.S. pipeline infrastructure is undergoing a drastic change at the moment as the focus shifts to delivering as much shale oil as possible to Gulf of Mexico terminals so that it can be exported. These changes involve the reversal of flow in existing pipelines as well as the building of new pipelines.

An example of the first type of change is the 1.2 million barrel a day Capline pipeline that is owned by Marathon Pipe Line LLC, a unit of Marathon Petroleum (NYSE: MPC). In 1967, this pipeline began to ship imported oil northward from the Gulf Coast to Illinois and from there oil was dispensed to a number of Midwestern refineries.

But now, thanks to shale oil, that is no longer necessary and the flow has nearly dried up. But instead of shutting down the pipeline, Marathon is proposing to simply reverse the flow and send crude from places like North Dakota’s Bakken to reach Gulf Coast ports for export.

Of course, the most prolific field at the moment is the Permian Basin in Texas and New Mexico. Brand new pipelines – the BridgeTex, Permian Express and Cactus pipelines – now connect the Permian to the ports of Houston and Corpus Christi. The respective owners of these pipelines are:

  • BridgeTex is owned 50/50 by Magellan Midstream Partners L.P. (NYSE: MMP) and Plains All American Pipeline L.P. (NYSE: PAA).
  • Permian Express is controlled by Permian Express Partners, which is owned 85% by Energy Transfer Partners (NYSE: ETP) (after its merger with Sunoco Logistics Partners in April 2017) and 15% by Exxon Mobil (NYSE: XOM).
  • The Cactus pipeline is owned by the aforementioned Plains All American Pipeline.

And more pipelines are on the way. The energy consulting firm RBN estimates that a number of midstream projects (such as the Epic Pipeline, funded by private equity firm Ares Capital) could add 2 million to 2.1 million barrels a day in pipeline takeaway capacity from the Permian Basin. RBN believes that is “likely more than enough” to accommodate growing oil output from the Permian for the next five years.

Oil Pipeline Investments

Yet, despite all of this good news regarding the critical role pipelines play in the U.S. shale oil boom, the stocks of pipeline companies have been chronic underperformers. When U.S. oil prices collapsed from $100 a barrel in mid-2014 to a low of $26 a barrel in February 2016, the Alerian MLP index of pipeline companies (NYSE: AMLP) fell 60%. Oil has since more than doubled but the index has recovered only 27% as investors seem not to believe the recovery story.

This is understandable. Many energy master limited partnerships (MLPs) shifted towards financing growth from internal cash flow instead of raising money from capital markets. This policy resulted in slashed dividends – distributions grew by an average of only 1.5% in 2017 among the companies in the Alerian index. That was well below the 10-year average of 5.1%.

But still, with sentiment so low, I see the sector as a contrarian investment for you and one that is ripe for a rebound. The fund management company Pimco agrees with me. In a recent note to clients, it argued that by reducing dividends and leverage, the energy limited partnerships have been “healing” and their equity valuations “represent an overly negative outlook on the sector”.

My colleague Tim Plaehn writes about these energy MLPs quite often, so I urge you to check out his articles. But here are a few beaten-down ones that caught my eye.

The first MLP on my list is Energy Transfer Partners, with its wide geographic spread of pipelines. It should now begin reaping rewards from its major projects including Rover Pipeline, Bakken Pipeline and Permian Express 3. And its merger with Sunoco should lead to $200 million of cost savings by 2019. I also like its increasing cash distribution, which showed a year-over-year jump of over 40% in the recent quarter.

It still has a large amount of debt, but with the stock down more than 28% over the past year (though it’s little changed this year) it now may be worth your time to take a look.

The second MLP on my list is Plains All American, whose shares have fallen by nearly a third in the last year, but are up about 5% so far in 2018. The uptick may be due to investors seeing that the company is modifying the way it manages inventory and is implementing provisions in the contracts it signs that should reduce chronic earnings volatility.

A plus this year is that a number of its pipeline projects have, or will very soon, come online. These include the extensions of its Diamond Pipeline and BridgeTex Pipeline, which will be put into service during the first quarter of 2018. The company’s STACK JV Pipeline in already in service and the Cactus Pipeline project was completed at the end of 2017. Its Sunrise Pipeline Extension, approved during the third quarter of 2017, is expected to come online during the first half of 2019.

These pipeline additions should also add more stability to its earnings, again making it worthy of consideration by you.

Finally, for the broadest exposure, there is the aforementioned ETF (AMLP). But I personally prefer buying specific companies in this case.

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

3 Tech Stocks to Buy as Apple Moves Into Healthcare

More disruption is headed to the healthcare industry, challenging the power of the incumbents in the sector. I’ve already told you about the recently announced effort by JPMorgan, Warren Buffett’s Berkshire Hathaway and Amazon.com (Nasdaq: AMZN) to get into the healthcare space. Their aim is to create a not-for-profit healthcare company to try to lower the cost of healthcare for their collective one million employees.

Now, it seems that Apple (Nasdaq: AAPL) is also getting serious about its push into healthcare. The hint about Apple’s seriousness came at a keynote speech by CEO Tim Cook in September 2017 when he said the sector is one where Apple can have a “meaningful impact”.

At the recent shareholders meeting, Cook again was critical of the healthcare system in the United States. He said it “doesn’t always motivate the best innovative products”. Healthcare companies are designed based on reimbursements rather than the patients’ best interests, he said.

Apple Seizing the Opportunity

Cook said that Apple sees healthcare and wellness as a core part of its app, services and wearables strategy. Cook added that the healthcare market makes the smartphone market look small by comparison. He’s right – with over $7 trillion in healthcare spending annually (about half of that in the U.S.), it’s already about 10% of global GDP.

And think about Apple’s built-in opportunity… the company has over 85 million iPhone users and over one billion Apple devices are actively being used around the globe. That is a number than dwarfs what any health insurer or healthcare provider can boast.

Apple has been slowly building its push into healthcare over the past several years.

Apple’s first foray into the health segment occurred in 2014, with the release of the Health app and HealthKit. Then in March 2015 came the release of ResearchKit and the Apple Watch. Apple has used its HealthKit and ResearchKit software and data platforms to connect users’ health information across third-party apps and into clinical research projects.

The move by Apple into health accelerated in 2016 with the purchase of the digital health company Gliimpse, along with some health-related hires such as experts in remote health monitoring. In 2017, Apple joined with start-up Health Gorilla to advance its quest to turn the iPhone into a comprehensive repository of users’ electronic health records.

Today, Apple is working with Stanford University on a study to see if the Apple Watch’s sensors can detect heart abnormalities. Apple is also working on a number of other health-related solutions, usually using the Apple Watch, such as non-invasive blood glucose monitoring.

And with an upcoming software update, iPhone owners will be able to download their electronic medical records directly from some US hospitals. In January, Apple announced it was teaming up with 12 major hospital systems, such as John Hopkins, to enable patients to see all of their medical records on their iPhone.

And now Apple is taking an even bolder step…

Last month came word that Apple was preparing to launch a network of medical clinics for its employees and their families. The network is named the AC Wellness Network and is scheduled to launch this spring. On Apple’s website, it is described as an “independent medical practice dedicated to delivering compassionate, effective healthcare to the Apple employee population”.

Apple Partners

This move to open its own medical practice doesn’t mean Apple isn’t willing to work with some of the incumbents in the sector. Here are just several examples:

In November, the company came to an agreement with Aetna (NYSE: AET) to distribute more than 500,000 Apple Watches to its customers in 2018, broadening a pilot program that gave Apple Watches to Aetna employees. The special Watches will be loaded with apps co-developed by the two companies to do things like reminding users when to take their medications.

The goal is to, when the technology is perfected, to give the Watch to all of Aetna’s health-insured population. This Apple strategy strikes me as sharing parallels with Apple’s initial strategy of using carriers to subsidize the cost of the initial iPhone, essentially using the carriers as distribution channels.

Apple has also teamed up with several medical device makers to create iPhone-enabled devices, including Dexcom (Nasdaq: DXCM) for glucose monitoring and Cochlear (OTC: CHEOY) for hearing aids. As software becomes more and more important for medical device companies going forward, Apple could be positioning itself as an analytics, software, and patient health platform for these companies to plug into rather than having to build these capabilities themselves.

And at this week’s HIMSS18 annual conference, Apple is teaming up with Cerner (Nasdaq: CERN) to showcase to make health care records accessible in the Apple Health app. Cerner will also be offering a look at virtual health solutions that empower individuals to manage their health via telemedicine and remote monitoring technologies as well as intelligent solutions for hospitals as they adjust to rising costs and new technologies.

Brave New Healthcare World

The bottom line for you is that technology is finally changing healthcare as we know it. The one sector where costs have continued to inflate every year looks to be set for technology to have its deflationary effect.

That means the middlemen companies in the sector – with the fat profits – are going to be going on a ‘diet’. In other words, profits will be squeezed as Apple, Amazon and others move in.

Related: Sell These Healthcare Middlemen About to Get Amazoned

Healthcare could end up being a major part of the services business for Apple in a few years. Bad news for the incumbents, unless they have smart managements like the aforementioned companies and are teaming up with Apple and other technology firms.

All those in the health field now need to remember the old saying, “An Apple a day…”

Get Your Hands on Stocks Growing Revenues (and Stock Prices!) Faster than Google and Apple

I’d like to reveal to you the blue chip stocks – one in particular – that could literally be worth millions of dollars to you over the next decade.

Revenue for one firm in particular is growing faster than that of Google and Apple, the darlings of Wall Street. Investors have watched the stock price shoot up over 100% this past year and we’re just getting started.

You need to get in this stock before April 1st (it’s closer than you think!).

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

2 Stocks Winning the Cable Cutting Wars

The media wars have heated up, all thanks to a British company called Sky PLC (OTC: SKYAY). The company has three American suitors – Comcast (Nasdaq: CMCSA)Walt Disney Company (NYSE: DIS) and Twenty-First Century Fox (Nasdaq: FOX) – all vying to tie the knot with Sky.

It seemed straightforward enough… as Disney’s $66 billion offer for some of Fox’s assets that would include 39% of Sky, allowing Disney to expand its international presence. Separately, Fox is trying to buy the 61% of Sky that it does not own with an offer worth in excess of $16 billion. So eventually, it was thought, Disney would own all of Sky.

But then Comcast jumped in with a $31 billion all-cash bid for the entirety of Sky. Comcast is desperately looking for growth outside of the moribund U.S. cable business where cord-cutting by consumers makes Comcast particularly needy.

The faster-growing European market offers it an opportunity to strengthen a major weakness (little overseas exposure). Comcast currently has about 29 million U.S. customers, while Sky has about 23 million subscribers. If Comcast is successful, its international revenues will climb to 25% of total revenues from just 9% currently.

I do think this is a good attempt by Comcast to improve its fortunes. So I’ve been amused by some of the comments from U.S. analysts on the proposed offer for Sky by Comcast. As I’ve found all too often, there is a lack of understanding about businesses overseas by analysts in the U.S. Some U.S. analysts have given the deal a thumbs-down, saying why would Comcast want to buy a satellite TV company?

Sky is a whole lot more… as Comcast CEO Brain Roberts said, “There’s nothing as great in the United States.” Here’s why…

A Look at Sky

First, Sky is much more than a U.K. satellite TV company. It is pan-European, having expanded into Germany, Italy, Switzerland, Spain, Austria and Ireland. But more importantly, Sky is both a telecoms operator (selling TV, internet and phone services), and a media company with its own original news, sports and entertainment programming.

The company is not sitting by idly as rivals such as Netflix (Nasdaq: NFLX) and Amazon.com (Nasdaq:  AMZN) enter their turf. Sky recently launched a low-cost plug-in stick that will provide access to its films, television shows, and live sports including English Premier League soccer matches on any TV set.

Sky is also launching a download service called Now TV – after customers with children clamored for such a feature – to watch programming any time you’re away from home and have no internet or Wi-Fi connection.

These innovations let a customer avoid the expense of a high-end Sky set-top box and pay £14.99 ($20.61) for the smart stick and remote, choosing to buy Now TV day- or week-passes to watch box sets, films and Premier League sport without being stuck in a monthly contract. Sky has positioned Now TV as a lower-cost streaming competitor to Netflix and Amazon since it costs less than £10 ($13.75) a month. Later this year, Sky is also planning to unveil a broadband TV service that will allow customers who want its full TV service to do so without the need for a satellite dish.

So in effect, Sky is a smaller European version of what the U.S. media giants like AT&T (NYSE: T) with its proposed takeover of Time Warner (NYSE: TWX) are trying to become. That is, an integrated distribution platform that produces its own content.

Higher Bid Likely

It is highly likely that Fox/Disney will raise their bid for control of Sky. In addition to the reasons above, Sky is now worth more than the original Fox bid because of its recent success in securing rights to the lucrative and extremely popular English Premier League soccer for another three years at a very good price.

One reason I expect a higher bid (to be absorbed by Disney) is the aforementioned Netflix. The rise of streaming video from pioneers such as Netflix and Amazon upended the staid television industry, eroding audiences and sapping advertising revenue. As the industry tries to deal with changing viewer habits, traditional media distributors realized they are exposed and may not survive without making major changes.

As Rich Greenfield, an analyst with BTG Research, told the Financial Times “Netflix has changed people’s desire to watch linear TV,” he adds, referring to traditional broadcast or cable TV where viewers tend to tune in at particular times. “And it has killed the concept of channel brands.” Viewers, he says, “no longer know or care” which channel their programs come from after “decades of broadcast and cable networks trying to build brands”.

The Two Best Stocks to Buy

Investors have it right when they give Netflix such a rich valuation because its model is the right one – direct-to-consumer and global. I see Netflix continuing to power ahead in the industry.

I also like Disney a lot. Sky will only add to its move toward more streaming services of its own. Disney is launching a streaming service for its Disney and Pixar brands and one for sports fans (ESPN).

The big plus as it moves toward streaming is Disney’s vast array of popular content including the traditional Disney cartoon characters as well as Marvel super-heroes and Star Wars. You need only to look at the popularity of Shanghai Disneyland – where the number of visitors (over 11 million) in its first year blew away even the most aggressive estimate – to understand the global appeal of the Magic Kingdom.

Disney’s wide array of assets, including its parks & resorts, as well as highly successful movie franchises (and marketing opportunities from that) make it the safest bet to be one of the long-term survivors in the new media landscape.

No matter the outcome of the bidding for Sky – although I’m betting on Disney – Netflix and Disney will be the two companies to own in this sector.

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 

How to Get Your Cut of Apple’s Money Coming Back to the US

Financial risks can seemingly come out of nowhere. Think about how many on Wall Street were caught off guard by the 2008-09 financial crisis or even the volatility of a few weeks ago. Yet the potential risk emanating from the packaging of bad mortgages was in plain sight, but ignored.

Today, there is another financial risk lurking in plain sight. It lies in the vast overseas holdings of technology giants like AppleAlphabetMicrosoft and many others. I discussed this topic to my subscribers in the October issue of Growth Stock Advisor. But since there is so much misunderstanding about the roughly $1 trillion (or possibly as high as $2 trillion) in funds held overseas by U.S. multinationals, I wanted to clear it up for you.

I know there is much misunderstanding about this subject just from gleaning the comments section on several recent articles published by The Wall Street Journal. Apparently, Americans are under the impression that this $1 trillion is just sitting in bank accounts overseas and that both the overseas banks and host countries don’t want to lose control of this money. Nothing could be further from the truth. Let me explain…

The New Force in Global Bond Markets

I want you to think about it for a moment, and it will make sense. Over the past decade, the largest U.S. companies have built up cash piles of as much as $2 trillion, rising more than 50% in that time period. Why would these firms let all that cash sit there idly, parked in a bank account?

Well, they haven’t. Instead, these aforementioned technology companies – they control about 80% of the overseas hoard – and other U.S. multinationals have put the money to work by snapping up all sorts of bonds. The purchases have mainly been the bonds of other corporations, but government bonds have also been bought.

In fact, companies like Apple, have actually issued their own low interest rate bonds and then used some of the proceeds to invest into the higher-yielding debt of other firms. In some cases, it has taken a large anchor position in certain offerings à la an investment bank like Goldman Sachs. In effect, it has become one of the world’s largest asset managers.

According to the Financial Times, thirty of the top U.S. companies have more than $800 billion worth (mainly short- and medium-term) of fixed-income investments. The breakdown is as follows:

  • $423 billion of corporate debt and commercial paper (very short-term corporate debt)
  • $369 billion of government and government agency debt
  • $40 billion of asset and mortgage-backed securities
  • $10 billion of cash

Those 30 aforementioned companies have accumulated more than $400 billion worth of U.S. corporate bonds. That is nearly 5% of the $8.6 trillion market. Apple itself owns over $150 billion of corporate bonds, more than most asset managers. And Microsoft owns over $112 billion in government securities.

This should not come as a shock to students of history. Some of the banking industry’s most venerable names started out in other businesses. The Rothschilds were merchant traders that became the most powerful banking empire in Europe. As Mark Twain is reputed to have said, “History doesn’t repeat itself, but it often rhymes.”

Related: 3 Stocks to Sell Under Trump’s New Tax Law

The Risk to the Bond Market

I now want you to think about this scenario… let’s say most of these companies bow to political pressure and bring “home” this overseas hoard.

That would mean selling a lot of corporate and government bonds. The likely result would be a massive spike higher in interest rates. Just look at how poorly the market acted when there was just a hint of a tapering of purchases by the Federal Reserve. A massive unloading of bonds could quickly turn into a nasty market event starting in the bond market and quickly spreading to the stock market.

Ironic, isn’t it? A massive tax cut and ‘patriotically’ bring money back to the United States could end up being the trigger event for a recession caused by much higher interest rates.

Luckily, from what most of the technology companies (with the exception of Apple) have said in their latest conference calls, they are making no major plans to sell their bond holdings.

Microsoft – with the second biggest pile held overseas – said it had already been able to make all the investments it wanted under the old tax regime, and didn’t expect anything to change as a result of the law. Alphabet said, “There’s no change in our capital allocation.”

What It Means to You

As market participants, I think we should all breathe a collective sigh of relief. As of the moment, nothing has changed and you should just stick to your current investment plan.

But what if the political pressure heats up and these tech companies wilt and decided to liquidate their bond holdings?

Then putting money into the ProShares UltraShort 20+Year Treasury ETF (NYSE: TBT) would make a lot of sense. This ETF uses futures and swaps to correspond to twice the inverse of the ICE U.S. Treasury 20+Year Bond Index. It is up 15% year-to-date thanks to the recent bond market scare, but is little changed over the past year.

Since most of the tech companies own a lot of corporate bonds, and if you have a high risk tolerance, you could short corporate bonds ETFs such as the Vanguard Long-Term Corporate Bond ETF (Nasdaq: VCLT), which is down 4.7% year-to-date and the SPDR Barclays High-Yield Bond ETF (NYSE: JNK), which is down 0.6% year-to-date.

But only think about these trades if and when the technology companies begin liquidating their holdings. I do not think that will happen any time soon, but stay tuned.

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 

How to Profit from Demand Destruction of Oil

In the latest annual energy outlook from BP PLC (NYSE: BP), it was the first time the company forecast oil demand would eventually peak and then steadily decline. BP put the date for peak oil demand in the late 2030s.

And the cause is one I’ve told you about quite often in my articles – the rise of electric vehicles. BP said there would be 300 million electric vehicles on the road by 2040, up from about 3 million today. BP says electric vehicles will account for only 15% of the roughly 3 billion cars on the road in 2040. But they will account for 30% of all passenger car transportation, as measured by distance traveled, because so many of them will be shared vehicles, à la Uber.

BP’s outlook also envisaged renewable power growing from just 4% of global energy consumption today to 14% in 2040.

Add all of that up and you can surmise that a lot of changes are ahead for the oil industry. Yet only some of the world’s major oil companies are preparing for what the future will hold.

Your Friendly Neighborhood Power Provider

The oil companies that seem to have begun the process of adapting to a lower carbon economy are located across the pond in Europe. These include Royal Dutch Shell PLC (NYSE: RDS.A and NYSE: RDS.B)Total SA (NYSE: TOT) as well as the aforementioned BP. Both Shell and Total, for example, have invested heavily into natural gas as a cleaner alternative to coal for power generation.

But now the two companies are moving forward with even more ambitious plans.

Both Shell and Total are moving into the consumer power market. The reason is obvious to the head of Shell’s “new energy” strategy, Maarten Wetselaar. He forecast that the proportion of global energy consumption to be met by electricity will climb from less than 20% currently to about 50% over the next few decades.

This outlook is largely in agreement with the forecast of BP, which can be seen in the chart below:

Both companies have also moved into renewable energy. In January, Shell bought a 44% stake in the U.S. solar energy company, Silicon Ranch Corporation, for $217 million. And last October, it purchased NewMotion, which operates one of Europe’s largest electric vehicle charging networks. The company also has a 20% stake in the huge Borssele offshore wind project off the coast of Holland.

Total’s strategy is similar. It paid nearly $300 million for a 23% stake in the French renewable energy company, Eren. It also spent $2 billion (about a billion each) over the past few years buying the U.S. solar company, SunPower, and the French battery developer Saft. The latter makes specialized long-life lithium-ion batteries for industries including telecommunications, medicine, aerospace and defense. Its products are installed in two-thirds of the world’s commercial aircraft and over 200 satellites.

The management at both companies acknowledge that the global energy market – long dominated by oil – is beginning to give way to a lower-carbon system, with much larger future roles for natural gas and renewable power. And both companies are already laying the foundation for such a future by moving into the selling of power…

Shell is close to completing its acquisition of First Utility, the UK electricity and gas supplier, which it agreed to buy last December in a deal that will pit it against the U.K. ‘s larger power suppliers. Meanwhile, Total is in the early stages of building a retail energy business in its domestic French market to challenge the country’s incumbent power providers.

These acquisitions are all part of the long-term strategy of these companies. It’s a rather straightforward strategy too – to sell the power from their own renewable and other energy sources (such as natural gas) through their energy trading businesses to customers, both commercial and to a lesser extent, residential.

Shell, for instance, already is among the largest power traders in both Europe and North America. And given its size and scope, it may become a supplier of choice for many large industrial customers, threatening the long-term viability of existing utilities.

Related: Dump These Energy Stocks Before the Next Correction

What the Other Oil Companies Are Doing

Most of the other major European oil firms are moving down the same path as Shell and Total, albeit at a slower pace. BP has owned a large U.S. wind business for many years and in December signed a $200 million deal to buy Lightsource, a U.K. solar power developer. Even Italy’s Eni SpA (NYSE: E) and Norway’s Statoil ASA (NYSE: STO) are investing in solar and offshore wind, respectively.

Yet the two U.S. giants – ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) – have largely not followed their European peers into other forms of energy besides oil. They seem content being dinosaurs drawing jeers from climate activists.

Exxon and Chevron are ignoring the eventual transition to a lower carbon world. No one knows how fast this transition will occur. But one thing is all but certain: electricity will be at the heart of the shift with power demand increasing in transportation, industry and the services sector as oil is displaced.

If you want to invest in oil stocks, I would completely avoid the U.S. majors and stick with the European majors where management seems more willing to diversify. As Mr. Wetselaar of Shell was quoted by the Financial Times, “Electrification… is going to be the story of the next decades. We want to not just be part of it; we want to become a leader.”

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

2 Construction Stocks to Buy Even if Trump’s Infrastructure Plan Never Happens

Once again President Trump has brought to the fore the sorry state of infrastructure in the United States, which is the end result of decades of neglect from governments on all levels.

A White House report said, “Our infrastructure is broken. The average driver spends 42 hours per year sitting in traffic, missing valuable time with family and wasting 3.1 billion gallons of fuel annually. Nearly 40% of our bridges predate the first moon landing. And last year, 240,000 water main breaks wasted more than 2 trillion gallons of purified drinking water—enough to supply Belgium.”

 

The report did not exaggerate. You need to look no further than the 2017 report card on infrastructure from the American Society of Civil Engineers (ASCE). It gave an overall grade of D+ for U.S. infrastructure, continuing the persistent D grades seen since 1998.

This is a serious matter if we want to have a 21st century economy. As the ASCE report stated, “The cost of deteriorating infrastructure takes a toll on families’ disposable household income and impacts the quality and quantity of jobs in the U.S. economy.” This is a true statement because infrastructure effects how efficient and productive companies are, which in turn effects the country’s GDP.

 

The ASCE report estimated that through 2025, every U.S. household will lose $3,400 a year in disposable income thanks to infrastructure deficiencies. As a whole, the ASCE estimate is that the U.S. economy will lose almost $4 trillion in GDP by 2025.

Trump’s Infrastructure Plan: All Hat, No Cattle

The problem is that to fix our country’s infrastructure woes a lot of money will be needed. And that’s where the President’s proposed plan falls down.

 

The target for his infrastructure plan has been raised to $1.5 trillion, but the federal government will only kick in $200 billion over a 10-year period. In Texas, they would call that plan “all hat and no cattle.” Keep in mind that we have an almost $5 trillion shortfall in infrastructure, according to ASCE. Apparently, the days of federally-funded projects like the Hoover Dam and the interstate highway system are long gone.

One major flaw in the Trump plan is that it expects greatly increased contributions from cash-strapped cities and states. These entities already furnish the bulk of government spending on infrastructure, including three-quarters of the national spending on transportation and water systems.

States’ ability to borrow what’s needed to fund very large, multi-decade infrastructure projects is limited. And most states will be wary of raising taxes, since the Trump administration’s new tax plan limits the ability to deduct local and a state taxes from federal tax bills.

But what about the much talked about public-private partnerships?

Private Equity Says Fuhgeddaboudit

The Wall Streeters sitting of hundreds of billions for infrastructure investments gave Trump’s plan a cold reception. And it’s not just because of doubts about the politicians on the local and national levels.

FYI – there was a record $33.7 billion raised last year for North American infrastructure investments. The total since the end of 2015 is about $70 billion.

Infrastructure fund managers are mainly looking for assets that are already privately owned, such as railroads, utilities and pipelines. They are little interested in the deteriorating government-owned infrastructure like roads and bridges. And to the extent they are interested in publicly-owned infrastructure, their focus is much more on the privatizing of existing infrastructure rather than on new development – the core of Mr. Trump’s push.

As pointed out by the Wall Street Journal, one prime example is the Blackstone Group L.P. (NYSE: BX). It has plans to raise as much as $40 billion (not included in the previous figures) for U.S. infrastructure investments. But a mere 10% will be devoted to public infrastructure assets. The story is similar with almost all infrastructure funds.

Infrastructure Investments

Despite our country yet to get its act together on infrastructure, it still can be a good sector for you to invest in. You just have to pick and choose carefully. Here are two examples.

The company at the top of my infrastructure investment list has to be Caterpillar (NYSE: CAT), the world’s leading manufacturer of construction and mining equipment. It also makes diesel and natural gas engines as well as industrial gas turbines.

A big plus is that Caterpillar is truly a global company with more than half its sales generated outside the U.S. In its latest quarter, CAT reported a 34% rise in sales globally, with strength across all regions. This was a level last seen in August 2011. The company specifically noted that in North America the gains were led by construction. Adjusted earnings surged 160% in the quarter.

As of the end of fiscal 2017, Caterpillar’s order backlog was at $15.8 billion, driven by higher backlog in its resources-related industries business. The strong global macroeconomic background led management to guide its adjusted earnings per share to a range of $8.25-$9.25 for fiscal 2018. The midpoint of the guidance range reflects 27% year over year growth.

If you are looking for more pure U.S. exposure, there is Martin Marietta Materials (NYSE: MLM), which is a leading supplier of construction materials (such as aggregates) for highways, infrastructure and other building projects.

The company posted impressive results in the latest quarter, beating consensus estimates on both earnings and revenues. Adjusted earnings were up 21.3% from the year ago quarter to $1.88, while revenues were 2.3% higher to $970.5 million. For 2018, management guided revenue estimates to between $4.2 billion and $4.4 billion.

And if anything happens on the public infrastructure front, MLM is a sure beneficiary. Infrastructure construction accounts for about 37% of the company’s total aggregate product line shipments.

So even if the politicians dither (as usual), infrastructure investments can still be money-makers for you.

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 

Dump These Energy Stocks Before the Next Correction

After topping 10 million barrels per day for the first time since 1970 in November, the U.S. Energy Information Administration (EIA) said that U.S. crude oil production hit 10.2 million barrels per day in January. That surpassed the previous record (10.04 million barrels) for any month that was set in 1970 during the final days of the first Texas oil boom.

This is a remarkable feat considering the United States hit its low point in oil production in 2008 at about five million barrels a day. And oil imports are down to only about 2.5 million barrels a day as compared to the peak of 13.4 million barrels per day in 2006.

The EIA also upped its forecast for U.S. crude production for this year to 10.6 million barrels per day and for 2019 to 11.2 million barrels per day. If the forecast is right, it will make the United States the world’s largest oil producer, surpassing both Russia and Saudi Arabia.

For the prime example of the change in U.S. oil fortunes, look no further than the Permian Basin, which is located in Texas and New Mexico. Output there in 2017 totaled 815 million barrels. The previous record was set in 1973 at 790 million barrels.

All of this is good news, right?

Yes, if you’re an oil consumer. But if you happen to own oil stocks, the answer is a resounding no.

Shale Oil Company Stupidity

And the reason is obvious. The last time oil prices rose into the $60s per barrel, the U.S. shale producers pumped oil out of the ground as fast as they could. The assumption was that demand from places like China would continue to soar exponentially.

So when demand cooled a bit, the result was a crash that took the oil price into the 20s per barrel, which devastated the industry for several years.

Demand is still strong at the moment. For example, China is the second-largest market for U.S. crude oil, having imported 50 million barrels in the first nine months of 2017. But the oil storage facilities in China are nearing capacity, leaving an open question about the extent of future U.S. oil imports.

And since the recovery rate for oil from shale reserves remains very low, this suggests there is more potential for increased production as the technology to get at these reserves is improved.

Based on the history of absolutely no discipline from the U.S. shale industry, I expect an even greater flood of U.S. crude than the EIA forecast. That flood will likely send oil prices tumbling once again. And it’s not just the smaller shale companies that are solely to blame.

Energy giant ExxonMobil (NYSE: XOM) said in late January that it plans to increase its oil output in the Permian Basin fivefold by 2025 to 500,000 barrels per day. And Exxon is hardly alone among the majors.

Chevron (NYSE: CVX) also has said it will invest $2.5 billion in shale this year, with most of that investment going into the Permian Basin. For 2019, Chevron said it will invest a total of $4.3 billion into shale, with $3.3 billion of that going into the Permian Basin.

Oil companies continue to invest into shale even though most U.S. shale companies have struggled for profitability, and the industry as a whole has consistently lost money since the first successful shale oil wells were drilled in 2008-09. Exxon itself lost $439 million on oil and gas production in the US in the first nine months of 2017.

Other Considerations

While all of this is going, the smaller shale companies are also being adversely impacted by the change in the tax laws limiting interest deductibility.

Remember that many of the shale firms have heavy debt loads and now they will not be able to deduct all of their interest payments on that debt. According to Greensill Capital, if the limits on deductions in the 2018 to 2021 period had applied in 2016, companies would have been unable to claim tax relief on 39 % of their interest payments. The limit for 2022 onwards would have prevented relief on 97 % of those payments.

Consider too how quickly too oil dropped below $60 per barrel during just a few days of market turmoil, suffering its worst week in two years. That shows you will see how little firm support there is at the current price level. The steep price decline was likely the result of hedge fund liquidations – hedge funds had accumulated a record long position in crude oil.

Add this all up and I would avoid, or sell short if have a high risk tolerance, the oil producing sector as a whole.

Investment Implications

With the added consequences of the new tax law, I would definitely avoid the exploration and development companies that are carrying heavy debt loads. Two ETFs that have large exposure to these type of companies are the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) and the iShares U.S. Oil & Gas Exploration & Production ETF (NYSE: IEO). These two ETFs are down 12.88% and 9.05% respectively year-to-date. The former is off nearly 20% over the past year.

Even the Energy Select Sector SPDR Fund (NYSE: XLE), whose largest positions are Exxon (22.6%) and Chevron (17%), is actually a little in value over the past year. In other words, your money will be treated better elsewhere; especially in the light of these companies going in so heavily into shale and ramping up output that will very likely not be needed.

However, if you still wish to have some exposure to the oil sector, I would go with the Norwegian oil company Statoil ASA (NYSE: STO) whose stock is up 21% over the past 52 weeks. The company reported better-than-expected earnings in its latest quarter on the back of record production.

It also, in December, gave the go-ahead to its flagship Johan Castberg project in the Barents Sea after slashing costs by 50%. The breakeven for the project is now less than $35 per barrel. The Barents Sea is thought to hold about half of Norway’s undiscovered oil and gas. The company’s management also showed their savvy when they bought mature oil assets offshore Brazil for the equivalent of $10 per barrel in December.

Now don’t get me wrong. If oil falls in price, so will Statoil’s stock. But I like a management that is focused on squeezing costs and only going ahead with the most profitable long-term projects.

That is unlike some U.S. company managements that only know the words, “Drill, baby, drill!” No doubt due to the fact that some incentive packages for executives are still based on the amount of oil produced and not on bottom line profitability.

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 

Wondering Why Your Package is Late? Stocks to Buy for Trucking Boom

While the advancement of electric trucks is the headline grabber, the real news in the sector is that the U.S. trucking industry is enjoying a period of prosperity it hasn’t seen in years. Let me explain…

As I have written about many times, the U.S. economy has joined with nearly every other economy around the globe in a period of synchronized economic growth that the world has not seen in over a decade.

That is great news for a number of sectors and for us as investors. It makes even a supposedly boring industry like trucking filled with excitement over the growth opportunities.

U.S. Trucking Boom

We just experienced a robust Christmas season for retailers. In fact, it was the best since 2011. When you add in that manufacturers are also shipping more cargo – industrial production recently experienced the largest year-over-year gain since 2010 – it makes it a great time to be in the trucking industry.

We saw the ratio of loads in need of movement to trucks available in December hit the highest level on record. Then, in early January, just one truck was available for every 12 loads needing to be delivered according to online freight marketplace DAT Solutions LLC. That was the most unbalanced marketplace since the aftermath of Hurricane Katrina in October 2005. Moving into late January, that number only dropped to one truck for every 10 loads.

Related: Top 3 Electric Vehicle Stocks to Buy Instead of Tesla

This is significant since January is typically a quiet month for the industry. Yet this year, the national average spot truckload rates have been higher than during the peak season in 2007.


That has led to rising costs to get something shipped. The spot rate to hire a 53-foot tractor trailer has risen by 24% over the past year to over $2 per mile. Of course, many companies are being forced to pay a lot more than that if they want to jump to the front of the line and definitely have their goods delivered on time.Not surprising then that the consultancy FTR said the rate of active truck utilization stood at 100%, versus a 10-year average of 93%. In other words, there was no excess capacity in the system.

The situation is likely to get worse in April when produce shipments pick up. And this year we have a special factor – the full enforcement by the federal government of the ELD rules kicks in. An ELD is an electronic logging device in truck cabs that will monitor whether truck drivers are getting the amount of rest required by law. Truckers will be limited to driving only 11 hours per day. Trucks without the devices may be removed from the road.

All of these factors add up to great news for the stocks of companies involved in trucking and logistics. One such company is XPO Logistics (NYSE: XPO), which I will discuss in a moment. But there is also another obvious beneficiary of this boom.

Truck Manufacturers Also Booming

That beneficiary happens to be the companies that manufacture heavy-duty trucks. December saw the most Class 8 trucks (that most commonly used on long-hauls) ordered in three years. According to ACT Research, there were 37,500 such vehicles ordered, a rise of 76% from a year earlier.

And January was even a better month for the truck manufacturers! There were 48,700 heavy-duty trucks ordered. That is double the year-ago level and is the most big rigs ordered in 12 years.

The top truck manufacturing companies include: Daimler AG (OTC: DDAIY)Navistar International (NYSE: NAV), and a company that I’ve spoken about before with regard to electric trucks, Volvo AB (OTC: VOLVY), which is the world’s second-largest truck manufacturer.

On January 31, Volvo raised its forecast for the U.S. truck market saying that it expected deliveries to rise 7%. It said this would bring the company much closer to its goal of lifting operating profit consistently above 10% of revenue.

As I said, Volvo is a leader in the electric truck segment too. It is testing a hybrid powertrain for long-haul heavy-duty trucks that is all part of its Super Truck project working in conjunction with the U.S. Department of Energy. Here are some of its features:

  • It recovers energy when driving downhill on slopes steeper than 1%, or when braking. The recovered energy is stored in the vehicle’s batteries and used to power the truck in electric mode on flat roads or low gradients.
  • It also has an enhanced version of Volvo Trucks’ driver support system I-See, which has been developed specially for the hybrid powertrain, which analyzes the upcoming topography using information from GPS and the electronic map.

For long hauls, it is estimated that the hybrid powertrain will allow the combustion engine to be shut off for up to 30% of driving time.

Two U.S. Trucking Opportunities

Two U.S.-based firms that I like as beneficiaries of this ongoing trucking boom (which I can expect to last into 2019) are the aforementioned XPO Logistics and Navistar International. Here are some details on these two companies for you…

XPO Logistics is a top ten global logistics firm with operations in both logistics and transportation in 32 countries. Customers trust XPO with an average of 160,000 shipments and over seven billion inventory units every day.

It currently generates about $15 billion in annual revenue, with about 60% of that coming from the U.S. The breakdown between its two segments shows that roughly 63% of revenue comes from transportation (trucking and brokerage), with the remaining 37% from logistics. The logistics segment includes e-commerce fulfillment and warehousing operations.

XPO actually owns 16,000 tractors; 39,000 trailers; 10,000 53-feet intermodal boxes, and 5,200 chassis.11,000 trucks are contracted via independent operators and it brokers more than one million trucks. XPO also owns 440 cross-docks and 767 contract logistics facilities.

It is also an innovator in the industry with the use of advanced robotics and automation and leading -edge software and cloud-based platform. These innovations helped XPO to be named the top-performing U.S. company by Forbes on its 2017 Global 2000 list.

Navistar International manufactures International brand commercial and military trucks, school and commercial buses as well as diesel engines. Trucks make up most of its revenues, generating 67.8% of the total in 2017. The company has issued positive guidance for 2018 saying it expects revenues to be in the range of $9 to $9.5 billion versus $8.6 billion in fiscal 2017.

The company should benefit from the launch of new products. In order to strengthen the Class 8 lineup, the company introduced a new 12.4 liter engine – A26 – in February 2017. This new lighter-weight engine will provide a competitive entry to the company in the 13 liter segment, which constitutes about 50% of the Class 8 market. Navistar also started delivering new International brand vehicles with A26 engines. On the electric truck front, by 2019, Navistar plans to unveil an electric medium-duty truck in conjunction with Volkswagen.

A year ago (February 2017), Navistar unveiled a strategic alliance with Volkswagen’s truck division. Volkswagen purchased a 16.6% stake in Navistar for $256 million. This alliance should definitely broaden the company’s technology options and widen its range of products and services.

The lesson here is that you don’t have to limit your investments, if you’re looking for growth, to just sectors like technology or healthcare. Sometimes you can find growth opportunities in places you’d least expect.

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

Dump These Healthcare Stocks Getting Amazoned

Amazon.com (Nasdaq: AMZN) has often been referred to as the ‘Death Star’. In Star Wars, this was the ultimate weapon, capable of destroying an entire planet. Not a bad analogy, considering Amazon’s ability to totally disrupt the existing order of entire industries.

Next on the list of industries to be disrupted looks to be healthcare, as Amazon recently announced a partnership with Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A and BRK.B) and JPMorgan (NYSE: JPM). The three behemoths are forming a not-for-profit healthcare firm whose goal will be to lower costs for the three companies nearly one million employees and “potentially all Americans”.

This is good news for American consumers. Here’s why…

The rising price for healthcare in the U.S. has meant health benefits now make up about 20% of total worker compensation, up from a mere 7% in the 1950s. This is likely one of the major reasons why we have wage stagnation in our country. Healthcare – emergencies and the cost of them – are also the number one reason for personal bankruptcies in the U.S.

Ripe for Disruption

But while the Amazon-led venture may be good for consumers, any company in the healthcare sector, except those that actually provide the care or manufacture medicines should be shaking in their boots.

The reason why was summed up nicely by Carmen Weelso, director of research at Janus Henderson, when she spoke to the Financial Times. She said, “The healthcare sector is ripe for disruption. [JPMorgan, Berkshire, Amazon] are potentially creating a model for something that is a lot cheaper than what is out there already.” Weelso added, “Healthcare margins are fat, and it is opaque how they make their decisions. Their profits have been great, so they’ve got a target on their back.”

This venture will be a competitive threat to all of the many middlemen in the healthcare sector. These include insurance companies, wholesalers and pharmacy benefit managers (PBMs). I’m sure the CEOs of these middlemen companies recall Jeff Bezos’ words: “Your margin is my opportunity.”

The U.S. simply has too many middlemen involved in its healthcare system. And so despite spending more per capita on healthcare than any other developed country, the US still ranks 12th out of the 12 wealthiest industrialized countries when it comes to life expectancy, according to data from the Organization for Economic Co-operation and Development (OECD).

So make no mistake – this venture is aimed squarely at those middlemen driving up the cost of healthcare. Warren Buffett said, “The ballooning cost of healthcare act as a hungry tapeworm on the American economy.” And he’s right – check out this graph on rising drug costs:

So what sectors are companies are in the crosshairs of these three giants of American industry?

First are the healthcare insurance companies. These include the top five U.S. insurers: UnitedHealthAnthemAetnaHumana and Cigna. UnitedHealth alone provides or manages employee health insurance for nearly 30 million people.

Next come the PBMs that negotiate drug prices on the behalf of insurance firms and employers. These include Express Scripts and CVS Health and UnitedHealth. These latter three are involved in the lives of 250 million people!

And while the drugmakers will not be affected directly – Amazon will not begin manufacturing drugs – they will be affected in so far as they may struggle trying to maintain premium pricing on their drugs.

What the Venture May Do

While no one yet knows what exactly the venture may do, I think their first target will be insurance.

Amazon, Berkshire and JPMorgan will “self insure” their employees on a not-for-profit basis. Importantly, they would likely invite more companies to join the initiative in the very near future.

Some large companies, including all the U.S. automakers, already fund their own insurance plans by keeping the premiums and setting aside capital for potential losses. But they have contracted with the health insurers and PBMs to manage the plans. That has left control and fat profit margins still in the hands of those firms. For example, Amazon uses Express Scripts as its PBM and JPMorgan uses both Cigna and UnitedHealth to meet its employee healthcare needs.

This alternative is definitely needed. According to the Kaiser Family Foundation, annual premiums for employer-sponsored family health coverage reached $18,764 last year, up 3% from 2016. Workers, on average, paid $5,714 towards the cost of their coverage with employers picking up the rest. You can clearly the rising cost of healthcare insurance:

The not-so-funny joke among those in charge of employee benefits is that they currently have no option but to deal with ‘CUBA’ – Cigna, UnitedHealth, Blue Cross, Anthem or Aetna. But now, there will soon be a much cheaper and very viable alternative in the form of this newly-formed Amazon-led venture.
Investment Implications

So what could the investment implications be for you? They’re pretty obvious.

It should give you another reason to own  Amazon, if you needed one. I think the ‘Death Star’ will be successful in disrupting another sector, benefiting American consumers.

And even though the middlemen companies will fight change tooth and nail (already the big insurers have voiced their ‘concerns’ to JPMorgan’s Jaime Dimon) I would avoid or sell the stocks of all these companies.

I would even go as far as, if you have a high risk tolerance, to look at shorting these two ETFs that are loaded with middlemen stocks, the iShares U.S. Healthcare Providers ETF (NYSE: IHF) and the SPDR S&P Health Care Services ETF (NYSE: XHS).

Get Your Hands on Stocks Growing Revenues (and Stock Prices!) Faster than Google and Apple

I’d like to reveal to you the blue chip stocks – one in particular – that could literally be worth millions of dollars to you over the next decade.

Revenues for one firm in particular is growing faster than that of Google and Apple, the darlings of Wall Street. Investors have watched the stock price shoot up over 100% this past year and we’re just getting started.

You need to get in this stock before April 1st (it’s closer than you think!).

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