All posts by Tony Daltorio

Technology

2 Reasons You Need to Dump Apple Now

Apple (Nasdaq: AAPL) just set a record for the most profitable quarter in the company’s history. Not surprising since Apple executives said in November that they were expecting its “biggest quarter ever” and a return to double-digit revenue growth for the first time in years.

But not all is well with the world’s largest company by market capitalization. One needs look no further than the stock’s relative performance to the S&P 500 index over the last three month period. Apple has been a definite laggard.

I expect that relative underperformance to continue. Here are two reasons why:

Reason #1 – Overpriced iPhoneX?

Apple may have made a classic mistake and priced the new iPhoneX too high, thinking its fans would pay any price for its phones.

This phone is the first from Apple with an organic light-emitting diode (OLED) display. It also features facial recognition and wireless charging. But many complain it lacks groundbreaking new technologies when compared to some of Apple’s previous models. In other words, the same old complaint under the leadership of Tim Cook – a lack of innovation.

The iPhoneX price starts at $999 here in the U.S. And in the very important China market, the cost starts at a whopping $1,334! This is crucial since, in December, the flagship Mate 10 Pro from China’s Huawei was launched at a starting price of just over half the cost of the iPhoneX. In the latest survey of Chinese consumers, Apple still lags Huawei in what brand their next smartphone purchase will be. As recently as 2015, Apple was named by twice as many consumers as Huawei was.

What really caught my eye though was the article last week in the Nikkei Asian Review that revealed Apple had told its Asian suppliers it was slashing its production target for the iPhoneX by half for the first three months of 2018. Production was slashed because sales had failed to meet Apple’s lofty expectations. If sales are faltering, that means the whole Wall Street tale about the iPhoneX supercycle was a myth.

And let’s not forget that there continues to be intensifying competition in the premium smartphone market. Alphabet (Nasdaq: GOOG) officially closed its $1.1 billion deal with HTC Corp., adding more than 2,000 smartphone specialists in Taiwan. This is expected to help Google chase Apple in the increasingly cut-throat premium handset market.

Reason #2 – Smart Speaker Delay

In relation to the entire innovation question, I do wonder what Apple’s next act will be after the iPhone? The iPhone is still responsible for about 70% of the company’s revenues.

One bright hope was the smart speaker market. After all, Apple’s Siri was the leader in the virtual assistant space. But it has now taken a back seat to smart speaker products from both Google (Home) and, of course, Amazon.com (Nasdaq: AMZN)and Alexa. Amazon’s Echo speaker was launched in 2014 while we still wait for Apple’s entry.

Apple’s HomePod smart speaker will finally be launched on February 9, after missing the Christmas selling season. But unlike the debut of the iPhoneX, Apple Watch Series3 or AirPods, pre-orders for the HomePod have not sold out ahead of the launch date.

That is likely due to the relatively high price tag (again). The HomePod will sell for $349 while you can get a speaker from Amazon for $50 to $150. This market will be extremely important long-term as the hub in many people’s homes. Canalys Research forecast that sales for smart speakers will soar by 70% in 2018 to 56.3 million. In other words, it is the biggest consumer electronics products since the smartphone.

Performance will matter when it comes to the virtual assistants in our homes.

Tests comparing Alexa to Siri to Google Home’s assistant have shown Google the winner in general knowledge with Siri performing the worst. And when it comes to shopping, Alexa was tops with the HomePod again bringing up the rear. The only areas where the HomePod came out on top was in regard to privacy and music.

Apple’s Future

Another growing negative for Apple is that sentiment toward the company has shifted, albeit slightly so far. The whole incident regarding the company intentionally slowing down its older devices was handled very poorly. So poorly in fact that now Apple faces a wave of class-action lawsuits as well as regulatory inquiries from both the Department of Justice and the Securities and Exchange Commission.

Money-wise, the investigations will be nothing Apple can’t handle. But the danger is there of a major sentiment shift against Apple from both the public at large and the investment community.

If sentiment further shifts, you may see Apple’s stock continuing to underperform the general market.

For me, that turns the race between the stocks of Apple and Amazon into a very real one. Already, Amazon is within $190 billion and closing very rapidly. . .the gap at the end of 2017 was $326 billion. And I expect to close further in 2018, unless Apple begins to innovate again, justifying the premium pricing on its products.

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Source: Investors Alley 

Technology

3 Companies Working to Destroy the Blockchain with Quantum Computing

It pays sometimes to listen what comes out of the annual meeting of the world’s elite at Davos, Switzerland. This year was a prime example.

Satya Nadella, the CEO of Microsoft (Nasdaq: MSFT), gave the stark warning that the world is rapidly “running out of computing capacity”. He added that Moore’s Law – the maxim that the power of computer chips doubles every two years – is “rapidly running out of steam.”

Nadella said the problems the world faces today need superfast quantum computers to solve them. As the head of the company’s quantum computing team, Todd Holmdahl, said to the Financial Times, “We have an opportunity to solve a set of problems that couldn’t be solved before. On a classical computer, they would take the life of the universe to solve.”

This is breakthrough technology that will change our world, making quantum computing (a subject I’ve touched on previously) a topic worth revisiting.

Related: Here’s Where to Invest in The Promise of Quantum Computers

Quantum Computers

Building a quantum computer has stumped scientists and engineers for about 35 years due to the complicated physics involved.

Qubits – the basic units of quantum information – are highly susceptible to ‘noise’ and therefore error. For qubits to be useful, they must achieve both quantum superposition (a property something like being in two physical states [0 and 1 in computing] simultaneously) and entanglement (a phenomenon where pairs of qubits are linked so that what happens to one can instantly affect the other, even when they’re physically separated). These delicate conditions are easily upset by the slightest disturbance, like a slight vibration or a fluctuating electric field.

Quantum computers will be particularly suited to factoring large numbers (making it easy to crack many of today’s encryption techniques and probably providing uncrackable replacements), solving complex optimization problems, and executing machine-learning algorithms. And there will be other applications no one has yet even thought about.

The cracking of encryption techniques may even push current blockchain technologies to the dustbin of history quickly. More on that later.

Until now, scientists have only been able to build fully programmable five-qubit computers and more fragile 10- to 20-qubit test systems. Neither kind of machine is capable of much. But the head of the quantum computing effort at Alphabet (Nasdaq: GOOG), Harmut Neven, says his team is on target to build a 49-qubit system perhaps within a year.

That would be close to the minimum target set by scientists of around 50 qubits. This 50 qubit target isn’t an arbitrary one. It’s a threshold, known as quantum supremacy, beyond which no current supercomputer would be capable of handling the exponential growth in memory and communications bandwidth needed to simulate its quantum counterpart. In other words, the top supercomputer systems can currently do all the same things that five- to 20-qubit quantum computers can do, but at around 50 qubits this becomes physically impossible.

The Threat to Blockchain

Before I tell you about some of the breakthroughs in quantum computing coming from the likes of Microsoft, let me first fill you in on the greatest threat to blockchain out there. It’s not regulations, it’s quantum computers. Let me explain…

Much of the allure of blockchain comes from its security benefits. The technology allows a ledger of transactions to be distributed between a large network of computers. No single user can break into and change the ledger, making it both public and secure.

Public key cryptography uses a pair of keys to encrypt information: a public key which can be shared widely and a private key known only to the key’s owner. Anyone can encrypt a message using the intended receiver’s public key, but only the receiver can decrypt the message using their private key. The more difficult it is to determine a private key from its corresponding public key, the more secure the system is.

Even if today’s supercomputers tried to figure out what the private key is, it would take it an estimated 785 million times longer than the age of the universe. In other words, it’s impossible. But with quantum computers possibly 100 million times faster than classical computers, they could possibly break today’s public key cryptography, rendering the blockchain technology that relies open to hacking and obsolete.

So naturally research into quantum-resistant cryptographic systems has already begun at places like the National Security Agency (NSA). But I doubt these systems will be available before the advent of quantum computers.

Breakthroughs Around the Corner

That is thanks to efforts from companies like International Business Machines (NYSE: IBM), Google and Microsoft, which make quantum computers likely and commercially viable within several years. Previous estimates were that quantum computing was still decades away.

But two impending milestones – from Microsoft and Google – will show that the frontiers of theoretical physics are quickly being turned into practical reality. Google’s revelation involves that aforementioned machine that will be the first demonstration of quantum computer solving a problem that is at the very limit of what is possible for a classical computer.

IBM has been a pioneer in the field and actually achieved a working qubit in 1998. It announced in December a long list of partners to help it develop practical applications for the technology. The partners include a number of universities, government research institutions and major companies, such as JPMorgan.

I would say that IBM is ahead of Google in that it has already programmed a supercomputer to simulate a quantum machine with more than 50 qubits. A feat, I might add, most did not think was possible.

Both Microsoft and IBM are offering simulations of quantum computers that run on today’s “classical” machines, while IBM is also giving its partners access to a rudimentary quantum system.

Microsoft’s Different Approach

Now let’s focus on Microsoft, which began working on producing a working qubit (quantum bit) 12 years ago. And now finally, it is “imminently close” to announcing that it has reached that goal.

I find Microsoft the most interesting of the three leaders in quantum computing because of the unique approach it is taking. It apparently has developed a type of qubit that effectively fragments electrons. That means the same piece of information is held in multiple places at the same time. If one part of the qubit goes through quantum decoherence, the information it contained is not lost.

This will likely lead to a more stable system than its competitors’ systems. Microsoft will likely need only one qubit compared to 1,000 or 10,000 (mainly unstable) qubits.

For me, if Microsoft does indeed reveal that working qubit, it will place them ahead in the race for quantum computing supremacy. It would be my choice as a major future beneficiary of quantum computing.

But don’t forget about Google and IBM, as well as Intel and the Canadian private firm, D-Wave Systems. All are working on developing the leading computing technology.

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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...
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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.
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Source: Investors Alley 

Growth Stocks

The Tax Cut May Not Deliver All Its Promises

basic truth in life is that, if it sounds too good to be true, it usually isn’t all it’s cracked up to be. The same applies to investing. You have probably heard how great the tax cut will be for companies across the board. Well, ‘warts’ are already appearing on the tax cut front.

In an earlier article I on taxes I wrote: “Will the airlines just use the [tax] windfall to launch into another round of airfare wars? (See article here.) The industry has squandered windfalls in the past, such as from plunging oil prices.”

Based on the recent earnings call from United Continental Holdings (NYSE: UAL), it looks like another airfare price war is just around the corner.

The Airlines Never Learn

UAL’s management said it plans to increase available seat miles over the next three years by 4% to 6% per year. That compares to a 3.5% rise in 2017 and only a 1.4% rise in 2016. That sounds a lot like previous mistakes of expanding too much too quickly and then being forced to slash ticket prices.

Other airlines, of course, would respond in kind and another price war would be underway. Adding to the concerns about the industry, UAL’s management also seemed to signal a willingness to take on low-cost carriers on a price basis.

So forget about anything you may have heard about the benefits of the tax cuts for the airline industry.

Yes, the benefits are real. But it looks like, once again, that the industry will squander the benefits as it did when oil prices fell steeply. Until it becomes clear whether the airline industry will go down the path of another price war, I would avoid them and in particular, United Continental.

This should just bring home the point to you that you have should never base an investment decision solely on tax or other government policies.

While the airlines seem to be fumbling an opportunity to prosper, what really caught my eye regarding the new tax law is the potential perverse effect it will have on the prospects for technology companies repatriating their overseas assets (some cash, but mainly bonds).

Will Repatriation Happen?

Apple (Nasdaq: AAPL) garnered a lot of headlines recently when it said it would make a one-off $38 billion tax payment on the repatriation of some of its overseas profits. That led to speculation by the Trump Administration and others about how other technology companies would follow Apple’s lead.

But some tax experts say it may not happen. They point to parts of the legislation that could end up having the direct opposite effect, leading firms to shift more of their assets (and jobs) offshore.

A law professor at the University of Southern California, Ed Kleibard, told the Financial Times “The bill is biased in favor of offshore real investment.” In other words, companies may perversely be encouraged to build plants overseas, creating jobs there. Let me explain…

There is a new tax on any overseas profits above a fixed, tax-free return that companies will be allowed to earn on their tangible assets, such as plant and equipment. This is known as the GILTI (global intangible low-tax income) tax and it is aimed at taxing excess profits from intangibles, such as a technology company’s or pharmaceutical company’s patents and intellectual properties. Thanks to technology, the share of many companies’ assets that are intangible has grown a lot in recent years.

However, the GILTI tax rate is only half the new U.S. corporate tax rate. And companies can take a credit for any foreign taxes paid on this tax. This may encourage firms to keep as much of their profits in tax havens as they can, lowering their overall foreign taxes to a level where they can fully offset the minimal GILTI tax.

And here’s where it touches on the earlier point I made about real overseas investments. A law professor at the University of Pennsylvania, Chris Sanchirico explained to the Financial Times that all sorts of multinationals will have an incentive to add to their offshore facilities like factories (and the linked jobs), since such action will boost their tangible assets outside the United States, therefore sheltering even more of their profits from tax.

The likely result of all these new tax ‘games’ that will be played by the big multinationals? Likely hundreds of billions of dollars will remain ‘trapped’ outside the U.S.

What It Means to You

As far as investment implications goes, I think it means you should stick to investing in the large U.S. multinational companies. These same companies are already enjoying the benefits of a much weaker U.S. dollar that the Trump Administration is encouraging.

One prime example is Microsoft (Nasdaq: MSFT). In early December, its stock was down to $81 over worries about the tax bill. Now it is over $92 a share and still climbing. There are lots of reasons why, but I’m sure Wall Street has by now realized the new tax law won’t hurt Microsoft. Again, never make an investment decision solely on something like taxes.

In Microsoft’s case, I much prefer concentrating on its efforts in the cloud, artificial intelligence and quantum computing. For more on Microsoft and quantum computing, stay tuned for my next.

One other investment for you to consider is the WisdomTree U.S. Export and Multinational Fund (NYSE: WEXP). It is filled with blue-chip U.S. multinationals such as Microsoft, Boeing, Johnson & Johnson, Apple and Alphabet.

This ETF is up 21% over the past year and I would expect this type of performance to continue as long as the dollar tailwind and other macro factors (including taxes) continue to be favorable.

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

Uncategorized

3 Stocks for Real Blockchain Investors, Not Speculators

The latest buzzword on Wall Street is blockchain. There is a logic to the interest since the research firm Markets & Markets forecast that the market for blockchain-related products and services will reach $7.7 billion in 2022. The market for such products was a mere $242 million in 2016.

That has led investors to jumping on anything and everything even remotely connected to blockchain technology. That can be seen in the soaring stock prices for companies that have said they are “investing” into blockchain and therefore have added blockchain to their name.

A prime example of this is Riot Blockchain (Nasdaq: RIOT), which used to be known as BiOptix Diagnostics, a small supplier of diagnostic equipment for the biotech industry.

(Can you spot when Blockchain was added to the name?)

Another example is the former seller of hard ice tea – Long Island Iced Tea, which changed its name to Long Blockchain (Nasdaq: LBCC).

(A similar thing happened when blockchain was added to the name of a tea company)

I shouldn’t have to tell you this, but I will anyway… do not buy any of these companies – one of the biggest red flags you will ever see surrounding companies in the stock market is waving now! Instead, look at companies that have legitimate blockchain businesses. Or that at least are legitimately pursuing practical applications of blockchain technology.

Related: Buy These 3 Stocks to Ride the Bitcoin Boom

Blockchain Patents

For a hint about what companies you should be looking at, see what firms have either applied for, or have already received patents on blockchain technology. Not surprisingly (since blockchain can make transactions faster and more efficient), banks are among the leaders here.

Number one on the list – according to a study from EnvisionIP, a law firm specializing in analyses of intellectual property – is Bank of America (NYSE: BAC), which has applied for or received 43 patents for blockchain.

Tied for second on the list are Mastercard (NYSE: MA) and International Business Machines (NYSE: IBM). The latter was one of the very first big companies to see the promise of blockchain, contributing code to an open-source effort and encouraging start-ups to try the technology on its cloud for free. What really caught my eye regarding IBM’s blockchain efforts was a recent announcement.

Why Blockchain Is Appealing

Before I give you the details on the announcement, I want to fill you in why blockchain technology appeals to nearly every company.

The blockchain enables companies doing business with each other to record transactions securely. Its main strength lies in its trustworthiness. In other words, it’s tough to change what has been recorded. The blockchain can also hold many more documents and data than traditional database storage, and it can hold embedded contracts, such as a car lease, whose virtual key could be transferred to a bank in the event of a default.

That’s why, according to a survey done late last year by Juniper Research, 6 in 10 large corporations are considering using blockchain. Companies like Walmart are already testing blockchain technology in the hopes of streamlining their supply chain as well as speeding up payments.

A Practical Application for Blockchain

The words supply chain bring me to what I consider to be a major announcement last week from IBM and the world’s largest shipping company, AP Moller Maersk A/S (OTC: AMKBY). The two firms are setting up a joint venture to use blockchain technology in order to help make the companies’ supply chains more efficient.

The two companies estimate that businesses spend up a fifth of the cost to transport goods around the world on processing documents and related administrative costs. No wonder then that major corporations such as General Motors and Procter & Gamble are interested in joining Maersk as the first companies using the platform.

I fully expect other large corporations will join the platform. Beginning in June 2016, a pilot of this program saw companies including DuPont and Dow Chemical participate as well as the ports of Houston and Rotterdam and the U.S. and Dutch custom services.

Obviously, the hope of IBM and Maersk is that their system will set the standard for the digitalization of supply chains around the globe. Bridget van Kralingen, head of solutions and blockchain for IBM Global Industries, said to the Financial Times “There’s a lot of write-up about blockchain. But what we see is that the thing that is going to help the world is blockchain as a distributed ledger. The significance of that is huge for any transaction that has multiple parties.”

I totally agree – this is a practical usage for blockchain. Companies at different stages of the supply chain will be able to see all of the information they need about each transaction easily. Not to mention the automation and digitalization of the paperwork involved.

The proposed joint venture should be up and running within six months, with the blockchain software developed running on the IBM cloud. When it has its initial start, the venture will be tracking 18% of containerized, sea-going global trade.

Despite this important development, investors still ignore IBM as a blockchain pioneer. Maybe it should change its name to International Blockchain Machines?

For a more detailed look at the intricacies of what blockchain is and what it does, stay tuned for a special report from me in the near future.

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 

Uncategorized

3 Stocks to Sell Under Trump’s New Tax Law

It seems like most U.S. financial media cannot quit gushing about the new tax laws. The coverage is universally positive – I’m waiting to hear that the tax cut will cure the common cold.

However, the media ignores the fact that some companies will end up paying higher tax bills. All thanks to the provision in the law that limits deductions on interest payments.

The law limits deductions for interest payments to 30% of EBITDA earnings (earnings before interest, tax, depreciation and amortization) between 2018 and 2021. The restriction become even tighter from 2022 onward with deductions limited to 30% of earnings before interest and taxes.

This is a major negative for any companies with a heavy debt load.

As David Fann, CEO of the private equity advisory firm Torrey Cove Capital Partners LLC, told Reuters, “It [the new tax law] is a deviation from what has been allowed in the last 50 years. This is a radical change.”

Big Effects

The new restrictions on interest deductibility will mean that companies that have EBITDA less than double their interest payments will see “little or no benefit” from the tax reform package, according to Standard & Poor’s, the credit rating agency.

And some firms will suffer under the new rules. S&P Global Ratings estimates that about 70% of companies whose debt amounts to more than five times EBITDA would be negatively affected by the interest deductibility cap.

Prime among the companies affected will be those shaped by private equity, which loves to saddle companies with lots of debt. According to Moody’s around a third of all leveraged buyouts will be worse off under the new tax system.

The changes in tax law could mean that a company like Toy “R” Us may be less able to come out of bankruptcy proceedings. It also puts into question the future of companies such as WebMD Health that was bought by private equity firm KKR. Dell Technologies will now have to shoulder more of the burden of its $2 billion in annual interest payments from its $60 billion merger with EMC Corporation in 2016.

As far as sectors go, there are leveraged companies in just about every sector. Although Moody’s says that the sectors with the most buyout activity are technology, healthcare and aerospace. The trade finance firm Greensill Capital says it feels that these industries should be watched for companies with a lot of debt: oil and gas, coal mining, casinos and trucking.

Greensill said that, based on 2016 earnings in the exploration and segment of the oil industry, firms would have been unable to claim tax relief on 39% of their interest payments, and for 2022 onwards, they would be unable to claim relief on 97% of those payments. Of course, with higher oil prices now
the calculations would not be quite as severe.

Bottom line – there really isn’t just one sector you should avoid. You must look at individual companies on a case-by-case basis. Here are just a few companies on the must avoid list.

Three Companies on the Avoid List

First Data (NYSE: FDC) provides merchant transaction processing; credit, debit and retail card issuing and processing; prepaid services and check verification and other similar services.

This company was bought by KKR in 2007, at the height of the leveraged buyout boom, for $29 billion. KKR then brought First Data back as a public company, via an IPO, in October 2015.  As of a recent 2016 filing, First Data is still burdened with a whopping $18.5 billion in junk-rated debt, which generated the company nearly $1 billion in interest expense over the past year.

The limiting of interest deductibility will mean a lowering of its net income going forward. I doubt that the stock will perform as well over the next year as it did over the past year (up 15%).

Tenet Healthcare (NYSE: THC) owns and operates hospitals and other healthcare facilities. It is one of the largest investor-owned healthcare delivery systems in the United States.

However, it had problems even before the passage of the new tax law. Its revenues have actually declined over the past two quarters. And its debt has been on the rise, climbing in 2016 by 5% year-over-year to $14.4 billion.

And even though its debt declined slightly in 2017, its interest expense rose 6.2% over the first nine months of the year. It already deploys much of its existing cash flow toward the payment of the interest on its debt. No wonder its stock is down 14% over the past year. And now it’s likely to get worse.

JC Penney (NYSE: JCP) is a well-known department store chain with still 875 stores across the U.S. It is almost a poster child for being Amazoned. Adding to all the woes it faces on the competitive front is its heavy debt burden in excess of $4 billion.

At the end of the latest quarter, JCP had a debt-to-capitalization ratio of nearly 79%. In its SEC filing in November, the company said that disallowing tax deductions on interest “could have a material adverse effect on our results of operations and liquidity.”

The company, which has experienced a pickup in its business recently, has said that its goal is to reduce the net debt to EBITDA ratio to less than three times. The change in the tax law has made that goal even more of a priority. If it does not succeed, the stock – down over 43% during the past year – will continue on the slippery slope toward zero.

What does the change in the tax law mean to your portfolio?

It should be mainly good. But I would check to see if you own any highly-leveraged companies. Especially check any that may have been IPO’d by a private equity firm. If you do own any of these type of companies, it may be time to sell them. The tax law changes mean tougher times ahead for these financially-engineered firms.

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

Growth Stocks

3 Stocks Taking Off From Trump’s Tax Cuts

The cut in the U.S. corporate tax rate from 35% to 21% is supposed to do everything from juicing the U.S. economy to levels not seen in decades to enriching both shareholders and consumers alike. But the reality is likely to be quite different.

The first thing it will bring is a muddied fourth quarter earnings season for investors. A one-time tax on accumulated offshore earnings and revaluations of deferred taxes, based on the new rate, means a lot of potential charges and writeoffs for multinational companies. For firms that report only GAAP earnings, the headline impact on earnings could be quite large.

Investors should look through these one-off charges and focus on what the long-term effects will be on the companies they are invested in.

While many on Wall Street make proclamations about the benefits of the corporate tax cut for banks, I believe the sector still faces too many headwinds (like continuing low interest rates) for me to be interested in investing into banks. Instead, I’d rather focus on three other sectors – with still relatively low valuations – that should benefit from the changes in the tax law regarding U.S. corporations.

Airlines to Fly High

One of the biggest beneficiaries of the tax cut is the U.S. airline industry. Since most of their income is taxed domestically, the lowering of the tax rate to 21% from mostly in the mid-30s%, is a big deal.

Take Delta Air Lines (NYSE: DAL), for example. Just last week it said that the tax cut will boost its earnings by about $800 million a year. That translates to about $1 per share in increased earnings for 2018. Delta management raised their earnings per share guidance for 2018 to a range of $6.35 to $6.70, up 20% to 30% from the year earlier level.

Delta, like many U.S. airlines, pays no cash taxes. However, Delta expects it will become a cash taxpayer in 2019 and 2020, so the lower rate will be a boon.

The tax cut is a bit of icing on the cake for Delta, which is doing very well currently. In the latest quarter, it reported an 8.3% revenue rise to $10.2 billion, which beat market expectations. Passenger unit revenue (PRASM) increased 4.2% in the quarter as Delta regained some of its pricing power following a nasty airfare war.

That’s the danger for the airline industry and the tax cut. Will the airlines just use the windfall to launch into another round of airfare wars? The industry has squandered windfalls in the past, such as from plunging oil prices.

Oil Company Tax Gusher

Speaking of oil, the oil industry should be another beneficiary of the changes in tax law. According to Bloomberg, it pays the second-highest effective tax rate of any sector – 37%. So a drop to 21% is an obvious boost.

Other tax perks for the industry were left in place. For instance, the century-old tax treatment of allowing oil companies to expense intangible drilling costs was retained. As was another century-old treatment that affects small independent companies and royalty owners – the percentage depletion deduction.

A new provision allowing businesses to expense the full cost of new investments in certain plant and equipment for the next five years will give a boost to many in this capital-intensive industry. Giants like Chevron have an $18.3 billion capital and exploration budget in 2018 and ExxonMobil has an even bigger $22 billion budget.

And it’s not just the big oil firms to benefit. The oil refining segment should really get a major boost. The largest company in the segment, by market capitalization, Phillips 66 (NYSE: PSX), will receive a 16% boost to 2018 earnings according to an estimate from Piper Jaffray’s Simmons & Company energy investment bank unit.

Phillips 66 is a leading player in each of the segments it operates in: refining, chemicals and midstream.  The company will invest $2-$3 billion in capital investments this year. Yet, it still increases payouts to shareholders on a regular basis.

Retail Rebound

The third sector to look for benefits from the tax cut is retail. The tax cuts should give them a respite from being Amazoned out of existence, thanks to a soon-to-be increased cash flow. This holds true for the vast majority of retailers whose operations are domestically based. Wall Street analysts believe the average retailer will get a 15% earnings boost from the changes in the tax law.

One of my favorites in the sector is Ulta Beauty (Nasdaq: ULTA), which operates 1,058 stores and generated $4.8 billion in revenues in 2016. It should get a double boost – not only from the tax cut itself, but from consumers with a little extra in their pocket spending on simple luxuries like makeup, lip gloss, etc. Perhaps that’s why the stock is already up over 6% year-to-date.

Hopefully, the tax cuts will reinvigorate this once ultra-high growth company. Especially since parts of the company are still growing fast… e-commerce sales in its latest quarter did soar by nearly 63%. Management has forecast sales growth for 2018 in the 10% to 11% range.

Bottom line for you – the number one item to remember regarding the tax cut is that, like all three companies I spoke about in the article, it will boost domestically-focused companies much more than it does multinational companies. Of course, multinationals have other things going for them, such as a weak U.S. dollar.

Here are other important points to keep in mind regarding the tax cut: Even for companies within a sector that will generally receive a boost from the tax cut, some companies will benefit more than its competitors. So before investing, make sure to do your due diligence to see whether a company will really get a big bump from the change in corporate taxes.

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 

Growth Stocks, Technology

3 Winning Tech Stocks from the Consumer Electronics Show

It’s always interesting to see what technologies are highlighted at the annual Consumer Electronics Show (CES) in Las Vegas. I use it, and so should you, as an insight into the next possible investable technology trends. After all, the U.S. consumer electronics industry’s revenues in 2018 are expected to come in at about $351 billion in 2018.

Some of the technologies on display at this year’s show were augmented and virtual reality devices, robots, and artificial intelligence (AI). But the real focus of this year’s show were the automobile and the automotive parts companies and the seemingly inexorable move toward autonomous vehicles.

More on that a bit later… first, I want to fill you in on some of the other highlights of this year’s CES.

Will VR Ever Become Mainstream?

Two companies were front and center when it came to virtual reality (VR) at CES – Facebook (Nasdaq: FB) and Alphabet (Nasdaq: GOOG). Both are still trying to persuade consumers to buy VR headsets. But with little success… the segment is expected to generate only $1.2 billion in U.S. sales in 2018.

Facebook’s Oculus Go sells for $199, while VR headsets based on Google’s Daydream VR platform, such as a device from Lenovo, sells for almost double that amount.

I think neither company will make a success of their VR efforts. To me the best in the sector is Sony (NYSE: SNE) with its high-end Playstation VR headset. It has sold over two million units of this headset in 2017, which is impressive since it only launched in October. Gaming may be the only market where VR truly becomes mainstream.

Alexa, Make Me Money

Now, let me tell you about an interesting note at the start of the conference that came from the show organizers. They said that sales of the item that has brought the consumer electronics industry the type of growth it has not seen in years – smart speakers – will peak as soon as next year. They pointed to the ‘hockey stick’ growth in sales that hasn’t been seen in eight years, since tablet computers became a mainstream product.

The leaders in the smart speaker space are, of course, Amazon.com (Nasdaq: AMZN) and Google. U.S. sales of these speakers soared 279% in 2017 over the prior year to 27 million units. Sales are forecast to rise another 60% in 2018.

I believe there is one true leader in this space, with Amazon’s Alexa being almost everywhere.

This gives you just another reason as to why Amazon is a must-own stock. At CES, vendors showed off Alexa-powered headphones, smoke alarms, cookers, showers, light switches and even mirrors (for an extra $350).

And even you leave your home and hop into your car, you may find Alexa. Amazon announced an agreement with Toyota to add Alexa to some Toyota and Lexus vehicles. Toyota thus joined a long list of auto companies – FiatChrysler, Nissan, Daimler, BMW, Hyundai, and Ford – that are either letting Alexa into their vehicles or integrating the voice service into the connectivity systems that link customers’ cars and mobile phones.

Since we’re talking about cars, let’s move on to the highlight of the 2018 CES – the automobile of the future.

Nvidia and the Automobiles of the Future

Let me start by talking about a company that was unavoidable at this year’s CES – Nvidia (Nasdaq: NVDA). Their graphics processing units (GPUs) are at the core of many machine learning and artificial intelligence solutions, including for automobiles.

Nvidia’s stock soared after it announced that it would be partnering with Volkswagen to build an intelligent (AI) co-pilot system. The system that will gather data from both in and outside the car and will use some gesture and natural language voice controls and finally combine all that with what the AI has learned about the driver. And voila – you have a helpful AI assistant. It is expected this type of system may be available as soon as 2022.

Related: 5 Growth Stocks to Ride the Semiconductor Supercycle

In a similar vein, Uber also announced that it will power its self-driving cars and trucks by using Nvidia’s AI technology.

Nvidia also said that as part of its DRIVE Pegasus (PX) AI platform, the Xavier processors would be delivered to customers beginning in the first quarter of this year. Xavier is the culmination of a $2 billion investment to expand processing power and capabilities to the autonomous vehicle marketplace.

Auto Parts Companies Nirvana

The other companies I am focused on when it comes to the future of the automobile are the auto parts firms. At whatever auto or technology show they attend across the world, they are like kids in a candy shop. And for good reason…

Currently, the vehicle manufacturers still largely control design, and nearly every other important aspect of vehicle production. But that is slipping away from them as the wave of the future is more electrical systems and electronics and not mechanical systems.

Estimates are that 50% to 70% of the value of a car in the future will lie in those electronic components, which the automakers purchase from other companies. Some of these companies, ironically enough, were spunoff by U.S. automakers years ago because Wall Street told them they were low-margin, no-growth businesses.

There are a number of very good auto parts stocks for you to choose from. Here is just one example:

A company to consider is Visteon (NYSE: VC), which designs and manufactures electronics products for automakers. Visteon provides everything from standard gauges to high resolution, reconfigurable digital 2D and 3D displays to infotainment and audio systems.

At CES, Visteon introduced its DriveCore autonomous driving platform, which is the first solution that allows automakers to build such solutions in an open collaboration model. It also unveiled its all-digital cockpit of the future with reconfigurable instrument clusters and advanced display technology along with driver monitoring, ADAS integration and other features.

I also like the fact that the company has considerable global exposure. It is enjoying strong sales in China, which is Visteon’s highest profit region. These trends together should keep the stock motoring ahead, adding to the 52% gain over the past year.

Yet, Visteon is not my top recommendation in the sector. I just revealed that company in the January issue of Growth Stock Advisor. At CES, this company showed off a fleet of driverless BMW cars that had no problem navigating the busy streets of Las Vegas. The cars dealt with traffic lights, slower and faster cars nearby, lane changes, right and left turns, jaywalking pedestrians, and faded lane markings. Only once did the driver take over, and that was to steer around pylons in the middle of the road.

As the 2018 CES brought to the fore, some of the most exciting technologies are centering on the future of the automobile. Stay tuned for even more excitement to come from this sector adding capital gains to your portfolio.

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 

Growth Stocks

Buy These 3 Stocks to Soar Thanks to China’s Hunger for Clean Skies

One of the main messages I give you in my articles is that you have to pay attention to global events to find the best investment opportunities before Wall Street does.

Another great example of that occurred in March at China’s annual parliamentary meeting. The one main takeaway from that meeting could be summed up by one sentence that was repeated again and again at the meeting – “We will make our skies blue again.”

The Chinese are (finally) very serious about curbing the rampant pollution in their country. This has boosted industrial metals prices globally as China curbs output of aluminum and steel in the country.

And China has cut back on the use of coal for both power and heating purposes. As a substitute for coal, the Chinese government is placing a major emphasis on natural gas.

Therein lies the opportunity…

China’s LNG Imports

While China does produce some of its own natural gas and imports more gas from Russia via pipelines, the all-of-a-sudden big increase in natural gas demand has had almost immediate effects.

In early December, that demand pushed LNG (liquified natural gas) prices in Asia to a three-year high, 20% higher than a year ago – and up 80% from the 2017 low – at above $10 per million BTU. According to energy consultants Wood Mackenzie, import volumes of LNG were 48% higher in the first ten months of 2017. This follows a 25% jump the year before.

A cold winter in northern China raised demand even more and made authorities desperate to meet the need. In December, Chinese oil company CNOOC (NYSE: CEO) was forced to hire over 100 LNG-carrying trucks to bring LNG over 1,300 miles from the south of China, where the LNG import facilities are, to the northern parts of the country where the cold of winter was biting hard.

And while prices have fallen somewhat since with a January thaw, this trend toward higher LNG demand from China is a feature of the energy market that will be with us for many years.

In an interesting side note for natural gas, there is talk in the market that energy kingpin Saudi Arabia may (in the relatively near future) have to import natural gas in the form of LNG in order to meet domestic needs. Demand there has risen by 50% over the past decade while proven Saudi gas reserves have only risen by 20%.

To that end, it is believed Saudi Arabia is interested in funding LNG projects around the world. Are President Trump and U.S. gas producers listening? I hope they are.

US LNG Exporters

Especially since U.S. capacity to process LNG is set to grow nearly seven-fold by 2019 as five export terminals open.

Primary among U.S. LNG exporters is Cheniere Energy (NYSE: LNG), which is the owner of the first LNG export terminal in the U.S. that has been operating since early 2016. It is exporting at its Sabine Pass facility with three trains and a capacity of about two billion cubic feet of gas per day. Its total capacity is expected to be about five billion cubic feet per day once all five trains are completed (the fourth train was recently completed). An LNG train is a liquified natural gas plant’s liquefaction and purification facility.

Chiniere’s first mover advantage is evident. In November, it signed an $11 billion memorandum of understanding for long-term LNG sales with China National Petroleum Corporation. CNPC is the parent of PetroChina (NYSE: PTR).

However, competition for Cheniere is underway here in the U.S. There are five other facilities, in addition to Cheniere’s, that will add roughly 7.5 billion cubic feet of LNG export capacity in 2018 and 2019. Here is the list of these facilities for you:

Cove Point, Maryland terminal just started operating in December and is owned by Dominion Energy (NYSE: D). It used to be an import terminal that was retooled as an export terminal with a capacity of 0.82 billion cubic feet per day.

 

Cameron LNG, Louisiana is owned by Sempra Energy (NYSE: SRE) and is scheduled to begin operation in 2018. It has three trains currently under construction with the first train expected to begin operation in early 2018, and the second and third trains are expected to start up during the second half of 2018. The three trains will have a capacity of 2.1 billion cubic feet per day.

Sempra Energy is also in the permitting stage of constructing an expansion to the facility, which would add a fourth and fifth train. Project completion for the expansion is expected sometime in 2019.

Elba Island, Georgia is a relatively small-scale facility owned by Kinder Morgan (NYSE: KMI) with a capacity of 0.35 billion cubic feet per day. It was originally constructed as a regasification plant for imports of LNG and it is being retooled as an export facility. The project will use ten small scale liquefaction units, constructed in two phases. The first phase will begin service in mid-2018, while the second will come online in early 2019.

Freeport LNG, Texas has three trains currently under construction. It will begin operation between the end of 2018 and the third quarter of 2019, with a combined capacity of 2.14 billion cubic feet per day. A fourth train is under development.

Corpus Christi, Texas is currently under construction on 1,000 acres controlled by Cheniere Energy. It is being designed for five trains and construction on the first and second trains began in May 2015 and is now about 70% complete. The first train is expected to begin operating in the first half of 2019 with the first three trains having a combined capacity of 2.14 billion cubic feet per day.

While I do like Cheniere Energy, there are lots of LNG projects coming online in China’s neighborhood – namely Australia. So instead of focusing on just LNG exporters, I am also looking at the carriers of all that LNG to China – the LNG shipping companies.

LNG Shipping Companies

These companies are in the sweet spot between rising Chinese demand for LNG and limited supplies of ships. Transporting LNG requires specialized tankers and the market for these tankers has completely flipped. From a glut a few years ago, there is now a shortage of these specialized tankers.

This shortage has led to a doubling of LNG tanker rates since April 2016. And there is definitely room for further increases. Prices could double again and still not reach the highs set five years ago.

The LNG carrier shortage will not be alleviated quickly either since it takes about 30 months to build such a vessel. Between 2012 and 2014, there were orders for 66 LNG carriers. But with that aforementioned glut, orders dropped to only eight in 2017.

This will obviously benefit the companies that currently own LNG tankers. But be careful here – many of them are heavily loaded with debt. Here are two companies though I am looking at:

Golar LNG (Nasdaq: GLNG) – its stock is up nearly 20% over the past year. The company is one of the world’s largest independent owners and operators of marine-based LNG midstream infrastructure and is involved in the liquefaction, transportation and regasification of natural gas.

Related: A Top 10% Yield Stock to Own for Growth and Income

In others words, Golar is no mere LNG shipper, although it has 16 LNG shipping vessels. It is also focused on other aspects of the LNG pipeline including floating LNG liquefaction (FLNG) and floating storage and regasification units (FSRUs). It is the first company to convert ships into FSRUs and FLNGVs (floating liquefied natural gas vessel). This sets it apart from most of its competitors.

If you are looking at more of a pure-play LNG shipper, there is Gaslog Ltd. (NYSE: GLOG), whose stock is up nearly 30% over the last year, with most that gain occurring in the last three months.

Its fleet consists of 22 LNG ships on the water with another five ships on order being built. And like Golar, it is also becoming involved with FSRUs.

However, I like Gaslog because it is one of those carriers, along with Teekay LNG Partners L.P. (NYSE: TGP), that is greatly benefiting from the diversion of more and more LNG tankers to China. The daily rate of a 160,000 cubic meter LNG tanker soared to $80,000 in December from the 2017 low of $30,000 in April, according to ship broker Clarkson.

The third quarter of 2017 for Gaslog already saw record revenue and EBITDA. And thanks to Chinese demand, this should continue for the foreseeable future.

If you are looking more for income than capital gains, but still want to participate in the China LNG story, consider limited partnerships from the shipping firms.

Gaslog has a limited partnership worth a look, Gaslog Partners LP (NYSE: GLOP), which is up 5.77% over the past three months with a current yield of 8.36%.  And there is also the aforementioned Teekay LNG. It has risen nearly 13% over the past three months and has a 2.71% yield. Teekay will be receiving 11 new LNG vessels by the end of 2018.

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 

Technology

Buy This Tech Stock Instead of Apple, Facebook, or Google… or Even Bitcoin

I’m about to unveil to you another insight on what I believe is crucial to successful investing. And it’s one that is really just basic common sense.

There will always be hot opportunities and glamour stocks that ‘everyone’ is chasing in the stock market. You need look no further than Tesla Motors (Nasdaq: TSLA). I firmly believe though you should not buy the hype, that the best investing opportunities are found just outside the hype.

The classic example of this is the California Gold Rush. Let me take you back in time for a moment.

History Lesson

On May 12, 1848, a San Francisco store owner by the name of Sam Brannan held a ‘one-man parade’ to announce the start of the California Gold Rush. He went up and down Market Street in San Francisco shouting, “Gold! Gold from the American River!”, while waving a bottle of gold dust.

Gold fever took hold and many residents went off in search of riches.

Brannan had good reason for this one-man advertising campaign. You see he owned the general store in that served miners at Sutter’s Mill, where gold had indeed been discovered. And in the intervening week between the actual discovery of gold and his ‘advertising campaign’, Brannan had bought all the picks and shovels in the city.

Needless to say, Brannan became the Gold Rush’s first millionaire. And a timeless investing maxim was born, “when there’s a gold rush, sell shovels.”

It is this line of reasoning that led me to a recent addition to the Growth Stock Advisor portfolio. It is a leading provider of microcontrollers. But before I give you the details on it, let me fill you in on the microcontroller market and why you need to be invested in it.

What Is a Microcontroller?

A short definition of a microcontroller is that it is a tiny computer on a single integrated circuit containing a processor core, memory, and programmable input/output peripherals.

Microcontrollers (MCUs) are used in automatically-controlled products and devices. Examples include vehicle engine control systems, implantable medical devices, remote controls, power tools, appliances, smartphones and other embedded systems. Microcontrollers are also used in our smart credit cards and electronic passports.

By reducing the size and cost, microcontrollers make it economical to digitally control more and more devices and processes. In simple terms, the entire wonder that is supposed to be the Internet of Things (IoT), with 30 billion connected devices by 2020, would not be possible without microcontrollers.

MCUs are a low-cost and low-power bridge between the sensor and gateway parts of IoT devices. They link sensors to the IoT nodes and serve as sensor hubs in a wide array of IoT devices to gather and log data onto a network.

Microcontroller Market

The IoT microcontroller market is segmented based on types, which are first sub-divided into 8 bit, 16 bit and 32 bit MCUs with 32 bit being the largest segment thanks to its higher processing power. MCUs are also segmented on the basis of application – consumer and home appliances, automotive, industrial, medical, security ID, solar PV and smart grid.

The global microcontroller market is experiencing robust growth at the moment that is set to continue. The period from 2017 to 2024 is forecast to have approximately a 16% compound annual growth rate (CAGR).

(World Microcontroller Market, 10 Years Leading to 2024, in Billions USD)

Demand in key application areas such as automotive, consumer electronics, smart grid systems, solar power and healthcare is feeding that growth. The biggest future driver behind the growing demand for microcontrollers will be the Internet of Things, robotics and factory automation.

However, do not overlook the automotive market. Traditionally, automakers have used MCUs for engine control, anti-lock brakes, power steering, airbags and other applications. But now, microcontrollers are also needed in sophisticated safety features such as advanced driver assistance systems (ADAS).

Yet, despite the soaring demand, the industry has gone through tough times.

MCU Market Upswing

The problem for the industry has been too many players producing too many microcontrollers, driving down prices and profits. For example, between 2006 and 2015, the average price for an average 32-bit MCU fell 17% per year from $5.00 in 2006 to $0.92 in 2015.

But that is beginning to change, making it the right time for you to invest in the industry.

According to research firm IC insights, the average overall price for microcontrollers in 2016 rose 8% in 2016 and will rise another 2% in 2017. Going forward, it sees a steady climb in prices – due to that overwhelming IoT demand – up 3% in 2018, 4% in 2019 and 1% in 2020.

The price for that average 32-bit MCU increased 18% to $1.09 in 2016. Keep in mind that this is the largest segment of MCUs, and will account for 60% of total MCU revenue and 43% of unit volumes this year. These price increases will mean, according to ICU, that revenues for the industry will be in excess of $25 billion.

That’s a very positive trend. And so is the industry’s move toward consolidation, as companies jockey to be best positioned for a future dominated by the Internet of Things.

You’ll Need a Scorecard

The moves made in this bid for supremacy have scrambled the standings of the top companies in the MCU industry. You’ll need a scorecard to keep track. But let me briefly fill you in on the global standings, as of the end of 2016.

The former number one company is now number two, Japan’s Renesas (OTC: RNECY) and its 16% market share.

The new number one (19% market share) is NXP Semiconductors NV (Nasdaq: NXPI), thanks its purchase of Freescale in 2015, moving it up from sixth. NXP itself is now the subject of a takeover bid from Qualcomm (Nasdaq: QCOM).

Fourth through seventh are: Korea’s Samsung (12%), STMicroelectronics NV (NYSE: STM), Germany’s Infineon Technologies (OTC: IFNNY) and Texas Instruments (Nasdaq: TXN). Coming in eighth is Cypress Semiconductor (Nasdaq: CY), which moved up the standings thanks to its purchase of Spansion in March 2015.

Our recommendation of Microchip Technology (Nasdaq: MCHP) is now third globally, up from fifth, with a 14% share of the global market. Its 2016 sales rose 50% to $2 billion due to its $3.4 billion acquisition of Atmel in the second quarter of 2016.

Microchip Technology

Let me fill you in now on Microchip Technology, whose microcontrollers are likely all through your home – from your garage door opener to your coffee machine to your children’s or grandchildren’s toys.

It had a tough start in its corporate life. It was a failing spinoff of General Instrument that was acquired by venture capitalists in 1989. It went public in an IPO in 1993. Luckily, it has had good management teams and has grown through the years via acquisitions until today it is a major producer of microcontrollers (64.3% of revenues), memory and analog semiconductors, and interface products for embedded control systems.

I believe the purchase of Atmel last year was a game changer for MCHP and did a lot more for the company than just moving it up the market share standings. It is now one of the best positioned companies in the entire industry.

Prior to the Atmel purchase, the company had been the only major MCU supplier not licensing ARM CPU technology. This architecture comes from the U.K.’s ARM Holdings, which was snapped up by Japan’s Softbank (OTC: SFTBY) in 2016 for $32 billion.

For about a decade, Microchip Technology had developed and sold 32-bit MCUs based on RISC-processor architecture developed by the U.K.’s MIPS Technology, which is now owned by another U.K. firm, Imagination Technologies. The latter was a major Apple supplier, which was recently dumped by Apple.

But with the proliferation of Internet of Things devices, the ‘wind’ is clearly blowing in the direction of 32-bit MCUs using the low-power ARM architecture. Atmel’s strength is that it is strong player in the ARM microcontroller market.

Security too is of major importance in any IoT designs. Here again, Atmel is a big plus for MCHP. Its expertise in technologies such as Trusted Platform Module (TPM) and crypto memories can complement Microchip MCUs in securely connecting objects.

Consistency Is Key

As with my other recommendations, I look for companies with good global exposure. That is crucial here since overall the Asia-Pacific region accounts for about 35% of the microcontroller market. This region did account for 55.8% of net sales in the Microchip Technology’s latest quarter.

Its revenues aren’t overly dependent on any one sector either. The last quarter’s breakdown on its MCU segment among the major users is as follows: industrial – 35%, automotive – 25%, consumer – 24%.

Another item I like to see from a company is consistency. Despite the tough times in recent years for the industry as a whole, the company has managed to report 106 consecutive quarters of profitability!

Microchip Technology is now one of the fastest-growing global providers of 16-bit and 32-bit microcontrollers. This business continues to outperform the industry, which I think will enable it to continue gaining significant market share. Its analog business (about 25% of revenues) is also fast becoming one of the biggest analog franchises in the market.

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

Uncategorized

Buy This Robotics Stock Before the Machines Take Over

In order to survive in the 21st century, companies are demanding greater speed and efficiencies in their processes and robots are ever increasingly the answer. That’s why robot armies are spreading throughout factories and warehouses around the world as automation transforms an ever widening number of industries.

Global sales of industrial robots rose by 18% to a record $13.1 billion (1.828 million units) in 2016, according to the International Federation of Robotics (IFR). The IFR forecasts the number of units will jump to 3.053 million units by 2020, transforming many manufacturing operations into ‘factories of the future’.

Many of these robots will be ones that can work safely alongside humans. These are known as collaborative robots, or cobots. As components become ever smaller and complex, these type of robots can perform vital functions as they can handle the intricacies of manufacturing in ways humans cannot.  Or mundane tasks, such as filling your favorite box of chocolates with individual candies.

Crucial to these type of robotics systems is the rapid advancements being made in software, sensors and robotic vision systems. This looks to be the richest seam to mine when investing in the robotics sector. The IFR estimates this is already a $40 billion market.

Most important among these is robotic vision systems. These vision recognition systems, coupled with artificial intelligence and cameras, allow robots to not only identify objects, but to learn from experience to improve their performance over time.

Foremost in this sector is Cognex (Nasdaq: CGNX), which is the leader globally in providing vision systems, vision software, vision sensors and industrial ID readers. It sells its vision systems to most of the big players in the industrial robotics industry including ABB, Yaskawa Electric and Germany’s Kuka AG. The only exception is Fanuc, which makes its own vision systems. This translates to Cognex having a 30% share of the vision systems market.

Its business is quite profitable, with Cognex enjoying nearly 80% gross profit margins. And with much of the growth in robotics overseas, it is not surprising that 45% of its 2016 revenues came from Europe. Another 30% came from the Americas and 25% from Asia. The Greater China region – the fastest growing region – alone accounted for 12%.

Cognex is expanding rapidly into the fastest-growing segments of industries that are becoming more automated. For example, the logistics sector (warehouses, etc.) accounts for only 10% of Cognex’s revenues, but is currently growing at a 50% annual rate.

Another example is 3D vision, which is a necessity for cobots. Here the acquisitions of companies including Germany’s EnShape, Spain’s AQSense and Colorado-headquartered Chiaro Technologies gave Cognex’s products a lot of traction. Its 3D products grew well in excess of 100% in 2016 and that growth should only accelerate going forward.

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