The $5.1 billion deal to buy the Costa Coffee chain by Coca-Cola (NYSE: KO) is just the latest example highlighting the great lengths to which food and drinks companies are trying to keep pace with rapidly changing consumer habits that are upending traditional business models across the sector.

The former owner, Britain’s Whitbread, had said it would spin off Costa, the world’s second largest coffee shop chain after Starbucks. But the price Coke offered for Costa was simply too good to pass up.

For Coca-Cola, the transaction represents a full-fledged leap into the global coffee market, where it has little presence currently. “Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand,” said James Quincey, president and CEO of Coke. “Costa gives us access to this market through a strong coffee platform.”

This move continues Coke’s process of diversifying away from the fizzy and sugary drinks that made the company famous. These type of drinks have declined in popularity among increasingly health-conscious consumers. The deal is all part of the company’s effort to reposition itself as a “total beverage company”. As Mr. Quincey said, coffee was among the “strongest growing [beverage] categories in the world” and the company was missing out.

As the chart above shows, the potential for growth of coffee beverages versus soft drinks is high. So with Coke now entering the market, it sets up a battle royal for coffee sales between the world’s biggest beverage maker and the other giants in the sector including Starbucks, Nestlé and privately-held JAB Holdings. More on that later.

Consumer Drinks Pressure

Coke’s proposed transaction is just the latest in a series by established consumer brands, which are taking divergent approaches in response to the demand from consumers globally for fresher and healthier products.

Some consumer companies are expanding into territories or products with brighter growth prospects. Coke’s arch-rival PepsiCo recently struck a $3.2 billion deal to buy SodaStream, which makes home carbonation products. This deal came mere days after Coke agreed to buy a minority stake (with a path to full ownership) in BodyArmor, a sports drink maker backed by US basketball star Kobe Bryant.

Coke has struggled for years to loosen the hold of Pepsi’s sports drink business Gatorade with its Powerade drink. But it may have struck gold with BodyArmor. Its products use coconut water, have higher levels of potassium than its competitors, do not use artificial colors, allowing the company to market its products as a healthier alternative to Gatorade and Powerade. Now it will gain access to Coca-Cola’s bottling system, allowing it to increase production.

The research firm Euromonitor said that sports drinks volumes were flat last year in the U.S., as both of the big two brands struggled. The one real exception, according to Euromonitor, was BodyArmor. Analysts with Wells Fargo, relying on Nielsen data, estimated that Body Armor retail sales had climbed 90% over the past year to $288 million. Much of that market share came from Gatorade.

Both Coke and Pepsi are coming under increasing pressure from JAB Holding, a Luxembourg-based investment vehicle backed by the billionaire Reimann family. As part of its international buying spree JAB bought the Keurig Green Mountain coffee business, best known for its single-serve brewing machines, in December 2015 for $13.9 billion. And JAB made a more direct threat to the two incumbents when, in January 2018, it struck a $18.7 billion deal to acquire Dr. Pepper Snapple and combined it with Keurig to create a beverage group with almost $11 billion in annual revenue.

The Steaming Hot Coffee Market

Once you get to the global coffee market, the competition gets even hotter as global food and beverage giant Nestle is a major player. Its recent deals in the space include acquiring the rights to sell Starbucks products and taking a majority stake in roaster Blue Bottle.

According to Euromonitor, the global coffee industry is valued at more than $80 billion, and has been expanding at an annual rate of more than 5%. Here in the United States – the world’s biggest coffee market – most of the growth is coming from a resurgence in the café culture among millennials aged 18 to 34.

According to a recent survey conducted by the National Coffee Association, 15% of millennials had their last cup of coffee in a café and 32% had an espresso-based drink the day before the survey, the highest share for any age group. These are the type of consumers Coke is trying to reach through its purchase of Costa.

This data is also why Dunkin Brands (Nasdaq: DNKN) is Wall Street’s hottest takeover target, sending its stock to all-time highs. Dunkin is a lot more than a donut shop today and has pushed into more upmarket coffee offerings such as cold brew and espresso drinks. It will likely be added to the $250 billion in deals in the coffee business over the past six years.

But what about Coca-Cola? Was the purchase of Costa a smart move?

Coke and Coffee

Not surprisingly, I am once again in disagreement with the Wall Street consensus. They hate the deal and I love it.

Analysts are saying that Coke knows nothing about brick-and-mortar stores even though Coke insists “this is a coffee strategy, not a retail strategy.”

Maybe the analysts are right, but they are ignoring that the entire Costa team is staying in place. When Whitbread bought Costa in 1995 it was a company that was just a small chain of 39 cafes across Britain to today having 2,400 shops in Britain and another 1,400 in more than 30 countries with a brand that is recognized in most parts of the world.

Costa has recently begun its push into China, where it pitches its drinks to Chinese consumers as a luxury treat. It still has only 460 shops there, so the potential for growth is enormous. Starbucks has 600 shops in Shanghai alone.

Costa just did not have the financial firepower for a major push into China, but now with Coke’s financial muscle, it does. It will help too that surveys show Chinese consumers consider Costa to be of higher quality than Starbucks. And the trade war may play right into Costa’s hands if Chinese consumers begin boycotting American products.

And I like the deal for its symmetry. Think about it – Coke started out being served as a flavor of syrup in the soda fountains of little neighborhood stores (drug stores, etc.) in the late 19^th and early 20^th centuries. The soda was mixed by black-tied “soda jerks” behind marble counters – the forerunners of today’s baristas. Then Coke completely moved away from direct contact with consumers…

But now it’s back with Costa’s coffee houses and its baristas. Just for nostalgia’s sake, I hope they succeed. And they might – after all, Amazon had little brick-and-mortar experience before it bought Whole Foods and Apple does have its physical stores. Coke going back to its roots looks like a winner to me.

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A New York Times (NYT) headline blared, “Too Little Too Late’: Bankruptcy Booms Among Older Americans”. They reference a Consumer Bankruptcy Project (CBP) study, “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society”:

“For a rapidly growing share of older Americans, traditional ideas about life in retirement are being upended by a dismal reality: bankruptcy.

…. Driving the surge …. is a three-decade shift of financial risk from government and employers to individuals, who are bearing an ever-greater responsibility for their own financial well-being as the social safety net shrinks.”

While the NYT is noted for wrapping selective facts inside an article pushing a political ideology, the study appears well-researched. Look at the source data and form your own conclusions.

How bad is the problem?

The study shows triple-digit gains in bankruptcy for those over 55:

“The number of senior households filing bankruptcy is not negligible. With 800,000 household filings annually, approximately 97,600 (12.2 percent) of those are households headed by seniors. The drivers of these bankruptcies were reported by our respondents. The most pressing was inadequate retirement and employment income.(Emphasis mine)”

In 2013, John Mauldin and Jonathan Tepper authored, “Code Red, How to protect your Savings from the Coming Crisis”. Central banks lowered interest rates to historically low levels (Zero Interest Rate Policy – ZIRP); forcing yield-starved savers into the stock market:Why inadequate income?

“(Fed Chairman) Bernanke openly acknowledges that his low interest-rate policy is designed to get savers and investors to take more chances with riskier investments. The fact that this is precisely the wrong thing for retirees and savers seems to be lost in their pursuit of market and economic gains.” (Emphasis mine)

The CBP weighs in:

“While many Americans confront these risk shifts, they profoundly affect older people….

…. With the 401(k)-style of savings, payout during retirement is not defined or predictable,employees bear all of the market risks, and returns depend on employees’ investment skills.” (Emphasis mine)

This 2013 New Yorker magazine article, “Shut Up, Savers!” marginalizes the critics of Fed Chairman Ben Bernanke:

“…. to his detractors, Bernanke is guilty of waging a “war on savers”-fleecing people, especially retirees, of hundreds of billions of dollars that they could have earned in interest.

Certainly, it’s not the easiest time to live off interest income. The average rate on a savings account is less than 0.25 percent. Long-term certificates of deposit offer rates well below inflation, and even a ten-year government bond yields less than two percent.”

…. It’s easy to understand why savers feel like collateral damage (Emphasis mine) in the Fed’s fight against recession, but too much sympathy for their plight is dangerous.”

Dr. Ron Paul recently took another look at the economic fallout in, “The Dollar Dilemma: Where To From Here?”

“…. It is true that the rich are getting richer and the middle class is being wiped out. (Emphasis mine) …. The seriousness of the problem, …. explains the anger and frustration the people feel.”

Wiping out the middle class and almost 100,000 bankruptcies in a single year is a heck of a lot of collateral damage!

A second opinion

I reviewed the “Employee Benefit Research Institute 2018 Retirement Confidence Survey”. The EBRI is non-partisan. Retirement confidence is rapidly declining:

Their press release says:

“This year’s Retirement Confidence Survey (RCS) finds …. retiree confidence in having enough money to cover basic expenses and medical expenses has dropped: 80 percent say they are very/somewhat confident about covering basic expenses this year compared to 85 percent in 2017; and 70 percent say they are very/somewhat confident about covering medical expenses this year vs. 77 percent in 2017.

The EBRI discusses how important Defined Contribution (DC) plans, like a 401(k), are for retiree confidence.

“Those with a defined contribution (DC) plan like a 401(k) are far more likely to say they are confident in their ability to live comfortably in retirement: 76 percent of workers with a DC plan are at least somewhat confident in their ability to live comfortably in retirement versus 46 percent of those without a DC plan.

…. However, the data suggests many plan participants don’t know what to do with their DC plan assets at retirement.” (Emphasis Mine)

Here is what the New Yorker wants us to shut up about….

While Dr. Paul is correct, there is a lot of anger and frustration, it’s foolhardy to expect the government to fix anything.

What can WE do?

Two major factors affect us all. Even though they may not push us into bankruptcy, they should be understood and dealt with as best you can.

Debt is the enemy.

CBP weighs in:

…. 71.6 percent either “very much” or “somewhat” agreed that they filed because of the stress of dealing with debt collectors. Collectors called their homes, their workplace, their families, and knocked on their doors.

They quoted several respondents:

“All things went up in price. Retirement never went up. Had a part-time job that was helping to meet monthly payments.House payment kept going up.” ….

“Mismanaged my retirement savings…. Tried to restructure my debts but creditors refused. Unable to find suitable employment to pay my credit cards.” ….

“My wife developed medical problems and had to leave her job…. About two years later, I developed medical problems and was not able to continue working. We …. simply could not handle the debt load. The constant calls from bill collectors forced us to contact an attorney for help.”

The EBRI also discusses debt:

Dump the debt! Save your line of credit for real emergencies. Downsize and do what it takes to be debt free!

The debt rule is simple, “get out, stay out, and don’t ever come back!” I’ve never met anyone who lamented being debt free.

CBP weighs in heavily on medical costs:Medical Costs

“Despite the widespread belief that Medicare meets health needs of older Americans, …. it is utterly inadequate. Out-of-pocket spending among older Americans with Medicare comprises about 20 percent of their income, and the estimated total of all noncovered medical expenses for a 65-year-old retired couple during their retirement years is $200,000….

…. Respondents were asked to list the single most important thing that they or their family members were unable to afford in the year before their bankruptcies. Over half of older filers (52 percent) who responded indicated that the single most important thing they had to forego was related to medical care-surgeries, doctor visits, prescriptions, dental care, and health/supplemental insurance. These responses continue to suggest that their health care coverage is inadequate.”

EBRI shows the public has little confidence in the government providing medical care, social security – or doing the right thing:

What is the solution?

The NYT and CBP pushed for government-provided funded health care for all.

I prefer to avoid partisan politics; the entire political class governs against the will of the majority.

When I was with Casey Research I spent countless hours researching government health care. I interviewed doctors who practiced worldwide. I spoke with experts and a member of Congress who was on the committee that drafted Obamacare.

I’ve concluded:

• Government sponsored health care sounds good, but in practice it is terrible.

• While the motives of the health care workers may be pure, quality health care deteriorates. If the VA had to care for all Americans – do you think their quality would improve?

• Government health care is fiscally impossible. Health care costs in the UK are bankrupting the country.

• The underlying (unstated) motive of government health care is to ration care for seniors. A senior congressman told me the basis for care was the value of the citizen to society. Seniors could eventually expect end of life counseling as opposed to health care.

• Most countries have a two-tiered system; one for the masses and one for the elite who can afford to pay out of pocket. Many Canadians come to the US for treatment that they cannot get in Canada. I spent an hour with the president of a big-name hospital in central America. They were gearing up for hundreds of US patients once government medical is fully implemented.

• Expect social engineering. Politicos always pander for votes. I’m confident the majority of US citizens oppose paying for health care for those in the country illegally.

Buy good insurance! Medicare by itself will not provide quality coverage. The old adage, “you get what you pay for” applies to insurance premiums also. Many who bought inexpensive coverage did not realize it was inadequate until it was too late.

Those filing for bankruptcy are the tip of the iceberg. No one wants to live out their golden years constantly worrying about money. Get out of debt, save your money, learn how to invest wisely and buy good insurance.

And most of all – don’t ever be bullied into shutting up by anyone pushing a political agenda, whatever it may be.

As editor of Growth Stock Advisor, I’m always on the lookout for disruptors… trends that will change forever the way things are done. And of course, the companies that are at the forefront of the disruption and that will benefit from it.

One such disruption is occurring right now in my former field of employment – the brokerage industry and commission-free trading. It is perhaps apropos that the first disruptor in the sector is a company called Robinhood, which sent shockwaves through the brokerage industry in 2015 when it launched, offering free stock trades.

Robinhood (and others) to the Rescue with Zero Commissions

And like the hero of English folklore, this stock-trading app was designed to support the little guy by providing commission-free trading to individual investors. “We didn’t build Robinhood to make the rich people richer,” says Baiju Bhatt, co-founder and co-chief executive, to the Financial Times, “If they think it is useful that is wonderful, but the mission is to help the everyman, the rest of us, to be part of the financial system.”

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

The success of Robinhood is well known in the industry – it is now valued as a tech ‘unicorn’. That is, the private company is valued at more than a billion dollars. In fact, at its latest funding round, it was valued at $5.6 billion. But its very success has attracted the attention of the competition…

And you can’t get any bigger in the U.S. financial industry than JPMorgan (NYSE: JPM). It is launching its own low-cost digital trading platform, throwing down the gauntlet to online brokerages such as my former employer, CharlesSchwab.

You Invest, offers clients 100 free trades in stocks and exchange traded funds in their first year and the opportunity to earn unlimited free trading going forward. However, a minimum balance of $15,000 is required to maintain free trades beyond 100 per year. That may exclude many of the investors it is trying to pull away from Robinhood, which has no minimum balance required.

Robinhood Strikes Again

What really caught my attention is how Robinhood immediately responded to this challenge. It made the biggest addition to the number of stocks eligible for no commission since its launch three years ago.

But it is doing so with a twist that I love – Robinhood is adding 250 ADRs (American depositary receipts of companies from Japan, China, Germany, the U.K. and elsewhere. ADRs of companies from France will be added in the coming months. ADRs are stocks of foreign companies that trade and settle in the U.S. market in dollars, allowing investors to avoid having to transact in a foreign currency.

“We looked at what customers were searching for and not getting,” Robinhood co-founder and CEO Vlad Tenev told CNBC. “It allows customers to get some exposure outside of the U.S.” The company discovered its users wanted access to global stocks by looking at its own search data. Robinhood’s staff has access to what people are typing into the app’s search and looking to trade. Names such as Nintendo, Adidas, BMW and Heineken continued to pop up. The company used similar reasoning in February when it decided to add cryptocurrency trading after users repeatedly searched for bitcoin.

As someone that owns a good number of foreign stocks personally, this is fantastic – it caused me to open an account at Robinhood to take advantage of the zero commissions. This move has just made investing in the top overseas stocks easy, safe, and cost-efficient. While there are hundreds of quality foreign companies to choose from on Robinhood’s platform, let me briefly highlight just three…

Adidas

One such blue chip you can buy now for no commission at Robinhood is the world’s number two sportswear maker, Adidas (OTC: ADDYY), which is catching up to Nike.

The company reported an excellent set of second quarter results. It increased quarterly sales 4.4% year-on-year to €5.3 billion, compared with €5.2 billion expected by analysts. With the effect of foreign exchange movements stripped out, the increase was a very impressive 10%. Operating profit in the three months to June was 17.2% higher than a year ago and at €592 million beat analyst expectations of €546 million. Adidas said it is on track to meet its full-year guidance of 10% revenue growth excluding foreign exchange movements, as sales in the two key markets of North America and Asia are increasing at double-digit rates.

Adidas has stayed on top of fashion more than most of its peers. It nicely exploited the “athleisure” trend and is doing well again with its clunky, retro-inspired trainers popular with millennials called “Dad shoes”. Innovation also limits the amount of inventory that ends up being sold cheaply on Amazon. At Adidas, 80% of sales are generated by products that are less than a year old. That gives it strong control over pricing.

And while Nike’s operating margins at over 12% are still nearly two points higher than Adidas, the German group is catching up fast, thanks to economies of scale from growing sales, higher price points and growing online sales. Its margins should reach record heights this year.

More: Buy These 5 High-Yielders from Someplace You Wouldn’t Expect

Shiseido

Another very high quality company that is doing very well is Asia’s largest cosmetics company, Japan’s Shiseido (OTC: SSDOY).

A macrotrend that has gone almost unnoticed by U.S. investors is growth in the use of cosmetics by China’s millennial generation, which has benefited a number of companies including Shiseido, whose ADR has nearly doubled over the past year.

One area of growth for the company is online sales. It expects e-commerce to account for 15% of its global sales by 2020 compared to just 8% last year. The key driver will be China, where Shiseido expects the e-commerce segment to rise by 40%.

Tourism is another bright spot for the company. In 2017, Chinese visitors to Japan hit a record of about 7.35 million, a 15% increase over the previous year. Cosmetics are increasingly popular as souvenirs, ranking alongside cameras and watches. It is believed that about 80% of Chinese tourists purchase beauty products in Japan.

Finally, it is also expanding in China itself. Shiseido sells its biggest brand through about 270 stores in China. During 2018, it has started opening spaces for people to test products, assisted in some instances by beauty consultants. The company aims to have the spaces installed in all their stores by 2020. This is similar to its stores in Japan where Shiseido provides detailed consultations that are customized for individual skin types.

CSL Ltd

For those of you looking for a biotech company, there is Australia’s CSL Limited (OTC: CSLLY), whose stock is hitting record highs nearly every day. In May, the company raised its guidance for 2018 by an amount that surprised the market.

It is a major company with a $45 billion market capitalization, nearly $7 billion in revenues, and last year had net profit of $1.3 billion. CSL does business in over 60 countries, with major facilities in several countries including the United States. It has been around for more than a century and has several core focuses – influenza vaccines, blood plasma derivatives, and rare and serious diseases.

It is one of the biggest and fastest-growing protein-based biotech firms. Its drugs are used to treat bleeding disorders, immunodeficiencies, hereditary angioedema, Alpha-1 antitrypsin deficiency and neurological disorders.

I urge all of you to look into Robinhood and especially its addition of ADRs. Drop me a line if do open an account there or if you are interested in hearing more about ADRs.

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 

The Nasdaq was stymied on Wednesday as Congressional leaders grilled Facebook (FB) COO Sheryl Sandberg and Twitter (TWTR) CEO Jack Dorsey. “We were too slow to spot this and too slow to act,” Sandberg said of Facebook’s failure to identify fraudulent accounts ahead of the 2016 elections. With mid-term elections a mere two months away the social media companies did not convince the hearing members they had adequately addressed the problem. This prompted comments from the committee that Congressional action may be necessary. That did not sit well with the market, and the stocks of both companies, as well as Alphabet (GOOG), led the Nasdaq lower.

On Thursday Broadcom (AVGO) will step in front of the investing community and report earnings. The company’s stock has been guided by merger news for most of 2018. The stock started its move downward when it was denied in its bid to take over Qualcomm (QCOM) earlier this year. The subsequent announcement of a takeover of CA Technologies (CA) has resulted in a 14% decline for the stock and made it the worst major chip company in 2018. Analysts will be looking for information on the merger, and how management plans to optimize the combination. Also reporting on Thursday is value retailer Five Below (FIVE). The company’s stock has been very kind to investors the past year, rising almost 150% and far outpacing the competition. Analysts expect sales to increase 18% year-over-year, and are looking for $.38 per share.

The economic reports for both Thursday and Friday are all about jobs. Thursday we’ll get the Challenger Job-Cut Report, the ADP Employment Report and jobless claims. ADP is hoping to do a better job on Thursday when it reports projected employment numbers. The July estimate, at 219,000, was much higher than the actual numbers, missing the final government reported number by almost 50,000. The August projections are for the number to come in at a more modest 182,000. Friday the employment situation numbers are released with the unemployment rate, and payroll and wage gains. The unemployment rate is expected to move down slightly by .1% to 3.8%. Analysts will be focusing on wage gains to gauge any wage pressure impact on the Fed and its plans to gradually raise interest rates.

The first Friday of September has a limited earnings lineup, with only three companies scheduled to report. Genesco (GCO), Shiloh Industries (SHLO) and Tsakos Energy Navigation (TNP) will share the stage. Genesco is looking for a turnaround from last quarter. CEO Robert Dennis reported improved results from Journeys and Johnston & Murphy, but the gains were offset in poor performance from at Schuh and Lids. Analysts want to know if the underperforming businesses showed signs of improvement this quarter. Investors will be interested to hear how the new CFO of Shiloh Industries is taking to the position. Lillian Etzkorn