Market Preview: Possible Trade Deal with Canada, Earnings from Dollar Retailers, Lululemon

Good news on several fronts is keeping the market in rally mode this week. A trade deal with Mexico, and what appears to be an imminent deal with Canada, have come much quicker than most pundits believed possible. GDP numbers released Wednesday morning revealed a 4.2% growth rate, the highest in 4 years. With Apple (AAPL) up on the trade news, Morgan Stanley fueled the fire even more by raising price targets on both Alphabet (GOOG) and Amazon (AMZN). Both the Nasdaq and S&P 500 hit record highs for the fourth straight session.

Thursday morning Dollar Tree (DLTR) and Dollar General (DG) trot into the earnings arena. While Dollar General has done well this year, bouncing back from an earnings disappointment at the end of May, Dollar Tree has been hammered after earnings reports in both March and May. Both companies blamed the weather for last quarter’s disappointment, which apparently contributed to lower sales and raised costs. Lululemon will report earnings after the close. The stock has been on a major run this year, and will need to report a perfect quarter to continue the blistering pace. Analysts expect new CEO Calvin McDonald to report an earnings increase of just over 25% when the athletic retailer takes the spotlight.

Thursday’s economic calendar includes jobless claims, the EIA natural gas report, and personal income and outlays. Income is expected to rise .3% and spending is expected to rise .4%. The core PCE Core Price Index, which is closely watched by the Fed as it sets interest rates, is expected to rise .2% for a year-on-year gain of 2%, which happens to be the Fed’s target. Friday, the last day of August, investors will see Chicago PMI, consumer sentiment, and Baker-Hughes rig count numbers. Consumer sentiment is expected to rise slightly after a sharp downturn in July. The preliminary August report was the lowest since September of last year, with consumers still fretting over the then unsettling trade tariff news.

The lone earnings report delivered Friday morning will come from discount retailer Big Lots (BIG). Last quarter same-store sales fell a whopping 3%, and the stock breached a two year low before recovering and staging a rally. Analysts will be watching to see if the Big Lots earnings are on the mend, or if the retailer will continue to stumble through the rest of 2018. Traders may want to keep an eye on what technicians call a cup and handle pattern which could be forming in the stock.

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3 Great Semiconductor Stocks to Buy Now

Source: Shutterstock

Semiconductor stocks are having a bumpy 2018. While the sector is in the green overall, the chipmakers are trailing the Nasdaq Composite, as measured by the Invesco QQQ Trust (NASDAQ:QQQ) by a wide margin. The QQQ ETF is up 16% year-to-date, with the iShares PHLX Semiconductor ETF (NASDAQ:SOXX) up just half that for the year.

It’s not hard to see why investors are worried about chipmakers. Several of the trends that had powered them in recent quarters and years are starting to fade. The group of chipmakers tied to Apple (NASDAQ:AAPL), for example, have lost momentum as the global smartphone market looks increasingly saturated. Other trends that had been powering increased semiconductor demand, such as cryptocurrencies and Internet of Things are starting to see their expectations come back in a bit.

On top of that, semiconductor stocks were among the hottest groups in the market since 2016. A pause in their momentum is not a big surprise. That said, given the recent underperformance in the sector, it could be time to go fishing for a little value. And yes, that means steering clear of the controversial and expensive high-fliers like Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) in search of more compelling value.

Here are three such semiconductors stocks to buy today.

Semiconductor Stocks to Buy: Texas Instruments (TXN)

Semiconductor Stocks to Buy: Texas Instruments (TXN)

Source: Shutterstock

Texas Instruments (NASDAQ:TXN) suffered from a bit of unwanted publicity recently. Its new CEO, Brian Crutcher, resigned due to personal conduct issues less than two months after being promoted to the role.

Texas Instruments has reinstated long-time top executive John Templeton, who guided the company to great prosperity in recent years, to the CEO role indefinitely. While the management shake-up may have made some investors nervous, TXN’s core business keeps on humming. Last quarter produced yet another earnings beat on both the top and bottom line.

With the string of earnings-per-share growth in recent years, Texas Instruments now tops $100 billion in market cap. It dominates its niche: analog chips that process real-world measurable data for digital applications. It continues building out its patent library, manufacturing capabilities and product lines with additional acquisitions. As such, it has achieved massive scale and can continue plugging more products into its platform.

Texas Instruments has its fingers in many pies, with its efforts in automotive and communications chips showing particular promise given current market trends. Additionally, the company has more security and recurring revenue than most chipmakers, as its products tend to have much longer lifecycles than the sorts of designs that go into hot consumer products such as phones.

TXN stock has soared in recent years; it’s up from $50 to more than $110 just since early 2016. But the fun isn’t over yet.

TXN stock sells for 18x forward earnings. Combine that with its 15% projected five-year EPS growth rate, and you have a reasonably priced tech growth company. On top of that, the company pays a market-beating dividend of 2.2%, and management raises the dividend by a double-digit percentage every year.

Semiconductor Stocks to Buy: Intel (INTC)

Semiconductor Stocks to Buy: Intel (INTC)

Source: Shutterstock

AMD’s recent gains have, to some extent, been Intel’s (NASDAQ:INTC) pain. While AMD stock has soared to a new 12-year high, INTC stock has slipped back under the $50 level. Intel is still up strongly over the past year, but the stock has now corrected almost 20% since early June.

The dip in INTC stock is a buying opportunity.

The market has grown concerned about repeated delays with Intel’s line of 10nm technology. For the first time in many years, it appears that AMD is reaching technological parity with Intel across both the server and laptop markets. AMD, which has been stuck in the 20% market share range for ages, could draw much closer to Intel in coming quarters.

However, don’t count Intel out anytime soon. The company still has far more resources and R&D prowess than AMD. While its delays with this product cycle have been embarrassing, they can and will be fixed. And as it is, there is more to performance than just the nanometer size of chips — Intel’s current generation of products are still highly competitive.

Intel, like other lumbering tech companies, appeared to be waking up recently. INTC stock had started to trade up to a higher price-to-earnings ratio for the first time in years. But the recent drop has Intel back well into value territory. At these prices, INTC stock is selling at 12x trailing and 11x forward earnings. The company’s dividend is also back above the 2.5% mark.

Take advantage of temporary competitive issues against AMD to score INTC stock at a nice discount to recent prices.

Semiconductor Stocks to Buy: Qualcomm (QCOM)

Semiconductor Stocks to Buy: Qualcomm (QCOM)

Source: Shutterstock

Qualcomm (NASDAQ:QCOM), like Texas Instruments, has also had some excitement lately. Qualcomm finally abandoned its long-running attempt to take over NXP Semiconductors(NASDAQ:NXPI).

This acquisition would have broadly diversified Qualcomm’s business. Investors have looked nervously at Qualcomm’s concentration in patent-based revenues as its own chips have fallen prey, in some cases, to OEM competition.

However, there was also a good deal of execution risk in the proposed mega-merger. So China’s influence in scuttling the deal could come out as a plus. As it is, Qualcomm still gets huge royalties off of 3G and 4G technology, and it has an enviable position in the upcoming rollout of 5G.

Shareholders will get a concentrated ownership position on these assets. That’s because Qualcomm — now that the NXP deal is dead — announced a gigantic buyback of up to $30 billion by the end of 2019.

Given Qualcomm’s current $100 billion market cap, we’re talking about the company retiring something along the lines of a quarter of outstanding QCOM stock. On top of that, QCOM stock offers a large dividend yield, currently almost 4%, making it one of the top income plays in the tech space. QCOM stock has recovered nicely since the NXP deal failed. Still, the all-time high is up around $80, offering substantial upside as a target, especially as the buyback kicks in.

At of this writing, Ian Bezek owned shares in TXN, INTC and QCOM stock.

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9 Upcoming Dividend Hikes to “Front Run” Today

If you want to clobber the stock market – and double your money every two or three years – then buying companies with accelerating dividends is the easiest and safest way to do it.

And I’ve got good news for you: there are nine blue chip payers likely to raise their dividends next month. So why not “front run” this good news and consider these shares now?

The benefit of dividend hikes? Getting a fatter income stream is an obvious reason, but it’s just the start. A rising payout acts like a lever on a company’s share price, prying it higher and higher with every single dividend hike.

The pattern is plain as day in this chart of NextEra Energy (NEE), a supposedly “boring” utility that’s been quietly sending its shareholders bigger and bigger dividend checks over the past five years.

Look at how NEE’s stock has jumped with each and every dividend hike NextEra has delivered—and how its latest monster payout hikes have magnified those gains:

Bigger Dividend Hike, Fatter Share Price Pop

NextEra just delivered a 13% dividend hike earlier this year. But you and I can do even better by focusing on stocks that are due for a payout hike ASAP. Here are nine raise announcements we’ll probably see next month.

American Express (AXP)
Dividend Yield: 1.4%

American Express (AXP) announced in June that the Federal Reserve gave its adjusted capital plan the green light. As part of that plan, American Express will buy back $3.4 billion in shares between Q3 2018 and Q2 2019, and it’ll boost its dividend by 11% to 39 cents per share – the company’s seventh consecutive year of payout hikes. The official declaration should come sometime in the final week of September.

Another feather in the cap for AXP, which has recovered from its Costco (COST)-sparked woes in 2016, rallying for nearly two years to its current all-time-high perch.

American Express (AXP): Dividend Growth Leads the Charge!

Microsoft (MSFT)
Dividend Yield: 1.6%

Microsoft (MSFT) is the poster child for what should happen with a faithful dividend-growth stock – as the payout expands, so should the stock price.

Microsoft’s (MSFT) Price Has Finally Caught Up With Its Dividend

And come mid-September, the IT blue chip will likely announce its annual dividend increase.

Microsoft closed out its fiscal year with a boffo fourth-quarter report released in July, announcing 17% top-line growth, 11% bottom-line growth and better-than-expected profits and revenues. Better still, its fiscal 2019 guidance surprised to the upside. And even after cranking up capital expenditures to build out its burgeoning cloud business, Microsoft still generated $7.4 billion in free cash flow.

Microsoft has gobs of money. It could do with a significant payout bump – the yield has been crushed by a 145% run in three years (a wonderful problem to have, if you’re an existing shareholder) – on what would be its 15th consecutive increase. It also may be ready to update its $40 billion buyback program initiated two years ago.

JPMorgan Chase (JPM)
Dividend Yield: 1.9%

Like American Express, JPMorgan Chase’s (JPM) next dividend increase is, ahem, money in the bank.

The Fed approved JPMorgan’s capital plan near the end of June, and that included an absolute whopper of a dividend-and-buyback package. JPMorgan will buy back an impressive $20.7 billion worth of shares between July 1, 2018, and June 30, 2019. But the real eye-opener is a 43% spike in the payout to 80 cents per share.

JPMorgan has been the cream of the big-bank crop over the past five years, doubling over that time as it has recovered and retooled following the 2007-09 financial crisis. JPMorgan has benefitted from (and will continue to enjoy the fruits of) continued economic expansion as well as a return to gradually rising interest rates … and shareholders aren’t being left behind. The stock has rocketed 120% higher over the past five years, and its dividend (including the expected hike, which should be announced in the second half of September) has grown 47% in that time.

JPMorgan Chase (JPM): One of the Best Big Bank Stocks

American Tower (AMT)
Dividend Yield: 2.0%

My readers should be plenty familiar with telecommunications infrastructure REIT American Tower (AMT), as it regularly shows up in my lists of dividend stocks to watch for payout hikes, so we’ll just do a quick check-up.

AMT isn’t setting the world on fire with a 6% year-to-date return. But when you look at the flat return for the Vanguard REIT ETF (VNQ), it’s clear this REIT is doing something right. And so it has! Second-quarter funds from operations (FFO) of $1.90 per share easily clubbed Wall Street’s expectations for $1.78. That came on revenues of $1.78 billion that also climbed over analysts’ estimates.

But American Tower’s draw is its impressive streak of 26 consecutive quarterly dividend increases – every three months since 2012, AMT has upped the ante like clockwork. Q3 should be no different, with the company typically making its announcement sometime in the middle of September.

Texas Instruments (TXN)
Dividend Yield: 2.2%

Chipmaker Texas Instruments (TXN) is another perfect example of dividend growth and capital appreciation going hand in hand:

Texas Instruments (TXN): A Chip Off the Ol’ Block

Texas Instruments, by the way, isn’t your typical chip play. When you think semiconductors, your mind probably conjures names like Intel (INTC)Nvidia (NVDA) and Advanced Micro Devices (AMD) that fuel graphics and high-end computing.

Texas Instruments is, in fact, increasingly focusing on cutting-edge technologies, including the Internet of Things, artificial intelligence and even blockchain – the tech behind Bitcoin. But its core business is the uninteresting but very necessary analog chips that power simple gadgets such as calculators and alarm clocks.

This one-two punch puts Texas Instruments in most of the devices in your house, your workplace – you name it. That has enabled this blue-chip chipmaker to explode like a growthy startup, all while fueling fantastic expansion in the dividend.

The next chapter in this dividend-growth story should come in mid-late September.

McDonald’s (MCD)
Dividend Yield: 2.5%

McDonald’s (MCD) smacked down the naysayers in 2017, showing that the world’s most ubiquitous fast-food chain still had gas in the tank with a red-hot 44% gain. But the Golden Arches have come back to earth in 2018, dropping 10% to make it one of the worst performers in the Dow.

But I can’t find much fault with the company. McDonald’s has posted earnings beats in both of its quarterly reports so far this year. Yes, same-store sales limped in a little bit for Q2, in part because the company’s $1-$2-$3 Menu hasn’t resonated the way analysts hoped it would. But I love the fast-food chain’s vow to become “more aggressive” on value and launch a “2-for-$5 mix-and-match” offering.

There’s little room for complaint on the dividend front, too. McDonald’s is a Dividend Aristocrat with 41 consecutive payout hikes under its belt – another raise, likely in the back half of September, would be No. 42. And MCD’s raises lately might not have been spectacular, but they’re decent, at about 25% growth since 2014.

OGE Energy (OGE)
Dividend Yield: 3.6%

No list of dividend-paying companies is truly complete without a utility stock, and that’s what we have in OGE Energy (OGE).

OGE isn’t as familiar as names like Southern Co. (SO) and Duke Energy (DUK). But its primary subsidiary, Oklahoma Gas & Electric (hence the OGE), serves more than 843,000 customers across Oklahoma and Arkansas. It also holds both limited partner and general partner interest in Enable Midstream Partners, LP (ENBL), which owns natural gas and crude oil infrastructure.

It’s also a little growth monster for the utility space. While the Utilities Select Sector SPDR Fund (XLU) is up just 2% in 2018, OGE shares have ripped off a market-beating 11% run. That came on the back of a stellar fiscal Q1 report that saw residential revenues grow 5.1% to prop up the top line by 8%, and a massive 50% pop in earnings to 27 cents per share – far better than the 17 cents Wall Street’s pros expected.

OGE Energy is no slouch on the dividend front, either. The payout has exploded by 48% since 2014, and you can expect another improvement to the dividend in the last week or two of September.

Can OGE Energy’s (OGE) Generosity Push Shares Over the Top?

Verizon Communications (VZ)
Dividend Yield: 4.5%

Telecom giant Verizon Communications (VZ) hasn’t exactly been blowing the doors off their hinges with its annual payout hike. While you can find plenty of companies averaging double-digit dividend growth every year, Verizon has managed to grow its distribution by only 11% since 2013 – a snail’s pace.

It’s understandable. Operating and free cash flow have been trending downwards for years as the telecom industry has grown completely saturated, forcing the likes of AT&T (T) and Verizon to slug it out against lower-cost providers such as T-Mobile (TMUS) and Sprint (S).

That said, investors could be in for something a little special this time around. The change in corporate tax rate benefits just about every U.S. business in one way or another, but it does wonders for companies such as Verizon that derive almost all of their revenues domestically. VZ’s corporate tax rate should sink from 35% to between 24%-26%. While Verizon still has other cash considerations, such as building out its 5G infrastructure, the telecom may, in either early September or very late August, take the rare opportunity to give shareholders something to cheer about.

Because sub-5% stock gains in five years sure aren’t doing the trick.

Verizon (VZ) Is Crawling Along … Just Like Its Dividend

Realty Income (O)
Dividend Yield: 4.6%

Realty Income (O) already has secured its place in the minds of investors as “The Monthly Dividend Company” – not just by paying monthly dividends, but by advertising this fact everywhere, including on the front page of its website.

But in September, it also will be eligible to join the ranks of the Dividend Aristocrats via its 25th consecutive payout hike.

Realty Income (O), while one of the most trusted REITs on Wall Street, hasn’t had the most promising 2018. Shares have barely budged northward, but it must be Wall Street following the narrative of the retailpocalypse rather than reality. In Q2, this retail REIT reported an increase in occupancy – 98.7% that was better year-over-year and quarter-over-quarter. Adjusted funds from operations (AFFO) climbed 5%, too.

That surely will help Realty Income afford its 84th consecutive quarterly increase, which you can expect to be announced sometime around the second week of September.

7 Dividend Growth Stocks with 112% Price Upside or More

You’ve probably noticed that a lot of these dividend-growth dynamos have pretty chintzy-looking yields. That’s OK. In fact, that’s a “hidden” bullish signal.

You see, the very best dividend stocks rarely show high yields because their prices keep rising in line with the increasing payments.

Most people don’t realize this. But those of us who do realize it stand to profit handsomely and almost automatically!

It’s a simple three-step process:

Step 1. You invest a set amount of money into one of these “hidden yield” stocks and immediately start getting regular returns on the order of 3%, 4%, or maybe more.

That alone is better than you can get from just about any other conservative investment right now.

Step 2. Over time, your dividend payments go up so you’re eventually earning 8%, 9%, or 10% a year on your original investment.

That should not only keep pace with inflation or rising interest rates, it should stay ahead of them.

Step 3. As your income is rising, other investors are also bidding up the price of your shares to keep pace with the increasing yields.

This combination of rising dividends and capital appreciation is what gives you the potential to earn 12% or more on average with almost no effort or active investing at all.

I’ve scoured thousands of stocks out there right now, looking for the very best companies that have both rising dividends and strong buyback programs in place … the kind of stocks that could easily spin off annual total returns of 12%, 17%, even 25% or more … doubling your money in very short order.

Right now, at this very moment, there are 7 in particular that I think you should consider buying.

They stand to do well no matter what the broad market does … regardless of what happens in Washington … and irrespective of interest rate trends.

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Market Preview: Trade Deals Driving Market Even Higher, GDP Announcement, Salesforce Earnings

Good news on trade between the U.S. and Mexico kept a fire under the market that won’t quit on Monday. The two countries announced they had reached a deal on NAFTA, and it is expected that Canada will join the renegotiated deal, perhaps as early as the end of this week. The new deal would require that 75% of automobile content be made in the NAFTA region, compared to the current requirement for 62.5%. Automakers Ford (F) and General Motors (GM) both jumped on the news. Markets set new record highs, and the Dow reclaimed the 26,000 level.

As earnings season is in its final weeks, Tuesday morning the market will see earnings from Best Buy (BBY) and close the day with Hewlett Packard (HPE) . Best Buy is expected to increase quarterly earnings by approximately 20%. Analysts want to know if the electronics retailer is keeping pace with apparel retailers, and that consumers are not just opening their wallets for new clothes. Hewlett Packard fell after earnings last quarter and has yet to regain levels set earlier in the year. Analysts have a price target of $19.47 on the company, but they’ll likely need to have a large beat to propel the stock back toward those levels.   

Tuesday’s economic calendar will have investors hopping. The full calendar includes international trade in goods, retail inventories, advanced wholesale inventories, Redbook numbers, S&P Corelogic Case-Shiller Home Price Index, consumer confidence, the Richmond Fed manufacturing index and investor confidence numbers. The Case-Shiller number will be a major focus, as housing is currently seen as one of the few possible wrenches that could be thrown into the U.S. economy. Wednesday, analysts will get to see new mortgage applications, corporate profits after taxes, which are expected to be up 2.7% year-over-year, the pending home sales index, and the EIA Petroleum Status Report. But the real conversation will be around the GDP number released at 8:30AM. GDP is expected to come in at 4.0%, a slight decrease from last quarter’s 4.1%.

On Wednesday morning American Eagle Outfitters (AEO) will take center stage. This trendy teen outpost has been on fire this year, and analysts expect nothing less than a stellar quarter. CEO Jay Schottenstein would like to announce a repeat of last quarter when the retailer beat on both earnings and sales. After the close the customer relationship management monster Salesforce (CRM) will report earnings. The $113 billion company has been on an acquisition spree, gobbling up smaller CRM companies to add to its offerings. With its stock at an all time highs, investors are expecting a very friendly report out of the company.

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Profit From This One Stock As Fresh Water Becomes Scarce

Back in April, I shared with you about the growing problem facing humanity in many places around the world – the growing scarcity of water, which is the foundation upon which our very civilization is built.

Conditions are still very bad, making water even more of a no-brainer sector for some of your investment money. Let me fill you in on what has happened since my last article on water.

First, there was new satellite data on freshwater reserves from NASA that revealed dozens of regions across the globe are in danger of becoming the next Cape Town. If you’ll recall, I told you about the South African city of nearly four million residents that was in danger this year of becoming the first of the world’s big cities to run out of water. It had to impose severe water-saving measures to avert “Day Zero”… more on that situation in a moment.

Research from scientists at NASA and the Jet Propulsion Laboratory shows that worldwide fresh water reserves have changed drastically since 2002. The decline in water availability in regions such as northern India, north-east China, the Caspian Sea and across the Middle East has been blamed mainly on irrigation and groundwater pumping.

The study was the first to use gravitational satellite data to map global trends in fresh water availability across a 14-year period, drawing on data from NASA’s Grace satellites. The research identified areas where water resources rose or fell significantly during the period, and it found 14 regions where changes were primarily due to human activity, compared with eight regions where the changes were mainly caused by climate. As Jay Famiglietti, one of the study’s authors, noted “Fresh water availability is changing and water insecurity is much closer than we think.”

Day of Reckoning Postponed Briefly

That means there could a number of Cape Towns in our future.

Speaking of Cape Town, it managed to postpone it so-called ‘Day Zero’… barely. Theewaterskloof, the biggest reservoir for the city, is a vastly diminished trickle of its former self after three years of relentless drought have reduced it to barely a tenth of its 480 billion-liter capacity.

But for now, ‘Day Zero’ has been put off until 2019. The drought is still going, but the people have made unprecedented efforts in conserving water. In three years, Cape Town residents have more than halved their use from 1.2 billion liters a day in 2015, to just over 500 million liters (about 132 million gallons) at the start of this year. Part of the restriction included suburban residents living with just 50 liters (a little over 13 gallons) a day per person versus the global average of 185 liters.

If and when ‘Day Zero’ restrictions kick in, residents’ water rations would be cut to 25 liters a day. This will be triggered when overall dam levels fall to 13.5% – they were 19% recently.

Water and Geopolitics

Water is also becoming more important geopolitically. Take a country that has been in the news a lot lately – Turkey.

Turkey is the country where the very important Tigris and Euphrates rivers originate and it decides how much of the water to release to its neighbors to the south – Iraq and Iran. It recently decided to restrict the water flow on the Tigris River as it fills a reservoir behind a newly-built dam. Many of those dams, by the way, flooded the traditional lands of the Kurdish people that President Recep Tayyip Erdoğan is constantly fighting against.

That restriction of the Tigris is not good news for those downstream. In Iraq, for example, inflows this year are 40% below the long-term median.

Water shortages pose an immediate and very real threat to Iran, Turkey’s ancient rival. Kaveh Madani, a former Iranian deputy vice-president for the environment and a professor at Imperial College London, said to the Financial Times: “This is not a water crisis. It is a bankruptcy.”

He was not exaggerating the seriousness of the situation. Drought now afflicts 97% of Iran. The country’s most serious recent protests were not against “moderates” or “conservatives” in the government and the average person there could care less about the U.S. withdrawal from the nuclear deal… they were protesting about the lack of water.

The protests are aimed in the right direction – poor government policy. Iran’s policy to raise national food production has led to the cultivation of marginal farmland and, in turn, over-irrigation, salinification and increased desertification.

Water Investments

As you can see water is becoming more and more crucial and is a must-own investment. So how can you participate in the water investment thesis?

The broadest way is through exchange traded funds of which there are five water sector ETFs. The one I like the most is the former Guggenheim S&P Global Water Index ETF, which is now controlled by Invesco and is called the PowerShares S&P Global Water Index Portfolio (NYSE: CGW).

This is nicely balanced geographically with about 45% in the U.S. and the rest overseas. The top two sub-sectors within the fund are utilities (46%) and industrials (41%). Wall Street is apparently still in the ‘ignorance is bliss’ mode when it comes to the global water situation because this fund gained only 6.7% over the past year and is actually down 1% year-to-date.

Among its top ten positions are names that should be well-known to U.S. investors: American Water Works (NYSE: AWK)Xylem (NYSE: XYL)Idex (NYSE: IEX)Danaher (NYSE: DHR) and Aqua America (NYSE: WTR). Both AWK and WTR are water utilities, while the other three are industrial companies.

Interesting to note that these stocks have actually outperformed the ETF on an individual basis, which is why I almost always opt for individual stocks instead of an index or an ETF. Here are the gains for these stocks on a one-year basis and year-to-date respectively:

  • American Water Works – 8.39% and a minus 2.75%
  • Aqua America – 12.1% and a minus 3.5%
  • Danaher – gains of 24% and 8.4%
  • Idex – gains of 35.5% and 16.5%
  • Xylem – gains of 28.5% and 11.66%

One of these stocks is my top water recommendation in my Growth Stock Advisor newsletter – Xylem. It recently came in at number 7 on the Fortune 2018 “Change the World” list for its effect on the world.

Following the acquisition of Sensus in 2016, Xylem now operates in three segments: water infrastructure, applied water and Sensus.

The Water Infrastructure segment includes the company’s business surrounding the sourcing, collection, treatment, and transportation of water. The primary customers in this segment are public utilities and large industrial companies. These customers use Xylem products including industrial pumps, filtration and treatment equipment, and infrastructure control systems.

The Applied Water segment involves the Xylem’s products and services sold to residential, commercial, industrial, and agricultural end-users. Some of the products in this segment include pumps, valves, heat exchangers, hydro turbines, and dispensing equipment systems. Its Applied Water business focuses more on the distribution of water to households and businesses.

The third segment of Xylem’s business is Sensus. It represents the company’s largest foray into the smart technology market. Sensus is all about technology and includes a variety of smart meters, cloud-based analytics software, remote monitoring and data management systems, and smart lighting.

The company reported excellent results for the second quarter of 2018. It delivered $1.3 billion in second quarter 2018 revenue, up 13% year-over-year. Revenue for the quarter rose 8% on an organic basis, driven by double-digit growth in utilities and continued strength in the industrial and commercial end markets across nearly all major geographies. Orders increased 8% organically in the quarter. Xylem now forecasts full-year 2018 revenue of approximately $5.2 billion, up more than 10% versus the prior year. On an organic basis, Xylem now anticipates revenue growth in the range of 6% to 7%. Xylem also narrowed the range of its full-year 2018 earnings expectations, with adjusted earnings per share in the range of $2.85 to $2.95. This represents an increase of 19% to 23% from Xylem’s 2017 adjusted results.

Xylem’s stock is up more than 12% since the November 29 recommendation date despite the turbulent stock market we’ve had in 2018. And I expect much more upside in the years ahead due to the water situation globally.

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3 “Screaming Buy” Dividend Stocks from the San Francisco MoneyShow

Last week at the San Francisco MoneyShow I did a joint, dividend stock focused presentation with Kelley Wright of Investment Quality Trends. Here is an excerpt from the MoneyShow description of the event:

“Dividends and dividend growth have historically accounted for the lion’s share of stock total returns. Moreover, companies that are rapidly growing their payouts can be found in some of the fastest-growing sectors of the economy. This gives rise to a largely underutilized strategy: ‘Stealth growth’ investing, which centers around buying quality stocks with a penchant for dividend growth.”

IQ Trends method tracks stocks between historic yields. Buy when the yield is near the high of the range and sell when the yield touches the low of the historic range. Each stock will have its own yield history. This is a very value oriented stock market strategy and the stocks he follow can go for years without hitting a buy or sell signal. The strategy works because the service only recommends growing dividends stocks. This means as the dividend grows and if the share price stays in the historic yield range, the share price must be appreciating.

While he didn’t go deeply into individual stocks Wright did give some quick hits on shares his system shows as undervalued. Here are several:

The Walt Disney Company (NYSE: DIS) has a historic yield range of 0.8% to 1.6%. The current yield is 1.5%, which under the IQ Trends system is a strong indicator that DIS is undervalued and should move higher from here.

Wright labeled CVS Health Corporation (NYSE: CVS) and Philip Morris International Inc. (NYSE: PM) as “screaming buys”. He also discussed his belief in the large cap energy companies stating he owned a “boatload” of Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX).

I personally like the contrarian value approach of Wright and his IQ Trends approach. He and I both use dividend yields and dividend growth as tools to help us find stocks that provide long term positive returns for investors.

More: 3 High Growth Dividend Stocks Paying Over 6%

During my portion of the presentation, I shared a handful of stocks I thought income investors should take a strong look at. My difference is that I often recommend newer companies. Under the IQ Trends system, stocks must have a 25 year dividend history. I like to find and recommend newer stocks with high yields and potential for dividend growth in the early years, on top of those yields.

Here’s one of the more recent ones I’ve unearthed:

PermRock Royalty Trust (NYSE: PRT) is a new investment I revealed to the presentation attendees. This is not a company, but instead the trust has a right to 75% of the net income from crude oil production from dedicated acreage in the Permian Basin.

PRT pays a variable, monthly dividend based on the prices received for sold crude oil and natural gas. I describe PermRock as a pure play, high yield way to participate in crude oil prices.

I believe that oil will continue to go higher, resulting in a higher share price and larger dividend payments. However, the latest dividend was lower, causing a share price drop, making PRT very attractive.

I expect PRT to yield between 8% and the mid-teens.

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Market Preview: Companies Ranging from Best Buy to Salesforce Report Earnings, and GDP Numbers

The market continued its winning ways on Friday, with the S&P and Nasdaq finishing at all time highs. Not even a firm stance on rising interests rates from Fed Chairman Powell could dampen the spirits of this aging bull market. Good economic news and even better earnings appear to be trumping political scandals and trade issues as we head into the waning days of summer. The CEO of Target may have put it best when discussing his company’s earnings earlier this week on CNBC, he said, “I think this is the healthiest environment I’ve ever seen.” The market apparently agrees.

Next week’s earnings calendar will give investors a wide range of stocks to parse. There will be additional retail numbers from Best Buy (BBY) on Tuesday, as well as a chance to check on the high end consumer when Tiffany (TIF) reports. Wednesday Salesforce (CRM) will detail their latest quarter in the customer management space, and Dick’s Sporting Goods (DKS) will step onto the earnings stage. Thursday we’ll hear from two of the biggest discount retailers when both Dollar General (DG) and Dollar Tree (DLTR) report. They’ll be joined by apparel seller lululemon (LULU). The earnings calendar is clear for the last Friday in August. 

Monday we’ll get earnings from Heico (HEI) and Bilibili (BILI). Heico recently went through a stock split, and the industrial parts supplier increased its semiannual dividend by 7%. Analysts will be keen to hear how the aircraft parts supply business is fairing in a bumpy plane market. Last quarter BILI doubled its sales and had double-digit growth in its mobile business. Analysts are looking to see if BILI is keeping the pulse of the young Chinese consumer which makes up most of its market.

The economic calendar next week is chock full of data, but the biggest focus for analysts will be the GDP number on Wednesday. We’ll also get international trade in goods and consumer confidence on Tuesday. Later in the week we’ll take a look at personal income, jobless claims, and the latest consumer sentiment numbers. Monday analysts will be focused on two Fed numbers. The Chicago Fed National Activity Index and the Dallas Fed Manufacturing Survey are both released Monday morning. The Chicago number tracks nationwide economic activity and inflation, while the Dallas Survey provides data out of Texas. Both numbers are expected to rise.

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3 Stocks to Buy If Trump Is Impeached

On Aug. 21, Michael Cohen, Donald Trump’s former personal attorney, pled guilty to two felony campaign finance violations, setting in motion a chain of events that could lead to President Donald Trump’s impeachment along with several “Trump impeachment stocks” to consider.

As far as I’m aware, if the president were removed from office by Congress, Mike Pence, the vice president, would become the new leader.

Under such a scenario, it’s possible that the White House’s economic policies wouldn’t change much, so the idea of benefitting from Donald Trump being stripped of his presidency and recommending three stocks to buy for a Trump impeachment could be a moot point.

That said, I don’t see Mike Pence being nearly as combative with America’s allies, which would mean a return to more normal diplomatic and economic relationships. That’s good news for any company currently suffering under the Trump administration’s protectionist tariffs.

America might be doing well today, but many experts suggest long-term, Trump’s trade policies are bad for business.

So, without further delay, these are the three stocks I believe are most likely to benefit from Trump’s removal from office:

Trump Impeachment Stocks: Harley Davidson (HOG)

Stocks to Buy if Trump Is Impeached: Harley-Davidson

Source: Shutterstock

I don’t think there’s any doubt that Harley Davidson (NYSE:HOG) would benefit from anybody but Donald Trump running the country.

The fact that the president would support the boycott of such an iconic brand just because the company chooses to make some of its bikes closer to its growth markets in Europe and elsewhere is evidence of the man’s failure to grasp simple business.

“Many @harleydavidson owners plan to boycott the company if manufacturing moves overseas. Great!” Trump tweeted on Aug. 12. “Most other companies are coming in our direction, including Harley competitors. A really bad move! U.S. will soon have a level playing field, or better.”

The truth of the matter is that companies who choose to manufacture in the U.S. do so, not because America makes products better than anyone else, but because they want to be closer to their customers.

It makes very little sense to sell a bike in Prague that’s made in Wisconsin. That said, if Trump hadn’t implemented the steel and aluminum tariffs, the EU wouldn’t have slapped a 31% tariff on U.S. motorcycles, and Harley likely wouldn’t have been nearly as quick to move some of its manufacturing overseas. 

I don’t know if Mike Pence understands economics any better, but I’m guessing Harley would like to find out.

Trump Impeachment Stocks: Fiat (FCAU) and the Auto Industry

Stocks to Buy if Trump Is Impeached: Fiat and Auto Stocks

Source: Shutterstock

This one isn’t so much a specific stock as it is a particular industry.

The president seems eager to undo anything that was created or achieved by the Obama administration. He loves the words, “Roll back the Obama policy,” almost as much as MAGA. To heck with the consequences. 

Recently, one of the great CEOs of modern business, Sergio Marchionne, died at the age of 66. President Trump might not like to hear this, but if it weren’t for Obama going against some of his advisors’ advice and opting for a bailoutFiat Chrysler Automobiles (NYSE:FCAU) might not exist today.

Just ask the good people of Windsor, Ontario, where they make a ton of Chrysler vehicles, what they think of Marchionne and praise is all you’ll hear. 

“There was a Great Recession, folks had lost confidence in Chrysler as a company,” said Windsor Mayor Drew Dilkens after Marchionne’s death July 25. “But he said, ‘You know what, I see a possibility.’ So, he took a leap that not many others were willing to take, and he took over Chrysler.”

The other thing people forget is that Fiat wasn’t exactly humming along when Marchionne proposed the merger. So, what does Mr. Trump want to do? He wants to slap a 25% tariff on cars coming from Canada and elsewhere.

Both Canadian and American auto parts suppliers would suffer under such a tax as would Fiat Chrysler and the rest of the Detroit automakers. And Windsor, Ontario? It would be crippled.

The entire North American auto industry benefits from a Trump impeachment.

Trump Impeachment Stocks: Amazon (AMZN)

Stocks to Buy if Trump Is Impeached: Amazon

Source: Shutterstock

The third company to benefit from a Trump impeachment would be Amazon (NASDAQ:AMZN); not that it needs any help because the president’s aggressive attacks against the e-commerce giant have put it in the spotlight for all the wrong reasons.

“Only fools, or worse, are saying that our money-losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed,” Trump tweeted April 2. “Also, our fully tax-paying retailers are closing stores all over the country … not a level playing field!”

Hmm … Isn’t Amazon the same company that’s opening a second U.S. headquarters that will employ as many as 50,000 employees at a projected cost of $5 billion?

I’m pretty sure that the VP wouldn’t be nearly as hard on the Seattle company knowing that it employs more than 9,000 people in Pence’s home state of Indiana. And it’s adding jobs at its five fulfillment centers in the state.

I thought Trump liked companies who’re creating American jobs?

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

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Source: Investor Place

Buy This Profitable Tech Stock Beating the FAANGs

In my last article few articles (herehere, and here), we looked at emerging markets. I gave you the breakdown as to the markets I do not like and those that I do, in the Asia-Pacific region.

But even if you’re not a fan of emerging markets, please do not make the mistake many investors do… just because you don’t like China, for instance, do not throw out the entire Asia-Pacific region. If you do, you will be missing out on some wonderful opportunities to make money.

One of my favorite investing destinations is Australia, which is a stable, democratic country in the Asia-Pacific region. It has a number of top-quality stocks, including a technology stock that trades right here in the U.S. – Atlassian Corporation PLC (Nasdaq: TEAM). The company provides team collaboration and productivity software solutions worldwide. It offers project tracking, content creation and sharing, real-time communication, and service management products to all sizes of organizations.

What Atlassian Does

The company’s products include JIRA, a workflow management system that enables teams to plan, organize, track, and manage their work and projects; Confluence, a content collaboration platform that is used to create, share, organize, and discuss projects; HipChat that provides teams a way to communicate in real-time and share ideas, updates, codes, and files; Trello, a Web-based project management application for capturing and adding structure to fluid and fast-forming work for teams; Bitbucket, a code management and collaboration product for teams using distributed version control systems; and JIRA Service Desk, a service desk product for creating and managing service experiences for various service team providers, including IT help desks, and legal and HR teams. It also offers other tools for software developers, such as Stride, FishEye, Clover, Crowd, Crucible, Bamboo, SourceTree, and StatusPage.

The company recently entered into a strategic partnership with Slack. Atlassian currently has two offerings in the real-time communications market: Stride and Hipchat. With this partnership, Atlassian will exit the communications space. Slack has acquired the intellectual property for Stride and Hipchat Cloud, both of which will be discontinued. Atlassian will also discontinue Hipchat Server and Data Center and will be working with Slack to provide a migration path for customers of all four products.

Related: Sell These 21 Stocks About to Be Destroyed by Amazon [ad]

Microsoft Competition

Atlassian also said it has also made an equity investment in Slack to reinforce the long-term nature and significance of the partnership. The logic behind the two companies joining forces in this particular segment is that both were facing significant competition from Microsoft and its TEAMs product that is offered to its Office cloud customers. Microsoft also offers a free version to people that do not subscribe to Office 365. The deal will let Atlassian and Slack focus on the area where they lead – Slack in chat and Atlassian in project management software.

Microsoft is also trying to encroach on Atlassian’s turf with its recent $7.5 billion purchase of GitHub.

Initially, investors were fearful that Microsoft’s buy would hurt Atlassian. But it turns out the deal may actually bolster Atlassian’s Bitbucket business, which competes with GitHub in the business of storing code for companies and software developers. Immediately after the Microsoft announcement, the company’s Bitbucket enjoyed its best day ever in terms of new user sign ups.

The reason is straightforward – Atlassian offers better products at lower costs. Bitbucket prices are significantly lower than GitHub’s due to its focus on spending more on research and development rather than sales and marketing (more on this in a second).

Atlassian’s Unique History

I have been following Atlassian for a number of years because of its uniqueness among tech firms. Let me fill you in briefly on its history…

Because of its Australian roots, it was a unicorn that was valued well below its Silicon Valley peers.

Part of the reason for that was that the company did not sell much stock (only about $200 million) to private investors. So there was not the typical feeding frenzy sending valuations soaring. And the potential future valuation potential had not been already squeezed out by the venture capitalists.

Also, Atlassian was unique in that the company had always been profitable. I’m sure the investment banks on its IPO had difficulty pitching this unique asset – a technology company that had healthy revenue growth, positive cash flow and a reasonable valuation. What a contrast from what normally comes out of Silicon Valley!

 And now its most unique aspect – Atlassian does not have a sales team. Its business grows simply on word of mouth about the high quality of its products. I absolutely love that concept… letting the quality of your product speak for itself!

Atlassian Still Growing

The lack of a paid sales staff certainly has not slowed down Atlassian’s growth.

Its latest quarterly report sent the stock soaring by rose more than 23%. The company reported financial results for fiscal Q4, with earnings and revenue that topped analysts’ expectations; it also provided guidance for fiscal Q1 and full year 2019 above forecasts.

For the quarter ended June 30, Atlassian posted earnings of $0.13 per share, compared with the prior-year period’s $0.09 per share. Wall Street analysts had expected EPS of $0.12. Revenue came in at $243.8 million, up from $174.3 million in the same quarter last year. That was again above Street estimates for revenue of $233.4 million.

The company expects fiscal first quarter EPS of about $0.19 on revenue of $258 million to $260 million. Wall Street analysts had been looking for guidance of $0.15 on revenue of $252.5 million. For fiscal 2019, Atlassian forecast EPS of about $0.77 on revenue of $1.146 billion to $1.154 billion. That compares to the Street view of EPS of $0.66 on revenue of $1.11 billion.

Not surprisingly, firms such as Oppenheimer boosted their price target on Atlassian. Oppenheimer raised its stock price target to $85 from $65 while retaining its outperform rating. “Strength reflects continuing good execution, broad-based product demand, and record new customer expansion,” analyst Ittai Kidron said in a note, while viewing its exit from the communications business positively because it’s playing catch-up in the business.” We’re buyers seeing multiple growth drivers (new customers, deeper penetration, new products, pricing).”

I’m in agreement, with my expectation that Atlassian will continue to be a winner following its unique Australian model of success.

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Source: Investors Alley

3 Best Wireless Stocks to Buy for the 5G Rollout

Source: Shutterstock

Looking over the last two to five years, the best wireless stock name jumps right out.

It’s T-Mobile US (NASDAQ:TMUS). The company has continued to grab marketshare with its “Un-carrier” ads and CEO John Legere ditching his suit to dress like an aging hippie. But the game is changing. Since bidding to buy Sprint (NYSE:S), the two stocks have moved in near lock-step.

But more importantly, there’s 5G to consider. The next mobile technology, which will make frequencies as high as 28 GHz usable by carriers, and offer speeds equivalent to wired broadband, will also cost billions of dollars to implement.

So which are the best wireless stocks to buy for the 5G rollout?

5G Wireless Stocks to Buy: T-Mobile Sprint

T-Mobile should still be on your list of mobile stocks to buy, especially if they win approval of the Sprint deal, which is not yet certain. Over the last three months the performance difference between the two stocks has widened again, as uncertainty over the merger’s future has grown.

The uncertainty is thanks to the Administration’s on-again, off-again merger policy, which still seeks to keep AT&T (NYSE:T) from buying Time Warner (even after it has done so), is stopping all Chinese money at the border, and appears inconsistent to critics.

T-Mobile says it’s already deploying 5G, across all the spectrum it owns, and that the merger will increase competition  because the combined company will be as big as AT&T and Verizon Communications (NYSE:VZ).

Sprint has claimed its 5G plans will deliver speeds 15 times greater than present 4G technology. The company believes new 128-radio Massive Input Massive Output (MIMO) gear will get it to market faster than competitors, using existing 2.5 GHz spectrum, targeting service next year. The merger with T-Mobile should help Sprint keep these promises.

5G Wireless Stocks to Buy: AT&T

Is AT&T Stock and Its Dividend a Must-Buy Ahead of Earnings?

Source: Shutterstock

I own AT&T. I’ve been disappointed with the stock, but it remains a good investment for you because it’s dirt cheap.

The company’s 50 cent per share quarterly dividend now yields over 6%, it has a price to earnings multiple of 6.4, and it has earnings to cover that dividend. The struggle with the Justice Department over Time Warner will eventually end, the balance sheet shows it has assets to afford 5G deployment, and it is already rolling out the technology in major markets.

The 5G data signals run so quickly that fiber is often needed for backhaul to get the full effect, and the company has been rolling out fiber for years.  Its purchase of FiberTower was controversial… because it might give AT&T an unfair advantage when it comes to 5G rollout frequency.

AT&T dominated 4G and is ready for 5G.

5G Wireless Stocks to Buy: Google

google stock

Source: Shutterstock

Your best bet for 5G profits is a speculative surprise.

It’s Alphabet (NASDAQ:GOOGL), also known as Google.

Google laid fiber cable behind my house a few years ago but didn’t light it because the per-house cost of running the wire was prohibitive.

With 5G, that problem goes away. Google says it wants more frequencies to be shared, the way WiFi is shared, and thinks sales of spectrum slow innovation, but the government still plans to start auctioning 24 GHz and 28 GHz spectrum in November, and Google is the only potential bidder with a crying need.

High frequency spectrum would let Google deliver its Fiber service to consumers with radios, rather than running wires, and make that profitable. Gaining spectrum wouldn’t just let it deliver fixed broadband but make it a true wireless carrier.  No wireless company can compete with Google’s balance sheet, with $4 billion in debt on nearly $200 billion in assets.

I had shares of Google, but got out when it crossed $1,000, and that was a mistake. Google’s price to earnings multiple of 52 makes is super-expensive right now, but the next stock market correction is likely to hit it hard, and when it does I’ll be a buyer.

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Source: Investor Place 

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