Monthly Archives: January 2018

Technology

3 of the Top Apple Inc. Acquisition Targets

You’ve probably heard: Apple Inc. (NASDAQ:AAPL) has a ton of cash, with some $252 billion on its balance sheet, a majority of which is held overseas.

Thanks to the new GOP tax cut legislation, the company is planning on bringing it back home. After accounting for taxes and money already promised (such as dividend and share repurchase announcements and capital expenditure plans) the company should have around $40 billion in its pockets to spend.

That’s likely to fire up expectations of M&A activity — something that’s perennially assigned to AAPL given its deep pockets. Especially since many of the companies thought to be buyout candidates are troubled technology stocks with not much else to bolster their prices.

Here are three to watch:

Apple Acquisition Targets: Twitter (TWTR)

(AAPL) Apple Acquisition Targets: Twitter (TWTR)

Twitter Inc (NYSE:TWTR) shares were recently upgraded to buy by analysts at Aegis Capital on expectations of another 17% rise in price this year — following a 40% increase since the company’s third-quarter earnings report. This is based on predictions of an acceleration in ad sales growth, stable user growth, profitability expansion and, yes, the specter of an acquisition.

The company will next report on Feb. 8, before the bell. Analysts are looking for earnings of 6-cents-per-share on revenues of $689.5 million. When the company last reported on Oct. 26, earnings of 10 cents beat estimates by 4 cents on a 4.2% drop in revenues.

Apple Acquisition Targets: Fitbit (FIT)

(AAPL) Apple Acquisition Targets: Fitbit (FIT)

Fitbit Inc (NYSE:FIT) shares have been under pressure lately, down roughly 25% from the highs set in early December to return to levels not seen since August. Analysts at ROTH Capital recently initiated coverage with a $10 price target, but that wasn’t enough to get the bulls motivated. The company hasn’t been able to capitalize on its first-mover advantage in wearables despite solid growth in the area, with IDC expecting shipments to double by 2021. All of this makes an AAPL buyout appealing because it could more easily expand its footprint in this area (by offering a cheaper alternative to the Apple Watch).

The company will next report results on Feb. 21, after the close. Analysts are looking for a loss of 6-cents-per-share on revenues of $583.6 million. When the company last reported on Nov. 1, a loss of 1-cent-per-share beat estimates by 3 cents, despite a 22.1% drop in revenues.

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Source: Investor Place

Technology

Alphabet Inc’s Google Is Still Growing, But Where Is It Going?

Alphabet Inc (NASDAQ:GOOGL) shares have risen 37% over the last year, beating the NASDAQ average. When it reports earnings on February 1, Google is expected to announce over $100 billion in revenue for 2017. If Alphabet meets estimates, the company should show earnings per share (EPS) of $32.33 for the year.

The question for investors: At a time when Google is entering more competitive markets, does 15%  growth in revenue and earnings justify a price of $1,138 per share?

As I’ve written before, Google is no longer just a cloud company, but a cloud-and-devices company. And in this new market, it finds itself fighting against companies just as good as itself, like Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN). The company is also working against new political headwinds.

Google Is Still Growing

Despite slowing growth and storm clouds on the horizon, Alphabet stock keeps rising because its earnings multiple keeps rising. The price to earnings multiple is currently at 39, up from 30 a year ago.  Yes, the average S&P 500 stock is now at a PE of 26, but does GOOGL deserve the premium, and does the S&P deserve the price?

Google is now third on Fortune’s list of the most-admired companies, which is great. But the two companies ahead of it are Apple and Amazon, increasingly competitors.

To further branch out, Google is making yet-another attempt to crack the Chinese market, signing agreements with Tencent Holdings Ltd (OTCMKTS:TCEHY), and investing in Chinese technology companies.

Google will benefit more from having its devices manufactured in China than China will from Google’s presence due to the country’s strict internet censorship and policies which don’t favor foreign tech companies.

Where Does Google Go From Here?

Right now, Alphabet is focusing its investments on expanding its cloud footprint, laying more fiber cable globally and trying to crack the developing AI market currently led by Amazon.

It is this competition with Amazon that Google bears are watching most closely. More online shoppers are using search engines to find products than before, but in the U.S., 49% go to Amazon first. Amazon is growing faster than Google in entertainment — thanks to its Alexa speakers and Fire Stick. The two companies are currently dueling across platforms and devices, with moves like Amazon disabling Fire Stick’s YouTube app four days before Google was planning to pull support.

Google appears to be waiting for better wireless technology before moving toward the high-speed internet sector currently dominated by Verizon Communications Inc. (NYSE:VZ), AT&T Inc.(NYSE:T) and Comcast Corp. (NASDAQ:CMCSA). The comany has pulled back on Google Fiber, no longer announcing new cities or even lighting fiber it’s laid in the ground. Experiments with serving homes from poles are continuing. 

The Bottom Line

While Alphabet remains a great company and a good stock, it’s facing new competition on multiple fronts where victory for it is uncertain.

Google’s growth continues to slow, thanks to the law of large numbers. And as its competition with Amazon increases in both cloud and devices, its margins are not going to accelerates.

The company has $86 billion stashed overseas and could bring some of that back to the U.S., benefiting shareholders. But Google is a global company. It needs the cash where it is, and Apple stock didn’t exactly take off like a rocket when it announced its repatriation scheme.

So why again am I supposed to pay a premium PE for this stock?

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Source: Investor Place

Dividends

2 High-Yield Dividend Stocks to Buy NOW

At least several times a week, I get a note from a newsletter subscriber or other investor who has heard a stock market correction or bear market is coming soon. The next statement is that the investor either plans to sell his stocks until prices drop or wait for the prices to drop before buying into any stocks. Like many commonly held beliefs about investing in stocks, this is one that is likely to cost the investor a lot of money.

Here are a couple of reasons why selling to avoid a market correction or waiting for one to buy will cost an investor money.

Reason 1: No matter what you see or read in the financial news, the next bear market does not appear to be imminent. The main reason to forecast an approaching bear market is because it has been almost nine years since the end of the last one. This logic doesn’t work because bear markets do not follow a calendar. Ten of the last 12 bears have been associated with an economic recession. The current economy gives zero indication that the next recession is on the horizon. History tells us that the economy will at some point go to negative growth, but currently there are none of the usual indicators for a pending economic downturn.

A stock market bear market is arbitrarily defined as a 20% decline from the most recent high. While the last decline of this magnitude occurred in 2008-2009, there have been several “near bear” corrections since then. Here are the three significant corrections that occurred during the current bull market:

  • 2010: 16% decline
  • 2011-2012: 19.4% decline
  • 2015-2016: 14.3% decline

These corrections have acted as circuit breakers that keep the current market values from a place where a big drop is likely just to take off some of the froth. While it is likely that a correction will occur within the next year (they happen on average once a year), a true bear market is very unlikely.

Reason 2: History shows that getting out of the market too early costs you more than riding out corrections and bear markets. Here are some averages on the 12 bear markets since 1937.

  • The average decline was 35.5%.
  • Average duration from market peak to bottom of 13.8 months.
  • Typical decline of about 20% in the first year.

The interesting additional data is that the two years leading up to the bear markets are, on average, the years with the biggest bull market gains. In the two years before the start of the bear markets, the S&P 500 climbed by an average 58% plus dividends. In the final year before the peaks, the average gain was 25% plus dividends. Comparing the numbers, even if you hold on through the average bear market, owning the stock averages for the two years prior to the start of the bear market leaves you with a larger portfolio value than if you had stayed out of the market and had perfect timing to get back in when the bear hit bottom. The not obvious lesson is that getting out too early can cost you more wealth than staying in through part or even all the bear market.

One feature of my dividend focused strategies is that they rule out the need to try to time when the next bear market or correction will start. I can more accurately predict dividend payments than I can swings in the stock market. My strategies focus on finding dividend stocks with a high degree of confidence in the ongoing dividend payments and buy those stocks to build a growing income stream. If the market declines into a correction or bear market, dividend earnings can be used to buy shares at lower prices boosting both the dividend stream and the capital gains when the market starts the recovery or next bull market. A dividend focused investment strategy allows you to take advantage of the proven techniques of dollar cost averaging and to buy low when fearful investors have panicked.

I recommend that income investors focus on building a portfolio of dividend stocks that balances high yield stocks with those where dividend growth is very predictable. Here are a pair of income stocks that illustrate this combination.

Hercules Capital Inc (NYSE: HTGC) is a business development company (BDC) that makes loans in in the venture capital space. Hercules client companies are growth businesses backed by venture capital investors that need additional capital to fulfil their growth and investment goals.

Loans from Hercules provide debt capital that does not dilute the equity holdings of investors and insiders. Hercules typically receives some sort of equity stake or warrant, so generates additional profits when a client company gets bought out or enters the public markets with an IPO.

This BDC has paid a steady, well covered by cash flow dividend for over five years. The shares currently yield 9.5%.

EPR Properties (NYSE: EPR) is a very well-run net lease REIT that has done a great job of growing the business and generating above average dividend growth for investors. With the net-lease (NNN) model, the tenants that lease the properties owned by EPR are responsible for all the operating costs like taxes, utilities and maintenance. EPR’s job is to collect the rent checks. Typically, NNN leases are long term, for 10 years or more, with built-in rent escalations.

EPR Properties separates itself from the rest of the triple net REIT pack by the highly focused types of properties the company owns. The EPR assets can be divided into the three categories of entertainment, comprised of movie megaplex theaters; recreation, including golf and ski facilities; and education which counts in its portfolio of properties private and charter schools, and early childhood centers.

EPR has generated superior returns for investors by growing its dividend an average of 7% per year for eight straight years. The shares yield 6.8%.

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Source: Investors Alley 

Uncategorized

7 Stocks Set for Monster Growth in 2018

With the market primed for success in 2018, I wanted to find stocks that go above and beyond the normal growth prospects. Here I looked for seven top growth stocks with huge upside potential and serious Street support. The best way to find these stocks is with TipRanks’ Top Analyst Stocks tool.

Why? Well, the tool reveals all stocks with a ‘Strong Buy’ rating from Wall Street’s best-performing analysts. You can then sort the stocks by upside potential to pinpoint compelling investing opportunities.

At the same time, I was careful to avoid stocks that have big upside potential simply because share prices have crashed recently. Check the price movement over the last three months to be sure shares are moving in the right direction.

With that being said, let’s get straight down into taking a closer look at these seven stocks — all of which I believe look undervalued right now:

Stocks With Top Buy Ratings: Cloudera (CLDR)

Big data cruncher Cloudera, Inc. (NYSE:CLDR) has upside potential of 27% say the Street’s top analysts. Currently, the stock is trading at $17.88 but analysts see it hitting $22.75 in the coming months. The stock has experienced some volatility in the last year, but it is now facing 2018 with a very promising setup. Indeed, in the last three months, shares have already improved 27%!

Abhey Lamba, a five-star Mizho analyst, notes that management has delivered results above consensus expectations in its first few quarters as a public company. He upgraded his Cloudera rating from “hold” to “buy” on Jan. 9. Here he explains why he is turning bullish on CLDR:

We can see from TipRanks that this ‘Strong Buy’ stock has 100% Street support. Indeed, in the last three months, CLDR has received five straight “buy” ratings, including an upgrade from Citigroup.

Source: Shutterstock

Stocks With Top Buy Ratings: Arena Pharma (ARNA)

Healthcare stock Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) has monster upside potential of almost 50%. Shares are already up 25% in the last three months. And now top analysts say the stock can leap from its current share price of $34.36 to $51.33.

Plus, it received three very recent “buy” ratings from top analysts all with bullish price targets.

The company’s development pipeline includes two important drugs: Etrasimod for chronic bowel disease Ulcerative Colitis (UC) and Ralinepag for Pulmonary Arterial Hypertension (PAH). William Tanner, a top healthcare analyst from Cantor Fitzgerald, is excited about both.

He says:

“We remain convinced that ralinepag could be a best-in-class treatment for pulmonary arterial hypertension (PAH)… Less well appreciated may be the potential of estrasimod, Arena’s S1P receptor modulator.” Arena is planning to release key Phase 2 data for estrasimod in 1Q18, and according to Tanner “positive data could create an opportunity for meaningful share price appreciation.”

Stocks With Top Buy Ratings: Dave & Busters (PLAY)

The hybrid game arcade and restaurant chain Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is set for a rebound in 2018. And that means big upside potential of 43% from the current share price. That would take shares all the way from $46 to $66.

However, Maxim Group’s Stephen Anderson is much more bullish than consensus. He believes the stock can soar to $83. This suggests massive upside potential of 79% from the current share price. Even though the stock has experienced some short-term sales volatility, he says that valuation remains very compelling.

The stock is ‘deeply inexpensive relative to Casual Dining Peers’ and ultimately: “Our core thesis on PLAY, which is comprised of; (1) high-margin entertainment revenue growth; (2) robust unit expansion; and (3) longer-term comp growth of at least 2%, remains intact.” PLAY should also benefit big-time from the upcoming tax reform.

In the last three months, PLAY has received an impressive eight consecutive “buy” ratings. As a result, the stock has a ‘Strong Buy’ analyst consensus. Out of these ratings, five come from best-performing analysts.

Stocks With Top Buy Ratings: CBS Corp (CBS)

Media stock CBS Corporation (NYSE:CBS) can climb a further 23% in the next 12 months say top analysts. This would see the stock trading at over $70 vs the current share price of just under $60.

Just a couple of days ago, on January 16, Benchmark’s Daniel Kurnos reiterated his “buy” rating. This was accompanied with a very bullish $78 price target (32% upside). “At just 9x 2018E OIBDA and 11x EPS, we believe CBS represents the best value in the network space” states Kurnos.

Reassuringly, Kurnos says “that the demise of Network ad revenues is greatly exaggerated.” He even says that this bearish talk is overshadowing “the positive traction CBS is seeing in its ancillary revenue streams.” The underlying business model is very strong and “the pressure on the media sector has created a buying opportunity for the content leader.”

Note that Kurnos is ranked as #210 out of over 4,750 analysts on TipRanks. Meanwhile, out of nine recent ratings on CBS, eight are buys. This means that in the last three months only one analyst has published a “hold” rating on the stock.

Source: Shutterstock

Stocks With Top Buy Ratings: Neurocrine (NBIX)

Over the last three months, Neurocrine Biosciences, Inc. (NASDAQ:NBIX) has already spiked by 29%. And top analysts believe this biopharma still has serious growth potential left to run in 2018. Specifically, the Street sees NBIX rising 33% from $76 to just over $100.

The Street is buzzing about Neurocrine’s Ingrezza drug. This is the first FDA-approved treatment for adults with tardive dyskinesia (TD). A side effect of antipsychotic medication, TD is a disorder that leads to unintended muscle movements. Oppenheimer’s Jay Olson is very optimistic about Ingrezza’s potential. He says:

“Ingrezza performance continues to overwhelm on several dimensions, and our observations suggest Ingrezza could become a pipeline within a drug that could unlock substantial unappreciated value to shareholders.” He even suggests this drug has ‘pipeline’ potential by expanding into similar disorders like Tourette Syndrome.

Encouragingly, the stock has received no less than 10 consecutive “buy” ratings from analysts in the last three months. Seven out of the 10 of these “buy” ratings are from top-performing analysts.

Sinclair Broadcast Group Inc (NASDAQ:SBGI)

Source: Shutterstock

Stocks With Top Buy Ratings: Sinclair Broadcast (SBGI)

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is one of the U.S.’s largest and most diversified television station operators. SBGI is already up 30% in the last three months. And top analysts see 25% upside potential ahead- with the stock due to get a big tax reform boost.

Indeed, Benchmark Capital has just named SBGI as one of its Best Ideas for 1H18. Five-star Benchmark analyst Daniel Kurnos says “We see SBGI as one of the best values in the entire media landscape.” He is eyeing $55 as a potential price target (40% upside potential).

According to Kurnos, Sinclair has multiple upcoming catalysts over the next six months. This includes the pending mega deal between Sinclair and Tribune. Sinclair is currently waiting for regulatory approval for the $3.9 billion takeover would give Sinclair control of 233 TV stations.

Top analysts are united in their bullish take on this ‘Strong Buy’ stock. In the last three months, five analysts have published buy ratings on Sinclair.

Source: Shutterstock

Stocks With Top Buy Ratings: Laureate Education (LAUR)

Laureate Education, Inc. (NASDAQ:LAUR) is the largest network of for-profit higher education institutions. This Baltimore-based stock owns and operates over 200 programs (on campus and online) in over 29 countries. Over the last three months, the stock is up 10%. But analysts say bigger upside of over 19% is on the way. Currently, this is still a relatively cheap stock to buy at just $15.26.

Furthermore, Stifel Nicolaus analyst Shlomo Rosenbaum notes that Chile’s election result is a “material positive” for Laureate. He says new President Sebastian Pinera is less likely to support legislation for free post-secondary education- the prospect of which has dampened prices to date. Rosebaum currently has an $18 price target on the stock (18% upside).

Overall, Laureate certainly has the Street’s seal of approval. The stock has scored four top analyst “buy” ratings recently. This includes a bullish call from one of TipRanks’ Top 20 analysts for 2017, BMO Capital’s Jeffrey Silber.

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Source: Investor Place

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.

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Source: Investors Alley

Options

Make 100% Or More On This Next Big Market Trend

One of the early financial market themes for 2018 is the renewed interest in commodities.  We’ve seen early gains so far in gold, oil, and natural gas, to name a few.  At least one of the drivers behind the buying is the expected increase in interest rates.

As a reminder, commodities are usually priced in dollars on a global scale.  As such, when US interest rates go up, it generally pushes down the value of the dollar and makes commodities more affordable on a relative basis (in non-dollar currencies).

Because interest rates are set to go higher this year – perhaps more than initially expected – commodities are starting to attract buyers.  If inflation is finally starting to rear its head, it means the Fed could be forced to raise rates faster than planned.  Commodities prices may or may not add to the acceleration of inflation, but they definitely experience increasing demand in periods of rising inflation.

It’s probably not a surprise, but traders may be positioning for a rise in commodities pricing.  The usually not-too-heavily-traded PowerShares DB Commodity Tracking Index (NYSE: DBC)had a fair amount of action last week, for example.

A trader looks to have purchased 10,000 April 17 calls for around $0.50, which the ETF trading just under $17 per share.  That’s a $200,000 bet that DBC will be at least $17.50 by April expiration.  The trade will generate $1 million for every $1 above the breakeven point.

Here’s the thing…

I’m not a big fan of DBC as a commodity tracking ETF and wouldn’t recommend emulating this trade.  It’s not that I disagree with the premise – in fact I do believe commodities are going to rally – but I’m not a fan of the instrument itself.

You see, DBC is supposed to track a broad-basket of commodities, but over 50% of the index weighting is based on energy commodities (mostly oil).  As such, the price of DBC is going to be heavily skewed by what happens in the energy markets.  My feeling is, if I want to have that much exposure to energy commodities, I’ll use a targeted energy ETF.

For a broad-based ETF, I actually want all the important commodities to be as equally weighted as is reasonable.  A much better product for this type of weighting is the iPath Bloomberg Commodity Total Return ETN (NYSE: DJP).

DJP doesn’t trade a lot of options, but it’s viewed as a good representative of the commodities market as a whole.  Energy commodities only have 30% weighting in DJP, which is in-line with the number of commodities it contributes to the index.  DJP does a better job of representing metals and agricultural products.

As I said, DJP doesn’t trade a lot of options, but it does have options listed.  If you’re bullish on commodities in general (as opposed to specific commodities) you could put on a DJP call spread in April for a reasonable price.

For example, the April 25-27 call spread (buying the 25, selling the 27) should only cost about $0.40 with the stock trading around $24.50.  That gives you a breakeven point of $25.40 with max gain of $1.60, and over 3 months of control.  With the options so cheap, you could conceivably generate returns of 300%.

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Source: Investors Alley 

Cryptocurrency

Bitcoin’s Not Dead

Stories about bitcoin dying have been written many times.

On Tuesday, there was one in The Atlantic titled, “Is This the Beginning of the End of the Bitcoin Bubble?”

This happens whenever bitcoin is down a nasty 20% in a day. The naysayers assume something very bad must be happening.

So even though bitcoin is still up 100% over the last three months and has done the entire boom-bust-boom cycle hundreds of times before, this time looks different. It looks scarier because it’s happening right now.

It’s in our nature to assume the sky is falling when something unexpected happens.

If you manage to hold crypto for long enough, that goes away.

Embrace the Dips

All the early crypto adopters were on buying sprees this week.

So when my mother-in-law texted me her condolences about bitcoin, I smiled and kept looking for bargains.

I don’t get upset when the prices of cryptos drop. That’s like yelling at the weather. Plus, only through these dips do we have the opportunity to buy cheap.

Once you really understand and appreciate what cryptocurrency is about, price shouldn’t matter that much.

It’s a bet on the future of money. That’s all I need it to be. No matter what happens to the price tomorrow, it will still be my wager – a hedge, of sorts.

Maybe if I had a larger crypto portfolio, these dramatic shifts would affect me more. But I don’t think so. I’ve talked with many crypto traders, and most of them feel the same way.

The global enthusiasm for crypto didn’t disappear overnight. It just fizzled for a moment due to a natural but significant sell-off.

You can’t kill off a movement this strong with a little negative price action and some scary headlines citing “possible government bans.”

Don’t get me wrong, governments are still the primary threat to cryptocurrency.

But cryptocurrencies present their own interesting dilemma for governments. If a government bans cryptocurrency, it is admitting that it fears for its own currency. It is telling its citizens that it decides what is best for them and their families.

So, naturally, governments will try to scare us into thinking cryptocurrencies are dangerous. The tools of criminals, hackers and worse.

We’ll have to stand up for our right to choose the currencies of our choice. It won’t be easy, but it’s a goal worth fighting for.

Good investing,

Adam Sharp
Co-Founder, Early Investing

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Source: Early Investing

Cryptocurrency, Technology

Where Is Blockchain Heading? Your Questions Answered

The talk around bitcoin, cryptocurrency and blockchain is getting silly.

This is because now that the mainstream business media has hold of the story, they’re desperately trying to fit it into past patterns. History may rhyme, but it never repeats.

The TV machine trots out so-called “experts,” employees of large companies and salesmen, who are just as clueless as you or I about what will happen. Instead, they trot out theories and talk analogies. It’s 1994 for blockchain, they say (maybe). They say some of the dot-com winners went on to great things — look at Amazon.com, Inc. (NASDAQ:AMZN) (name three more).

I was there. In 1999, I was an “e-commerce expert” with a six-figure paycheck. In 2002, I made precisely zero dollars. Same in 2003.

The truth is that almost every company we thought would be worth something in 1999 turned out to be worth nothing. It even took Amazon 10 years to get back to its 1999 price. If you were near retirement in 1999, you probably weren’t around to see it.

What about Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and Facebook, Inc.(NASDAQ:FB)? Google didn’t become public until 2004. Facebook didn’t exist in 1999. Apple Inc. (NASDAQ:AAPL)? The iPhone was still eight years away.

Forget first-mover advantage. Look for second-mover advantage — the guy who learns what the first mover is doing wrong and takes over from him (or her).

One of the more hilarious calls of the dot-com “experts” in the 1990s was to tell Yahoo! to stop focusing on mere “search” and become a “portal.” Buy GeoCities, they said. Buy Broadcast.com. Yahoo! did.

What we know, from history, is that first-mover advantage in the internet age wasn’t worth a thing. Even Bill Gates knew nothing. If you want to chuckle, read Gates’ 1995 “magnum opus,” The Road Ahead. He barely had a clue. And if Bill Gates didn’t have a clue in 1995, neither do you.

I’ll take your questions now.

Is bitcoin a bubble?

Yes.

Are the other alt-coins bubbles?

Yes.

Does that mean they’ll all be worth nothing in a year?

No, but most will.

Can I tell the difference, right now, between the winners and losers?

Not bloody likely.

What about ICOs?

You mean you want to buy something you can’t value, that’s completely unregulated, and that might be as phony as Bitconnect, which closed Jan. 17 after being accused (repeatedly) of running a Ponzi scheme? Have fun!

What about blockchain? Is blockchain like the internet in 1994? Is it going to create enormous value over the next 20 years?

Why, yes. It will also destroy millions of jobs, including high-salary jobs — especially for those in the business of making premature predictions.

How, then, do I get ready for blockchain?

The only stock I can recommend is Microsoft Corporation (NASDAQ:MSFT). The combination of blockchain and the cloud is the raw material from which a lot of great stuff is going to come. We just don’t know what it is yet.

If you want to go out on a limb, try some IBM (NYSE:IBM). It’s grabbing on to blockchain like a dying man grabs for a cancer cure. It also has cloud-related business. Maybe something will come of it.

Beyond that, understand what blockchain does, and in the future, look for companies that prove an ability to make markets with it.

Here is all you really need to know.

Blockchain automates trust.

It does this by encrypting each block of a database, organized as a general ledger. Buyers and sellers can be tied to transactions, bids and asks, without being identified until after the deal is done, if then.

All that paper you shuffled to get a car loan or a mortgage and all those forms you filled out at a doctor’s office or for the government? They’re just blocks in a chain. We can find them, we can refer to them, and we can make them legally enforceable so you never need to fill out a form again.

Let that help you get to sleep at night.

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Source: Investor Place

Technology

These Five Startups Shine Brightest at Vegas Tech Show

Why go to Vegas?

I don’t gamble.

And I’m not into seeing past-their-prime performers like Celine Dion or the Righteous Brothers command the stage.

For me, there’s only one reason…

To get a peek at some of the amazing technology on display at the Consumer Electronics Show (CES).

The massive exhibition attracted 1,200 exhibitors and 185,000 visitors. Adam and I went there last week as guests of Indiegogo and its co-founder Slava Rubin and CEO David Mandelbrot.

The company had one of the bigger booths among the 800 companies at the Eureka Park venue in the Sands Expo halls. Eureka Park, by the way, is reserved for startups only.

Over a sumptuous dinner one evening, Slava told us that an increasing number of visitors to the Indiegogo site are interested in buying equity stakes in companies. Until recently, Indiegogo offered only perks and rewards.

It’s always a positive to welcome aboard a company of Indiegogo’s stature and success. Indiegogo is a true crowdfunding pioneer. Over the past 10 years, it has raised $1.3 billion for 800,000 entrepreneurs.

So why is the company reaching out to us?

Because Indiegogo sees a similar opportunity in equity crowdfunding. The fact that it’s partnered with MicroVentures, a highly regarded equity funding portal and one of our favorites, will make it even easier for us to work with it to find high-quality startup deals.

Tooling around Eureka Park, I saw a number of impressive products. I suspect some of them will end up raising via Indiegogo/MicroVentures.

Below are the five that stood out the most to me. Keep in mind that while I found their technology fascinating, whether they evolve into successful businesses is another matter. As such, don’t construe what follows as investment recommendations.

Aris MD: The things you learn at CES! The co-founder of Aris, Chandra Devam, told me my kidney and lungs are different from yours in shape, location and pathology (or just plain wear and tear). Surgeons aren’t really sure where to cut. They have a general idea, but that’s it. Aris’s virtual reality /augmented reality technology takes a diagnostic image – an MRI, for example – and lets the surgeon practice in immersive reality before the surgery.

Aris MD’s Goggles

Source: Aris MD

I put on these goggles at its booth. And, with a little help, I extracted a person’s brain. What came into view was a 3-D image floating right in front of me. There was no tumor, but if there was, I would have been able to see its true shape, size and depth. Amazing.

Robomart: Imagine tapping a button on your phone and in five minutes, a vehicle packed with fresh food items stops in front of your house. No driver or human to be seen. No cash register to bother with. No money exchanged. You simply take what you want and you’re automatically debited. This will be the model competing with Uber Eats and Amazon’s Whole Foods hookup – not just an order, but a range of selections from the entire food store coming to you.

A Robomart delivery vehicle

Source: Business Insider

Hologruf: It’s 3-D, portable and easy to install. Hologruf’s hologram system projects signs and displays that float in midair.

Imagine you’re in an auto dealership and the car drives right up to your seat as a hologram. Hologruf wants to make that a reality. Seeing its holograms up close, I can attest to their outstanding quality.

BLOCKS: You’re familiar with building your own pizza or hamburger… but how about your watch?

It makes perfect sense. Smart watches can now do so many things, BLOCKS founder Omer El Fakir told me it makes no sense to manufacture a one-size-fits-all watch anymore. With BLOCKS, you start off with a core that has smartphone notifications, fitness tracking, Alexa personal assistant and other features…

And go from there.

You can add functions by buying individual modules. For some, that may mean a fingerprint sensor module. For others, an air quality monitor module. Or perhaps all you want is an extra battery module.

My favorite module? Probably the flash memory, which keeps your data safe and close by.

The core costs $259. The modules cost between $30 and $40 each. Would you buy one? I’m tempted.

Olli: Branded as the world’s first 3-D-printed car and first self-driving car to incorporate the artificial intelligence capabilities of IBM Watson, Olli is the brainchild of Local Motors. I took a tour while taking on the persona of a near-blind person. As I entered the vehicle, it told me where I could find a free seat, alerted me to my stop and gave me directions to my destination when I left the vehicle.

An Olli 3-D-printed car

Source: Local Motors

Olli has gone through several iterations and is still under development. The company has scheduled several deliveries for mid year, when the Olli team will be monitoring how it performs in different environments and use cases.

It wasn’t easy picking my top five. There were many others I also liked. Hopefully, down the road a bit, I’ll be seeing a couple of these companies on crowdfunding sites.
Technology is just part of the equation of what makes a startup successful in the long run. But developing exciting technologies that also address real needs gives these companies a leg up out of the gate.

It doesn’t get any easier. But having talked to dozens of founders at the show, I think they know that already.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Source: Early Investing 

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