Monthly Archives: January 2018

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Mega Trends Will Deliver Huge Gains in 2018

“This is an aging bull market. A crash is coming.”

“This bubble market fueled by the Fed is going to crash.”

“Trump’s going to cause the market to crash.”

For nearly all of 2016 and most of 2017, investors have been reading these kinds of headlines.

When I joined Banyan Hill, my first article, “Stocks: The Big Opportunity You’re Missing,”made many investors so angry that they wrote my publisher asking him to have me fired.

In that article, I told you that stocks were a good deal. And I told people that they should be buying stocks instead of panicking and selling them.

 Congratulations!

My suggestion to readers was to simply buy the SPDR Dow Jones Industrial Average ETF (NYSE: DIA).

If you were one of the readers who bought this exchange-traded fund, you are now up 65%. Well done and congratulations!

These are the best stocks to invest in this year because they follow the business mega trends that will lead to huge gains.

You deserve this because I know how hard it can be to buy when the markets are down.

It also took a lot of guts on your part to buy when most people told you to sell.

Those gains were hard-won by you.

But now that buying stocks is no longer scary, you might be wondering if it’s time for you to cash in your hard-won gains and sell everything.

 My GoingUpness System

For sure, stocks are a more popular trade than when I told you to buy in February 2016.

After all, the Dow Jones Industrial Average was up 28% in 2017 alone.

However, 2017’s large gains mean there’s a good chance that 2018’s gains will be smaller. My best guess is something like 8% to 10%, perhaps as high as 15%.

The way I come up with this estimate is by using my GoingUpness system. GoingUpness is the system that I use to pick stocks in my three paid services.

The GoingUpness system is based around the potential demand and supply for stocks. GoingUpness focuses on the most important benefit of owning shares: a rising stock price.

After two years of gains, my GoingUpness system says that at higher prices there are fewer people who are going to come in to buy stocks than in 2016 or 2017. That also means you’ll see some periods where some people cash in and sell.

The bottom line: Less demand and more supply means that you’re going to see smaller gains in 2018.

 A Focus on Mega Trends Reveals the Best Stocks to Invest In

However, for certain segments of the market, like the ones I focus on in my paid services, I believe we’ll see much higher returns.

The reason for that is because these stocks are going to be experiencing more growth. More growth means more demand for their stocks and bigger gains.

This is why readers in my Profits Unlimited  service have seen gains of over 200% in the Internet of Things (IoT).

Nearly every stock in the Profits Unlimited portfolio is up today. And I fully expect that we’ll see more big winners in 2018.

The reason for these gains, I believe, is a focus on mega trends like the IoT, precision medicine and the millennial generation.

And in 2018, we’ll add new trends:

  • Financial technology, or fintech (which includes using technologies like blockchain, mobile payments, peer-to-peer lending and artificial intelligence agents).
  • New energy (which includes natural, sustainable, renewable energy, lithium- and hydrogen-based energy sources, and portable, storable and local sourcing).

This focus on mega trends is the reason why I believe Profits Unlimited stocks are going to keep outperforming. And their contributions to market indices like the Dow and the S&P 500 are the reasons why I expect the overall market to keep going up.

That means while stocks are still a good bet for your money, the big mega trends like the ones in Profits Unlimited are going to be an even better bet for your money in 2018.

Regards,

Paul Mampilly
Editor, Profits Unlimited

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Source: Banyan Hill

Dividends

3 Closed End Funds to Greatly Benefit from Lower Corporate Taxes

t will take some time for investors to figure out all the investment related ramifications of the new income tax rules. Master limited partnership (MLP) focused funds are one asset class that will see a major benefit from the tax overhaul. Because they are forced into a different business structure, a fund with MLP assets of more than 25% will get the benefit of the corporate income tax reduction from 35% down to 21%. It’s a big deal.

The typical stock funds, including mutual funds, exchange traded funds (ETFs), and closed-end funds (CEFs), are formed and operated as Registered Investment Companies. The Investment Company Act of 1940 allows a fund to operate as a pass-through entity. This means the fund must pay out all portfolio income and realized capital gains as distributions to the fund investors. The fund does on pay income tax on the portfolio earnings. The tax characteristics of the income and capital gains are passed through to the fund investors.

The exception against a fund being able to operate as a registered investment company is if the fund’s portfolio holds more than 25% of its assets in MLPs. If that is the case, the fund will instead be organized as a C corporation and be liable to pay corporate income tax on the portfolio’s income and capital gains. Most of the MLP focused mutual funds, ETFs and CEFs have more than 25% MLP holdings and are organized as corporations.

In practice, here is how the corporate income taxes affect the returns of an MLP fund. Individual MLP distributions are classified as return of capital, so the dividends earned by MLP fund investors are typically mostly ROC. Profits and losses at the MLP level are reported to the fund on a Schedule K-1, and the fund will pay corporate income tax on profits or accumulate credit for the K-1 losses. If the portfolio’s MLPs go up in value, a fund will also occur an income tax liability on the capital gains. MLP funds account for the income taxes on gains in the fund net asset values (NAVs). The NAV is what each share is worth. Actual paid income taxes show up in a fund’s expense ratio. Which is why you sometimes see very high expenses reported by the MLP funds.

The corporate tax rate reduction will result in lower tax expense, and higher net returns for MLP fund investors. Consider this example. The MLPs in a fund’s portfolio go up by 10%. With a 35% corporate tax rate, the fund will have to account for the tax liability in the fund’s NAV, which means the share value will only go up by 6.5%. With the new 21% corporate tax rate, the hit to NAV will be lower, and the share value will go up by 7.9%. The new, lower corporate tax rate means that MLP fund investors will see over 20% higher gains when MLPs are rising compared to the 35% tax bite. The lower tax rate has already started to help MLP fund values. On December 26, the First Trust MLP and Energy Income Fund (NYSE: FEI) announced a NAV adjustment due to the fact it could lower the accrued tax obligation in the fund’s portfolio. The FEI share price was instantly increased by $2.016 or 8.75%. A good deal for investors. The adjustments for taxes on past gains will be one-time benefits for shareholders. However, the new corporate tax rate will provide ongoing increased profits as MLP values rise in the future. After a 2 ½ bear market, the MLP sector fundamentals are solid and with rising crude oil price, I expect the sector to do well in 2018.

Here are the three largest MLP closed-end funds. They all provide professionally managed exposure to the MLP sector.

Kayne Anderson MLP Investment Company (NYSE: KYN) has $3.25 billion in assets. The fund currently trades at a 1.5% premium to NAV and yields 9.5%.

Tortoise Energy Infrastructure Corp. (NYSE: TYG) has $2.1 billion in assets. The TYG share price is at a 3.4% premium to NAV. The fund yields 9.1%.

ClearBridge Energy MLP Fund Inc (NYSE: CEM) is a $1.6 billion assets fund. The CEM shares are currently at a 3.5% discount to NAV. This fund yields 9.5%.

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Source: Investors Alley

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Hot Start to 2018 Pushes Markets Higher

U.S. equities pushed confidently higher on Tuesday, the first trading day of the new year, resulting in the best kickoff for the tech-heavy Nasdaq since 2013. Bitcoin was hot. Gold well bid. But bonds were slammed, pushing up yields, in a possible sign that inflation and economic growth expectations are rising and will put further pressure on the fixed-income market.

In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 gained 0.8%, the Nasdaq Composite gained 1.5% and the Russell 2000 gained 0.9%. Treasury bonds declined, the dollar weakened again, gold gained 0.5% for its eighth consecutive gain and crude oil lost 0.1% after a run of strength.

Energy stocks led the way, in what could be possible sector rotation as crude oil tests above the $60-a-barrel threshold for the first time since 2015. Utilities were the laggards on yield pressure, falling 0.9%.

Netflix, Inc. (NASDAQ:NFLX) gained 4.8% after being upgraded by analysts at Macquarie noting changing consumer preferences to ad-free television and the impact of a second round of price increases. Citigroup analysts believe there is a 40% chance the company is acquired by Apple Inc. (NASDAQ:AAPL).

Nordstrom, Inc. (NYSE:JWN) gained 3.7% on an upgrade at JPMorgan on expected tailwinds from stock market gains and tax cut stimulus. On the downside, Sirius XM Holdings Inc. (NASDAQ:SIRI) lost 2.9% on a downgrade from JPMorgan on increased royalty costs.

On the economic front, the Market U.S. Manufacturing PMI came in slightly better than the flash reading, indicating the strong pace of factory activity in 11 months. Job growth was at the strongest since September 2014. And Eurozone activity increased to its best level since the survey began in June 1997.

Conclusion

With the books closed on 2017, the die has been cast: It was a record year, with stocks rising on a total return basis in each and every month for the first time in history.

For now, the consensus on Wall Street is that the uptrend will continue.

Goldman Sachs is looking for “rational exuberance” in 2018 on a combination of strong GDP growth, low and slowly rising interest rates, and profit growth driven by the recently passed GOP tax cut legislation. JPMorgan says investors should “Eat, drink, and be merry” in the new year on higher consumer spending and an even tighter labor market.

The latter, courtesy of strategist Michael Hartnett, fears a 1987/1994/1998-style “flash crash” within the next three months caused by rising interest rates.

Checking in with seasonality, the folks at the Almanac Trader note that January has had a volatile reputation since 2000, with 10 of the last 18 years featuring nasty declines starting with the 5.1% pullback that kicked off the dot-com collapse. January 2009 featured a 8.6% loss that was the worst January on record going back to 1930.

Mid-term election year performances were also tepid, as shown above. SentimenTrader notes that options traders are betting heavily on a spike in volatility in the coming weeks. And these folks tend to be right at extremes.  

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Source: Investors Place

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3 Threats to Amazon You Must Own Today

I love it when a plan comes together.

In early November, I wrote about Brazil’s airplane maker, Embraer (NYSE: ERJ), and its promising lineup of defense and civilian aircraft manufacturing contracts.

Separately, in December, I said: “If you’re looking for the best place to invest in 2018, one of your best bets is to put on your investment banker’s hat and bet on ‘M&As’ — mergers and acquisitions.”

Both predictions converged just before Christmas. Embraer’s shareholders reaped an instant 30% windfall when Boeing announced it was in talks for a “potential combination” with the company.

It’s not a done deal, of course.

As Embraer’s largest shareholder, Brazil’s government may only want to sell a big piece, not the entire company. Or perhaps it demands onerous financial terms.

But the point is, in a wide swath of industries — not just aerospace, but pharmaceuticals, chip manufacturing, packaging, chemicals, consumer goods, media, telecommunications and more — the game of M&A “musical chairs” is already underway.

And no one wants to be left without a seat when the music stops.

Amazon Competitors to Invest In

Another sector where I expect to see a lot of M&A activity this year? The U.S. retail sector.

A major theme I expect to emerge this year are Amazon competitors pairing off with the goal of better competing against Amazon.com Inc. (Nasdaq: AMZN).

For instance, eBay Inc. (Nasdaq: EBAY) is a likely buyout candidate.

A major theme I expect to emerge this year are Amazon competitors pairing off with the goal of competing better against Amazon.com.

Potential buyers? Google, among many possible suitors. It desperately needs an internet retail arm of its own if it wants to go head to head as one of the Amazon competitors.

EBay, as one of the most venerable internet retail brand names, and with an existing network of fulfillment warehouses, would be a good place to start.

The Kroger Co. (NYSE: KR) is another buyout possibility for Amazon competitors. Its stock is down 35% from last year’s highs owing to worries about whether it can compete with Amazon — an overblown fear as far as I’m concerned.

The grocer has nearly 3,000 stores around the U.S. Its success in selling organic foods is a major reason Whole Foods leaped into the arms of Amazon to begin with.

Kroger is no laggard in “retail tech” either — a few days ago, the chain said it will roll out “cashierless” checkout technology in its stores this year.

W.W. Grainger Inc. (NYSE: GWW) is yet another candidate for a merger deal, in my opinion.

Grainger isn’t usually thought of as a retailer. It’s considered an “industrial supply” business, selling everything under the sun — cleaning products, paper clips, shelving systems, you name it — to other businesses.

Like Kroger, the stock was knocked down last year as investors fled in fear of Amazon. But Grainger’s network of warehouses and distribution centers are ready-made assets for any company hoping to “bulk up” and compete effectively against Amazon.

Best of all, these three companies aren’t fixer-uppers. They’re already successful, profitable companies.

Together, they’ll report $15 a share in profits in 2018. Two of the three pay dividends of around 2% as well.

Kind regards,

Jeff L. Yastine

Editor, Total Wealth Insider

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Source: Banyan Hill