3 Robot Stocks To Buy And Hold For The Long Term

The robot revolution is here.

Right now, everyone is buzzing about artificial intelligence, automation, and robotics.

Amazon.com, Inc. (NASDAQ:AMZN) is trying to pioneer an era of cashier-less stores in the United StatesAlibaba Group Holding Ltd (NYSE:BABA) and JD.Com Inc(ADR)(NASDAQ:JD) are trying to do the same in China. Amazon is also automating its warehouses — and so is JDAlphabet Inc (NASDAQ:GOOGL) is making huge strides in the automated driving space. The fast food industry is rapidly moving towards automation.

Indeed, everywhere you look, there are signs that the robots are coming.

Is your portfolio prepared for this forthcoming robotics revolution?

Here are my three favorite robot stocks that are solid holdings for a long-term oriented investor

2.) iRobot Corp.

The company behind the mega popular Roomba vacuum, iRobot Corporation (NASDAQ:IRBT) is the undisputed king of the robotic vacuum world.

Although some IRBT bears have been concerned about rising competition, the company has successfully deflected those concerns en route to consistent 20%-plus revenue growth every single quarter.

And that is expected to continue over the next several years.

iRobot plans on launching several new products in 2018, thereby growing its reach in the consumer robotics world. Rumors are that a robotic lawnmower is in the works. Then, there will likely be a robotic window cleaner, a robotic surface cleaner, a robotic trash remover… the list of potential new products goes on and on.

Therefore, IRBT is the best of the robot stocks to buy for a pure-play on the whole consumer robotics market. This is a market projected to grow at a 20%-plus rate into 2023, meaning that IRBT’s revenue growth should remain in excess of 20% over the next several years.

Meanwhile, gross margins continue to grow despite the emergence of lower-priced competitors. Gross margin resiliency speaks to IRBT’s dominance, and illustrates that the company has powerful long-term margin drivers in place.

Altogether, this is a 20%-plus revenue growth narrative with strong margin drivers, implying earnings growth prospects in excess of 25%. But IRBT stock trades at just 28-times forward earnings, implying a price-to-earnings/growth (PEG) ratio of 1.1 The market is at a PEG of 1.2, so not only is this a promising growth stock, but its also an undervalued growth stock.

2.) Intuitiive Surgical Inc.

Just like iRobot is the undisputed leader in the secular growth consumer robotics space, Intuitive Surgical, Inc. (NASDAQ:ISRG) is the undisputed leader in the secular growth surgical robotics market. At the heart of ISRG is the da Vinci surgical system, which is essentially an exceptionally-precise robotic doctor’s arm in the operating room.

The da Vinci system has been a huge success. Global procedures grew by 16% last year, while shipments rose 27%. Moreover, growth accelerated towards the back half of the year, implying that the da Vinci system is still gaining momentum. Global procedures grew by 17% last quarter, while shipments rose a whopping 33%.

These da Vinci systems are big and costly machines. But they are also exceptionally valuable. And there really isn’t any major rival in the market. So ISRG has flexibility with pricing, which translates into big gross margins. ISRG currently operates at gross margins slightly north of 70%, and that is where they have been for several years.

Given tremendous pricing power and lack of stiff competition, there aren’t any signs of margin compression on the horizon.

But the ISRG growth narrative is more than just the da Vinci system. Robots are taking over medical rooms. This is a secular growth market that is expected to grow at a 20% clip over the next 8 years. That means ISRG’s big growth is here to stay for the long term.

The one knock on ISRG stock is that its expensive. Even if earnings growth over the long term does stay at 20%, ISRG stock is trading at a rather rich 43-times forward earnings. That gives the stock a PEG of more than 2.

But the balance sheet is rock solid, the moat is huge and the addressable market is larger. That feels like enough to justify the rich valuation. Consequently, ISRG stock should continue to trend higher as the surgical robotics market continues to grow.

3.) Cognex Corp. 

As it turns out, robots have to see, too. That is where machine vision comes into play. Machine vision is the technology which gives machines “eyeballs” for automated inspection and analysis.

The leader of this market is Cognex Corporation (NASDAQ:CGNX). Cognex has been around for a while (almost 40 years), but growth has been booming recently thanks to a surge in integration of vision-guided robotic systems across multiple industries. As it relates to Cognex, the three biggest industries are consumer electronics, automotive and logistics. All of these posted double-digit growth last year.

CGNX just reported a record year for revenues and profits. Revenue surged 44% higher while operating margins expanded 400 basis points.

This growth will inevitably slow, but its not going to zero anytime soon. The machine vision market, led by a surge in vision-guided robotic system usage, is expected to grow around 10%per year into 2025. But CGNX is the market leader and has higher exposure to the high-growth segments of the market, like automotive. Its no wonder, then, that CGNX revenue growth is pegged in the low- to high-teens range over the next several years, along with expected earnings growth of 27%.

But CGNX stock trades at just 37-times forward earnings, implying a PEG ratio of 1.4. That is pretty good for a hyper-growth robotics stock. Its also pretty good for a company with a cash-heavy balance sheet, a bunch of share buybacks in the pipeline, and a solid dividend.

Overall, CGNX stock looks like a long-term winner.

As of this writing, Luke Lango was long IRBT. 

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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.
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Source: Investor Place 

A Simple Way to Assess Startup Risk

Dear Early Investor,

Startup valuations are tricky.

This is due to the difficulty of assessing illiquid young companies with measly track records but exciting technologies and/or business models.

But you still have to pay attention to them. Why?

The valuations you begin with heavily influence the profits you end up with.

Which is why I always ask founders what their company’s valuation is… and how they arrived at it.

The wrong answer – an inflated valuation – is a deal breaker.

Enter the Berkus Method

Last Friday, I was talking to a founder who was telling me why his social engagement company was such a great investment.

Its value? “Five million dollars,” he said.

The startup was pre-revenue. And it was ramping up downloads at an impressive rate.

When I asked him how he arrived at a $5 million valuation, he said he used the “Berkus Method.”

I’ve heard of the DCF method, Risk Factor Method, Scorecard Valuation Method, Comparable Transaction Method, First Chicago Method and Venture Capital Method.

But the Berkus Method?

That was a new one.

When the founder explained it to me, it sounded pretty simple. Rather elegant, actually.

But I needed to know more. A company’s valuation is too important to depend on somebody’s two-minute explanation.

So I did some digging.

And you know what? The Berkus Method is worth knowing.

It’s a four-factor valuation formula. These same factors also give you a nice framework to assess the investment opportunity in terms of current risk and chances of future success.

This is what I found out…

Version No. 1

Dave Berkus created the first version.

Dave is a startup investor and author. He came up with his method in the mid-1990s, he said, to “help with the imprecise problem of how to value early-stage companies.”

His method gained prominence when it was published in the book Winning Angels in 2001.

It identifies four major risks that startups face: technology, execution, market and production. A startup can be credited in each of these areas with a maximum of $500,000 for reducing risk.

Plus, the startup automatically gets $500,000 for the idea itself.

If it earns a perfect score, its valuation tops out at $2.5 million.

Here’s the Berkus Method summed up in a chart…

Version No. 2

In 2005, Berkus’ method was tweaked by Alan McCann. He visualized the Berkus Method this way…

McCann replaced technology risk with investment risk and replaced production risk (making a product) with development risk (developing a product).

He also added the cohort responsible for each. “A nice touch,” Berkus said.

Its Current Use

The Berkus Method is meant for pre-revenue companies.

In the mid-1990s, when the method was created, that mostly meant seed companies.

Times have changed, though.

Nowadays, seed-stage companies usually generate revenue.

Used to determine seed valuation, the methodology yields valuations that are too low.

In a November 2016 blog post, Berkus agreed. He said that his method should create valuations that users “are willing to accept in a perfect situation.”

In our First Stage Investor portfolio, the lowest startup valuation is $2.7 million. That startup – Court Innovations – is one that Adam and I consider a huge bargain.

Most of our seed company valuations fall between $4 million and $10 million.

The Berkus Method is best suited for pre-revenue, pre-seed companies.

Take, for example, the founder I was talking to last week. He used the Berkus Method pre-seed. He was seeking his first angel investments and used the max $2.5 million valuation.

Now he’s raising again – in a seed round. And he’s upped the valuation to $5 million based on the progress his company has made in the four risk areas Berkus identified as key.

Rather than have each category be worth $500,000, he doubled them.

Sounds about right to me.

Valuations Matter

Progress and valuation: Alone, they’re impossible to decipher.

Taken together, one gives meaning to the other.

Nice progress at an exorbitant price isn’t a great investment.

A good price for mediocre progress isn’t such a great deal either.

Berkus says his valuation method only works if the startup reaches at least $20 million in revenue within five years.

Let’s say, conservatively, that this translates into a $100 million company (five times revenue).

That would place the startup in the upper third percentile of exit valuations. Two-thirds of startups do worse…

What can a $20 million-in-revenue company do for you?

If you invested in the company at a $2.5 million valuation, your profit would be 40X without dilution and roughly 20X including dilution.

Remember, only one out of three of your holdings would reach at least $100 million.

In a portfolio of nine holdings (to keep the math simple), with one out of three of your holdings reaching at least $100 million, you’d have three big winners.

If you invested $1,000 in each holding (again, keeping the math simple), you’d net a minimum of $51,000 for a portfolio of startups that cost you $9,000.

That’s nearly 7X in profits – or more.

At a $5 million valuation (which I think is more realistic), your total return would be cut in half. The profits from your three winners would go from 20X each to 10X each (counting dilution).

That’s exactly what Berkus had in mind. He said…

There is no question that startup valuations must be kept at a low enough amount to allow for the extreme risk taken by the investor and to provide some opportunity for the investment to achieve a 10-times increase in value over its life.

I agree.

Extreme risk should beget extreme rewards.

The math says when it’s used to invest at the right valuations, the Berkus Method does just that.

Invest early and well,

Andy Gordon
Co-Founder, Early Investing

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Source: Early Investing 

A High-Yield Stock That’s Better at 15% Than One at 20%

Last week I hosted an online session for my Dividend Hunter newsletter subscribers with InfraCap co-founders Jay Hatfield, CEO and Portfolio Manager and Edward Ryan, CFO and COO. During the hour long discussion we covered MLP investing and the changes to the high-yield InfraCap MLP ETF (NYSE: AMZA).

In January, AMZA announced a dividend policy change, going from quarterly to monthly and reducing the overall annual rate. As a result, the AMZA yield went from over 20% down to 15%. The move will benefit investors in the long term, but I wanted to get Jay and Ed in to discuss the different aspects of managing AMZA with my newsletter subscribers. The following is from my notes on the session.

The discussion started with details on valuations in the MLP space. It was shown on the presentation slides that compared to historical values the MLP yield and yield spread over BBB rated bonds are relatively high, which indicates MLPs are undervalued on historical standards.

The yield for the Alerian MLP Infrastructure Index (AMZI) is just under 8%, while REITs are yielding about 4.7% and utilities are at 4.0%. The slides on Enterprise value (EV) to EBITDA and Debt/EBITDA show that MLPs have as a group fixed their financial issues that caused business stress when energy prices crashed in 2015.

I asked Jay to discuss why he liked Energy Transfer Partners LP (NYSE: ETP) as the largest holding in the InfraCap MLP ETF (NYSE: AMZA). He discussed how ETP had become undervalued due to mechanical selling. When ETP merged with Sunoco Logistics, ETP was suddenly overweight in index tracking MLP funds. These index funds were forced to sell ETP to become balanced with the MLP indexes they are committed to mirror. Then Alerian put a 10% weighting cap on MLPs in the AMZI, and funds tracking that popular MLP index were again forced to sell ETP units to stay in line with the index weightings. The result is that Jay believes ETP with its 12% yield is very undervalued and has lots of upside potential from here.

We discussed the fact that MLP market values are highly influenced by the swings in energy commodity prices, especially crude oil. At the same time, both crude oil and natural gas production in the U.S. continue to grow.

Crude oil production growth is decreasing the need for oil imports and the increase in natural gas is being absorbed by the shift to gas to produce electricity, new chemical plants being built in the U.S. and the recent launch and growth of LNG exports. These charts show the production growth. It is this growth that produces the revenue growth for midstream MLPs. It was noted that MLPs increased distributions by 1.5% for the 2018 first quarter, which puts the sector on path for 6% annual distribution growth.

Now to the topic I think most want to hear about, the AMZA dividends. Ed and Jay discussed how during the last year, they were getting large purchases of new shares just before the ex-dividend date. As a result, they would have to immediately pay out some of the new capital as dividends. This left less capital to invest in MLPs to support the future dividends on new and existing shares.

With MLP values declining in 2017 it became very difficult to support both the dividend rate and the NAV (share value). Despite the challenges, AMZA did outperform the AMZI in 2017. The new dividend rate of $0.11 per share and monthly payment are intended to both continue to pay a very attractive yield and allow the NAV to grow.

The new dividend rate gives AMZA a 15% yield. The distributions from MLPs owned by the fund account for the first 10% and the fund’s call selling program will bring in the other 5%. Jay expressed confidence the management team could produce 5% cash flow from option selling and still grow the NAV when MLP values move higher. Ed and Jay also noted that the 5% figure will stay the same as the NAV increases. This means that if AMZA moves up to $10 or $12 per share, they will be able to generate higher cash per share from the options program. This fact plus the distribution growth in the MLP sector gives the potential for future dividend growth from AMZA. Nothing was predicted, and much is dependent on MLP values.

Taxes on dividends were discussed. Since MLP distributions are classified as non-taxable return of capital, the two-thirds of the AMZA dividend from the MLP distributions will be ROC. The one-third from the options selling program will come through as qualified dividends. Ed noted that future dividends should end up close to the two-thirds/one-third tax characteristics with the new dividend program. About taxes, Ed noted that the new tax law and lower corporate income tax rate provides a higher relative benefit to MLP funds compared to individual MLP investments.

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Source: Investors Alley 

2 Construction Stocks to Buy Even if Trump’s Infrastructure Plan Never Happens

Once again President Trump has brought to the fore the sorry state of infrastructure in the United States, which is the end result of decades of neglect from governments on all levels.

A White House report said, “Our infrastructure is broken. The average driver spends 42 hours per year sitting in traffic, missing valuable time with family and wasting 3.1 billion gallons of fuel annually. Nearly 40% of our bridges predate the first moon landing. And last year, 240,000 water main breaks wasted more than 2 trillion gallons of purified drinking water—enough to supply Belgium.”


The report did not exaggerate. You need to look no further than the 2017 report card on infrastructure from the American Society of Civil Engineers (ASCE). It gave an overall grade of D+ for U.S. infrastructure, continuing the persistent D grades seen since 1998.

This is a serious matter if we want to have a 21st century economy. As the ASCE report stated, “The cost of deteriorating infrastructure takes a toll on families’ disposable household income and impacts the quality and quantity of jobs in the U.S. economy.” This is a true statement because infrastructure effects how efficient and productive companies are, which in turn effects the country’s GDP.


The ASCE report estimated that through 2025, every U.S. household will lose $3,400 a year in disposable income thanks to infrastructure deficiencies. As a whole, the ASCE estimate is that the U.S. economy will lose almost $4 trillion in GDP by 2025.

Trump’s Infrastructure Plan: All Hat, No Cattle

The problem is that to fix our country’s infrastructure woes a lot of money will be needed. And that’s where the President’s proposed plan falls down.


The target for his infrastructure plan has been raised to $1.5 trillion, but the federal government will only kick in $200 billion over a 10-year period. In Texas, they would call that plan “all hat and no cattle.” Keep in mind that we have an almost $5 trillion shortfall in infrastructure, according to ASCE. Apparently, the days of federally-funded projects like the Hoover Dam and the interstate highway system are long gone.

One major flaw in the Trump plan is that it expects greatly increased contributions from cash-strapped cities and states. These entities already furnish the bulk of government spending on infrastructure, including three-quarters of the national spending on transportation and water systems.

States’ ability to borrow what’s needed to fund very large, multi-decade infrastructure projects is limited. And most states will be wary of raising taxes, since the Trump administration’s new tax plan limits the ability to deduct local and a state taxes from federal tax bills.

But what about the much talked about public-private partnerships?

Private Equity Says Fuhgeddaboudit

The Wall Streeters sitting of hundreds of billions for infrastructure investments gave Trump’s plan a cold reception. And it’s not just because of doubts about the politicians on the local and national levels.

FYI – there was a record $33.7 billion raised last year for North American infrastructure investments. The total since the end of 2015 is about $70 billion.

Infrastructure fund managers are mainly looking for assets that are already privately owned, such as railroads, utilities and pipelines. They are little interested in the deteriorating government-owned infrastructure like roads and bridges. And to the extent they are interested in publicly-owned infrastructure, their focus is much more on the privatizing of existing infrastructure rather than on new development – the core of Mr. Trump’s push.

As pointed out by the Wall Street Journal, one prime example is the Blackstone Group L.P. (NYSE: BX). It has plans to raise as much as $40 billion (not included in the previous figures) for U.S. infrastructure investments. But a mere 10% will be devoted to public infrastructure assets. The story is similar with almost all infrastructure funds.

Infrastructure Investments

Despite our country yet to get its act together on infrastructure, it still can be a good sector for you to invest in. You just have to pick and choose carefully. Here are two examples.

The company at the top of my infrastructure investment list has to be Caterpillar (NYSE: CAT), the world’s leading manufacturer of construction and mining equipment. It also makes diesel and natural gas engines as well as industrial gas turbines.

A big plus is that Caterpillar is truly a global company with more than half its sales generated outside the U.S. In its latest quarter, CAT reported a 34% rise in sales globally, with strength across all regions. This was a level last seen in August 2011. The company specifically noted that in North America the gains were led by construction. Adjusted earnings surged 160% in the quarter.

As of the end of fiscal 2017, Caterpillar’s order backlog was at $15.8 billion, driven by higher backlog in its resources-related industries business. The strong global macroeconomic background led management to guide its adjusted earnings per share to a range of $8.25-$9.25 for fiscal 2018. The midpoint of the guidance range reflects 27% year over year growth.

If you are looking for more pure U.S. exposure, there is Martin Marietta Materials (NYSE: MLM), which is a leading supplier of construction materials (such as aggregates) for highways, infrastructure and other building projects.

The company posted impressive results in the latest quarter, beating consensus estimates on both earnings and revenues. Adjusted earnings were up 21.3% from the year ago quarter to $1.88, while revenues were 2.3% higher to $970.5 million. For 2018, management guided revenue estimates to between $4.2 billion and $4.4 billion.

And if anything happens on the public infrastructure front, MLM is a sure beneficiary. Infrastructure construction accounts for about 37% of the company’s total aggregate product line shipments.

So even if the politicians dither (as usual), infrastructure investments can still be money-makers for you.

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Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
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 

Clarity on Crypto’s Biggest Threat: Government

I have long believed that the biggest threat facing cryptocurrency is government.

Most countries don’t appreciate competition from private markets when it comes to currency. Nearly all governments have operated with a central bank-controlled monopoly on money for a century or longer.

And after China shut down its domestic crypto exchanges and banned initial coin offerings (ICOs) last year, the fear was that other countries around the world would follow suit.

This regulatory risk factor has been stalking cryptocurrency markets ever since. It’s the No. 1 concern I hear about from our subscribers and other crypto enthusiasts.

Fortunately, we now have more clarity on this issue. In many countries where crypto trading is popular, discussion has shifted away from rumors of bans to talk about smart regulation.

In a U.S. Senate hearing this month, Commodity Futures Trading Commission Chairman J. Christopher Giancarlo was surprisingly upbeat about the future of U.S. crypto markets. Here’s a quote from the hearing…

“Do no harm” was unquestionably the right approach to development of the internet. Similarly, I believe that “do no harm” is the right overarching approach for distributed ledger technology… With the proper balance of sound policy, regulatory oversight and private sector innovation, new technologies will allow American markets to evolve in responsible ways and continue to grow our economy and increase prosperity.

You can read Giancarlo’s full written testimony here.

However, Giancarlo and Securities and Exchange Commission Chairman Jay Clayton struck a more cautionary tone about fraud in the market. They’ve already acted to stop a few cryptocurrency operations that were allegedly operating like Ponzi schemes.

Here’s an excerpt from a joint statement by Clayton and Giancarlo…

The CFTC and SEC, along with other federal and state regulators and criminal authorities, will continue to work together to bring transparency and integrity to these markets and, importantly, to deter and prosecute fraud and abuse. These markets are new, evolving and international. As such they require us to be nimble and forward-looking; coordinated with our state, federal and international colleagues; and engaged with important stakeholders, including Congress.

Similar developments are happening around the world. South Korea, a major crypto hub, has backed off a rumored ban on crypto trading. Government policy coordinator Hong Nam-ki said the following, as reported by Reuters

The government’s basic rule is to prevent any illegal acts or uncertainties regarding cryptocurrency trade, while eagerly nurturing blockchain technology.

This is exactly what I’ve been hoping for. We need regulators to step up and prevent bad actors from tarnishing the industry.

Regulation has the potential to legitimize the nascent cryptocurrency markets. Done correctly, it would clear the path for institutional buyers to step in and rocket the market higher.

Of course, there’s still the risk that governments could reverse their opinions. But based on what we’ve seen so far, I would argue that this is the most positive development we’ve had in years.

I cannot overstate the importance of the clarity we’ve gotten on the government/regulatory risk situation.

This prospect of widespread bans has been a looming threat hanging over the crypto world. For now, that threat has passed.

Crypto Markets Rebound Strongly

With the biggest near-term threat to crypto largely overcome, markets have reacted to this bullish news appropriately.

During the low of the sell-off on February 6, bitcoin briefly dipped below $6,000. We last saw prices that low just before Thanksgiving 2017.

That same day, I sent out a note to First Stage Investor subscribers titled “Crypto Markets: Nearing a Bottom?”

In the alert, I noted the following…

We are reaching a retracement point where, historically, a bottom forms… So if you believe in the long-term fundamentals of cryptocurrency (as I do) and have been waiting for a chance to buy the dip, now seems a fine time to do so across our recommendations.

So far, it looks like we may have called it (near) the bottom. Bitcoin is trading back above $10,000 as I write this, with most altcoins following bitcoin’s lead.

I continue to believe we’ll see new all-time highs in crypto this year.

Here’s how I think about it: 99% of the world is still on the sidelines. And other than a handful of early institutional adopters, 99.99% of the professional investing world remains on the sidelines as well (venture capital funds, hedge funds, wealth managers, family offices, etc.).

There’s no question in my mind that the potential rewards still far outweigh the risks.

The difficult part remains holding through nasty corrections and buying the dips when it seems as if the crypto world is ending. If you can discipline yourself to do that, you’re well on your way to making money in crypto.

Good investing,


Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

Buy 3 These Three High-Yield Funds to Shelter Your Money from Volatility

In my last two articles, I’ve focused on tech sector investments. (Specifically, an industry-leading companywhose critical products are driving several huge tech trends, plus a diversified way to play one of today’s fastest-growing industries).

Over that time, of course, the stock market has also decided that it’s finally time for a good, old-fashioned bout of volatility.

So today – and in the spirit of not panicking – I want to step away from growth-based tech and follow up on Tim Plaehn’s article on Monday by giving you a couple of ways to combat adversity. Investments that will keep passive income rolling in, even when the market takes a dip.

Let’s get to it…

“Complete Morons”

When the S&P 500 closed last Thursday, it officially entered “correction” territory, having dropped by over 10% from its January 26 peak.

In the process, five of the S&P’s 11 sectors also dropped by over 10%, as the index lost $2.5 trillion of its value.

The culprit?

“Complete morons,” according to CNBC’s Jim Cramer.

You’ve heard of the CBOE Volatility Index (VIX) – which measures the level of fear or complacency in the market, based on short-term S&P 500 options activity.

But you may not have heard of the VelocityShares Daily Inverse VIX Short-Term ETN (Nasdaq: XIV). It aims to return the opposite of the VIX – and is one of the investments that Cramer says is responsible for the precipitous drop, due to uninformed speculators betting against volatility through investments they knew little about… and losing big.

The fallout was so great that XIV plummeted from a high of $141.39 on January 26 to $5.30 today. As a result, Credit Suisse, which sponsors the fund, announced its liquidation and XIV will cease trading next Tuesday.

When volatility hits, don’t get left holding the bag on these risky investments. There’s a much better way…

Case Closed

A few months ago, I touted the benefits of closed-end funds (CEFs) as hybrid between ETFs and mutual funds. To recap briefly:

  • Like ETFs and mutual funds, CEFs invest in a portfolio of underlying stocks. These stocks give a CEF its Net Asset Value (NAV).
  • CEFs are actively managed and trade like stocks. There are a limited number of shares available, which are priced intraday – either at a premium or discount to the NAV.
  • The “closed-end” part comes from the fact that CEFs are closed to new capital after they’re launched. A fund must subsequently use leverage to raise new money. Because leverage is a percentage of total assets, there’s a risk-reward factor, which affects performance.

But here’s the key point relative to the current climate: They’re less affected by volatility because they don’t create new shares.

They also pay healthy average dividends of around 8%. Check out these ones…

Liberty All-Star Growth Fund (NYSE: ASG): You want diversity? This fund has it – both by industry and asset class. For example, it has strong holdings in tech (28%), consumer cyclicals (18%), industrials (16%), healthcare (15%), as well as financials and real estate.

It also splits across market caps, with 47% midcaps, 23% small caps, and 17% large caps, with the rest distributed among mega caps and microcaps.

The fund is up 27% over the past 12 months, compared to 12% for the S&P 500. Right now, ASG trades at a very slight premium – just $0.15 above its NAV. But it offers a robust $0.44 per share annual dividend (paid quarterly) – a 7.8% yield.

BlackRock Health Sciences (NYSE: BME): From diversity to specificity. This fund focuses exclusively on healthcare, with most of the portfolio dedicated towards large-cap stocks like Pfizer, Merck, Gilead Sciences, Bristol-Myers Squibb, Amgen, Biogen, Celgene, and Johnson & Johnson.

In terms of capital appreciation, the fund has notched gains in eight of the past 10 years, ranging from 5.5% on the low end to 42% at the top end.

And if you like your dividends more often, BME pays them monthly and boasts a 7.1% yield. The fund is also trading at a 4.5% discount to its NAV, with a 1.1% expense fee.

Clough Global Opportunities Fund (NYSE: GLO): As the name suggests, this fund offers a more global outlook, with around 22% of the portfolio containing non-U.S. stocks. This includes the likes of Samsung, Alibaba, Broadcom, and the Swiss-based CRISPR Therapeutics.

Technology, healthcare, and financials make up the bulk of the sector denomination and it’s weighted towards bigger companies, with around 55% of the portfolio comprising large-cap stocks.

The fund enjoyed an impressive 2017, notching a 35% return.

Dividends are paid monthly and GLO currently spits back a beefy 11.7% yield. Even better… it’s trading at a 9.3% discount to its NAV. However, its management fee is a little more expensive than the other two funds, with an expense ratio of 2.2%.

Ultimately, diversified closed-end funds like these offer a much better way to shelter your portfolio from volatility, versus the riskier, more direct ways that we’ve seen investors try to play the market recently.

And remember… even if the stocks fall with the market, you’ve still got an all-important income stream coming in.

Get up to 14 dividend paychecks per month from safe, reliable stocks with The Monthly Dividend Paycheck Calendar, an easy-to-use system that shows you which dividend stocks to pick, when to buy them, when you get paid your dividends, and how much.  All you have to do is buy the stocks you like and tell them where to send your dividend payments. For more information Click Here.

Source: Investors Alley 

Why the Government’s Approach to Crypto Won’t Last

Crypto is in a tough spot…

One of those lousy, unsought, “damned if you do, damned if you don’t” spots.

You see, it needs a well-thought-out and fair regulatory regime.

And it needs the government to get it right.

What Are the Chances?

Man, that’s a big ask.

It’s like inviting Uncle Sam to tax your money but not too much… to raise the interest rates but not too much… to shrink government but not too much…

How do you arrive at “too much” or, for that matter, “too little”?

Chances are, when you invite the government into your personal or professional life, you usually regret it.

You simply don’t expect them to get this stuff right.

What I hope for?

That they don’t get it completely wrong.

That’s what I’d like with crypto.

It’s pretty clear that the government wants to throw the hammer down on scamsters and schemers…

What the SEC calls “bad actors.”

Great. I agree with the SEC when it says that a thinly traded and volatile market is ripe for fraud from many different actors.

Question is, can it do this and also maintain a light touch?

Can it choose its targets with a minimalist approach?

Can it regulate what is absolutely necessary and leave the rest alone?

As I said, it’s a big ask.

Some Surprising and Not-So-Surprising Signs

Ninety-nine times out of 100, the answer is “of course not.”

But this time may be different.

The government has recently shown surprising signs of NOT wishing to drown the crypto sector in overly restrictive regulations.

A great sign?

It came from the chairman of the Commodities Futures Trading Commission (CFTC) in a recent Senate hearing. He said that “do no harm” was the right approach for distributed ledger technology…

Just as it was some 40 years ago for the internet.

The SEC has also chipped in with some surprisingly sensible statements. A recent one said that ICOs “can be effective ways for entrepreneurs and others to raise funding.”

This is real ground for optimism.

But, alas, the government has also been sounding… well, like what we’ve come to expect from Washington.

Consider these statements that come from Congressional testimony and an article co-written by SEC Chair Jay Clayton and CFTC Chair Frank Giancarlo…

  • “We are disturbed by many examples of form being elevated over substance, with form-based arguments depriving investors of mandatory protections.”
  • “Cryptocurrencies are now being promoted, pursued and traded as investment assets, while their much-touted utility as an efficient medium of exchange is now a ‘distant secondary characteristic.’”
  • “Experience tells us that while some market participants may make fortunes, the risks to all investors are high. Caution is merited.”
  • “The SEC is devoting a significant portion of its resources to the ICO market.”
  • “The SEC has made it clear that federal securities laws apply regardless of whether the offered security – a purposefully broad and flexible term – is labeled a ‘coin’ or ‘utility token’ rather than a stock, bond or investment contract.”
  • “Simply calling something a ‘currency’ or a currency-based product does not mean that it is not a security.”
  • “Market participants should treat payments and other transactions made in cryptocurrency as if cash were being handed from one party to the other.”

Don’t get me wrong.

None of these statements are unreasonable.

They point to three valid concerns…

First, frivolous ICOs created by so-called entrepreneurs wishing to make a quick buck need to be reined in.

Second, fraudsters need to be identified and prosecuted.

And third, companies can’t circumvent security regulations merely by calling their coins “utility tokens” or a currency.

What Makes Me Nervous?

It’s what they said about “Main Street” investors…

[Our] concern [is] that too many Main Street investors do not understand all the material facts and risks involved.

This is classic Big Brother – “we’ve got to protect the little guys from their own ignorance” – talk.

I was inundated with this kind of talk when startup investing was limited only to accredited investors.

It took several years for the SEC to get off its hindquarters and extend startup investing opportunities to EVERYBODY, as the JOBS Act intended.

But there’s no JOBS Act here.

The government is free to act in the name of investor protection to limit and even bancryptos and ICOs.

What Will the Government Do?

A hint came last September.

The SEC’s new Cyber Unit will “recommend enforcement actions” relating to cryptocurrencies against those who violate securities laws.

So it looks like the SEC is shifting into a more aggressive approach.

But then there’s this hint…

In testimony to the Senate, the SEC said it would apply the same “facts and circumstances” analysis to determine whether ICOs and cryptocurrency markets should be classified as securities.

Instead of a broad crackdown on ICO activity, the SEC plans to continue enforcement on a case-by-case basis.

So perhaps not so aggressive, after all.

Some may even call this approach “balanced.”

Which, to me, is just another way of saying it can’t last.

A Leap in the Making

Blockchain technology is allowing us to make the leap from systems based on trust in people and institutions to trust in math.

One recent crypto roundtable chose this motto for its conference: “No leaders. No rulers. In code we trust.”


The government is NOT to be trusted. The banks are NOT to be trusted. Fiat money is NOT to be trusted.

And individuals with wealth or power? NOT to be trusted.

How much longer can the government remain “balanced” in the face of such a radical creed?

Blockchain technology has already created much wealth among its creators and adherents. It’ll create much more when it commercializes and scales.

So before answering, we need to acknowledge another question lurking below the surface…

How much longer can it remain committed to disrupting the existing financial order and replacing fiat money?

History says not long.

The blockchain is something new and potentially powerful.

Who will be the ones to unleash its power?

The government? The banks?

Or people who distrust both but trust code?

Nobody knows. If somebody tells you they do, they’re lying.

We all have a vision of how the world could change for the better, and it’s always according to our own principles.

So I’ll leave you with a bit of wisdom from the Liverpudlian gang, circa 1968…

You say you want a revolution
Well, you know
We all want to change the world
You tell me that it’s evolution
Well, you know
We all want to change the world.

Okay, they didn’t have crypto in mind.

But, from the sound of it, they could have.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

Dump These Energy Stocks Before the Next Correction

After topping 10 million barrels per day for the first time since 1970 in November, the U.S. Energy Information Administration (EIA) said that U.S. crude oil production hit 10.2 million barrels per day in January. That surpassed the previous record (10.04 million barrels) for any month that was set in 1970 during the final days of the first Texas oil boom.

This is a remarkable feat considering the United States hit its low point in oil production in 2008 at about five million barrels a day. And oil imports are down to only about 2.5 million barrels a day as compared to the peak of 13.4 million barrels per day in 2006.

The EIA also upped its forecast for U.S. crude production for this year to 10.6 million barrels per day and for 2019 to 11.2 million barrels per day. If the forecast is right, it will make the United States the world’s largest oil producer, surpassing both Russia and Saudi Arabia.

For the prime example of the change in U.S. oil fortunes, look no further than the Permian Basin, which is located in Texas and New Mexico. Output there in 2017 totaled 815 million barrels. The previous record was set in 1973 at 790 million barrels.

All of this is good news, right?

Yes, if you’re an oil consumer. But if you happen to own oil stocks, the answer is a resounding no.

Shale Oil Company Stupidity

And the reason is obvious. The last time oil prices rose into the $60s per barrel, the U.S. shale producers pumped oil out of the ground as fast as they could. The assumption was that demand from places like China would continue to soar exponentially.

So when demand cooled a bit, the result was a crash that took the oil price into the 20s per barrel, which devastated the industry for several years.

Demand is still strong at the moment. For example, China is the second-largest market for U.S. crude oil, having imported 50 million barrels in the first nine months of 2017. But the oil storage facilities in China are nearing capacity, leaving an open question about the extent of future U.S. oil imports.

And since the recovery rate for oil from shale reserves remains very low, this suggests there is more potential for increased production as the technology to get at these reserves is improved.

Based on the history of absolutely no discipline from the U.S. shale industry, I expect an even greater flood of U.S. crude than the EIA forecast. That flood will likely send oil prices tumbling once again. And it’s not just the smaller shale companies that are solely to blame.

Energy giant ExxonMobil (NYSE: XOM) said in late January that it plans to increase its oil output in the Permian Basin fivefold by 2025 to 500,000 barrels per day. And Exxon is hardly alone among the majors.

Chevron (NYSE: CVX) also has said it will invest $2.5 billion in shale this year, with most of that investment going into the Permian Basin. For 2019, Chevron said it will invest a total of $4.3 billion into shale, with $3.3 billion of that going into the Permian Basin.

Oil companies continue to invest into shale even though most U.S. shale companies have struggled for profitability, and the industry as a whole has consistently lost money since the first successful shale oil wells were drilled in 2008-09. Exxon itself lost $439 million on oil and gas production in the US in the first nine months of 2017.

Other Considerations

While all of this is going, the smaller shale companies are also being adversely impacted by the change in the tax laws limiting interest deductibility.

Remember that many of the shale firms have heavy debt loads and now they will not be able to deduct all of their interest payments on that debt. According to Greensill Capital, if the limits on deductions in the 2018 to 2021 period had applied in 2016, companies would have been unable to claim tax relief on 39 % of their interest payments. The limit for 2022 onwards would have prevented relief on 97 % of those payments.

Consider too how quickly too oil dropped below $60 per barrel during just a few days of market turmoil, suffering its worst week in two years. That shows you will see how little firm support there is at the current price level. The steep price decline was likely the result of hedge fund liquidations – hedge funds had accumulated a record long position in crude oil.

Add this all up and I would avoid, or sell short if have a high risk tolerance, the oil producing sector as a whole.

Investment Implications

With the added consequences of the new tax law, I would definitely avoid the exploration and development companies that are carrying heavy debt loads. Two ETFs that have large exposure to these type of companies are the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) and the iShares U.S. Oil & Gas Exploration & Production ETF (NYSE: IEO). These two ETFs are down 12.88% and 9.05% respectively year-to-date. The former is off nearly 20% over the past year.

Even the Energy Select Sector SPDR Fund (NYSE: XLE), whose largest positions are Exxon (22.6%) and Chevron (17%), is actually a little in value over the past year. In other words, your money will be treated better elsewhere; especially in the light of these companies going in so heavily into shale and ramping up output that will very likely not be needed.

However, if you still wish to have some exposure to the oil sector, I would go with the Norwegian oil company Statoil ASA (NYSE: STO) whose stock is up 21% over the past 52 weeks. The company reported better-than-expected earnings in its latest quarter on the back of record production.

It also, in December, gave the go-ahead to its flagship Johan Castberg project in the Barents Sea after slashing costs by 50%. The breakeven for the project is now less than $35 per barrel. The Barents Sea is thought to hold about half of Norway’s undiscovered oil and gas. The company’s management also showed their savvy when they bought mature oil assets offshore Brazil for the equivalent of $10 per barrel in December.

Now don’t get me wrong. If oil falls in price, so will Statoil’s stock. But I like a management that is focused on squeezing costs and only going ahead with the most profitable long-term projects.

That is unlike some U.S. company managements that only know the words, “Drill, baby, drill!” No doubt due to the fact that some incentive packages for executives are still based on the amount of oil produced and not on bottom line profitability.

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 

Stocks Make Strong Comeback Despite Recent Turbulence

Stocks rebounded strongly on Wednesday in the wake of what looked, on the surface, to be a strong Consumer Price Inflation report.

In the aftermath of that February jobs report, which showed faster-than-expected wage growth, this looked like it would be a negative. But it wasn’t, as the expiration of February contracts on the CBOE Volatility Index unleashed a torrent of VIX selling, which pushed stock prices higher in an epic short-covering rally.

In the end, the Dow Jones Industrial Average gained 1%, the S&P 500 gained 1.3%, the Nasdaq Composite gained 1.9% and the Russell 2000 gained 1.8%. Treasury bonds weakened, pushing the 10-year yield up to 2.91% — approaching the 3% threshold that is widely seen as a critical level as GDP growth, fiscal largesse and inflation pressures push up borrowing costs.

The dollar was hit hard as well, with Societe Generale’s Albert Edwards worried the drop is being driven by the seemingly limitless spending being condoned in Washington by President Trump and Congressional Republicans. Both gold and crude oil moved higher.

Dow Jones

Breadth was positive, with advancers outpacing decliners by a 2.2-to-1 ratio. Troubled burrito maker Chipotle Mexican Grill, Inc. (NYSE:CMG) gained 15% on the announcement of a new CEO and hopes he can emulate the success he enjoyed at Taco Bell. At the sector level, gold miners led the way with a gain of 4.1%, while REITs were the laggards on the drag from the backup in rates.

On the economic front, both core CPI and CPI beat estimates on a monthly basis, but the annualized rates remain tepid. Core year-over-year CPI is running at just 1.8%. Retail sales disappointed as well, playing into hopes that the Federal Reserve continues to go slow with its rate hikes, with sales down 0.3% month-over-month for the first decline since September’s report on August sales.


Stocks Make Strong Comeback Despite Recent Turbulence

Volatility was intense today, with the Nasdaq up 3% off of its post-CPI futures low. The dollar and bond prices are collapsing. Gold and short volatility ETFs are soaring. The Dow Jones has now climbed above its 50% retracement of its peak-to-trough losses. And the 10-year yield has hit its highest level since January 2014.

This is short-covering, pure and simple. And a relief for risk parity funds that depend on stocks and bonds moving in opposite directions. As long as stocks can keep rising to offset T-bond weakness, the show can go on.

But once higher yields start to bite economic growth and earnings growth expectations — driven by the inevitability of higher inflation — we will see a repeat of the recent market unpleasantness.

My guess is we have a couple of months, at least, before that happens. Until then, the volatility meltdown is creating a number of new trading opportunities. Including the nice gain Edge Pro subscribers are enjoying on their iPath S&P 500 VIX Short Term Futures TM ETN(NYSEARCA:VXX) puts.

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: Investor Place

Buy This Stock Profiting From Out of Control Government Spending

To avoid near term chances of a government shutdown, last week the U.S. Senate and House passed a two-year spending plan, which the President signed. The new plan significantly boosts government spending over the next two years compared to the previously in effect sequestration plan. No matter what your thoughts are on the big vs. smaller government debate, the fact is that government spending and government buying is a growth industry. In the spirit of “if you can’t beat them, join them”, one way to participate in the growth of the federal government is to invest in properties leased to government agencies.

There are just two real estate investment trusts that focus on owning properties leased to government entities. Government Properties Income Trust (Nasdaq: GOV) sports a high yield, but is saddled with a poor, third-party management agreement. GOV is one of those REITs where the management team does a lot better than the stock investors. The other government agency focused REIT is Easterly Government Properties (NYSE: DEA). This is an income stock that deserves a closer look and probably some of your investment dollars.

DEA since it’s 2015 IPO.

DEA is a growth focused REIT that came to market with a February 2015 IPO. The company has increased the dividend four times in its three-year life. This is a fact that makes this stock deserve some attention. To generate growth, the Easterly management team has a detailed plan to invest a significant amount of new capital to work each year. With a market cap of about $1 billion, the company has targeted acquisitions of $200 to $300 million per year.

Easterly has a three-prong analysis system when selecting new investment properties. They want to work with agencies that have growing missions in the Federal government. Examples are the Veterans’ Administration, the FBI, and Homeland Security. With these agencies, Easterly wants to find properties that are mission critical to the specific agency. Finally, the buildings or facilities must be attractive investments as commercial properties. This means they are relatively young or build-to-suit, are strategically located, and the leases are accretive to Easterly.

DEA currently owns 47 properties with 3.8 million square feet of space. The average age is 11.8 years and average remaining lease term is 7.1 years. New leases have terms of 10 to 20 years, with 5 to 10-year renewal options. Government agencies rarely leave a building. Lease renewals equal rent increases and more profits for Easterly. Growth for this REIT will be a combination of steady acquisitions and rental rate increases.

Finally, leasing properties to Federal agencies requires in-depth knowledge of Government Services Administration (GSA) procurement process, protocols and culture. This is a commercial real estate sector with high barrier to entry. As a result, being able to meet an agency’s needs is more important than being ultra-competitive on the lease rates. DEA can generate attractive returns from having the world’s most credit safe tenant. You can expect high single digit annual dividend growth from this REIT, combined with a 5.3% current yield. Attractive!

Get up to 14 dividend paychecks per month from safe, reliable stocks with The Monthly Dividend Paycheck Calendar, an easy-to-use system that shows you which dividend stocks to pick, when to buy them, when you get paid your dividends, and how much.  All you have to do is buy the stocks you like and tell them where to send your dividend payments. For more information Click Here.