Daily Archives: June 22, 2018

Technology

Double Your Money in Less Than Three Years with This Backdoor Play on AI

Michael A. RobinsonMICHAEL A. ROBINSON

Citigroup Inc. (NYSE: C) is looking to cut half of its 20,000 tech and operations staff and replace them with artificial intelligence, robotics, and other forms of automation.

Goldman Sachs International is looking to do something similar.

This is according to a series of interviews in the Financial Times.

A Gallup survey of 3,000 Americans released in March shows that 73% felt that AI would kill more jobs than it creates. That tracks with a 2016 survey by the Pew Research Center in which 65% said automation that includes AI would replace “much” of the work done now by humans.

People are scared – and I understand why.

But there’s a much bigger story here – and it’s a positive one for job seekers.

It’s a positive story for technology investors, too – so you know you’ll want to pay attention to this.

The truth is, AI-led automation is not a zero-sum proposition.

So, today let’s drill beneath these alarmist headlines.

Let’s discover how AI-driven automation is actually sparking a jobs boom.

And let’s dig up a hidden way to play this field with a stock that I think will double in lesss than 30 months.

Check it out…

An AI Odyssey

We recently celebrated the 50th anniversary one of the great, groundbreaking films of all time.

For millions of Americans, the debut of “2001: A Space Odyssey” on April 3, 1968, served as their intro into the world of artificial intelligence. And it came with quite a negative point of view.

Recall that the AI-powered HAL 9000 computer takes over the spaceship Discovery One, and even kills one astronaut.

To this day, many Americans remain leery of AI thanks to “2001.”

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However, Stanley Kubrick’s film had such a powerful impact on me that I’ve followed the world of AI – both its positive and negative effects – ever since.

In recent years, AI has become synonymous with automation and robotics because the three are now tightly intertwined as factories all over the world adopt these high-output platforms.

While the mainstream media is focused on automation’s job-killing prospects, I believe that AI will be a long-term boon to the economy.

And I’ve got several pieces of empirical data to back that stance up…

  • Last month, the Asian Development Bank said automation had created an extra 34 million jobs in the region. That’s because the tech lowered prices while improving quality for Asian goods.
  • In a 2017 study, Deloitte found that automation in the United Kingdom had destroyed 800,000 jobs in the past 15 years. But over that same period, it had created 3 million jobs – and they paid an average $13,500 more than the old ones.
  • The Centre for European Economic Research predicts that by 2021 industrial employment in its home market of Germany will rise by 1.8%. The study says that’s because the tech is making those factories more competitive.
  • And a June 2017 study sponsored by Salesforce.com Inc. (NYSE: CRM) puts the economic impact of AI at $1.1 trillion by 2021 – and that’s just for cloud-based revenue in the customer relationship management end of the cloud computing sector.

So, it’s exciting news to see global chip leader and Silicon Valley pioneer Intel Corp. (Nasdaq: INTC) focus so heavily on AI.

In September 2017, Intel unveiled an experimental “neuromorphic” chip called Loihi. As Intel says, this chip compares “machines with the human brain.” It can “read” its environment and become constantly smarter.

In fact, Loihi mimics many of the basic neural pathways in the human brain by packing 130,000 neurons and 139,000 synapses into 128 computer cores.

But as much as I find Intel’s new breakthrough highly exciting, there is an even better way for technology investors like you to play this emerging field.

Fact is, as important as AI chips are becoming, they are useless without one key device – computer memory.

And this firm delivers…

Crushing the “Memory” Market

As a quick recap, memory devices store dynamic data to make computers run faster and more smoothly.

This is what allows you to open multiple windows on your web browser while you work on a document, edit photos, and add graphics to a presentation – all while streaming music in the background.

By definition, AI requires complex memory chips because of the daunting amount of data these systems must crunch through to work at speeds that approach the human brain.

And Micron Technology Inc. (NYSE: MU) is the best memory firm operating in the world today. Even better, it has signed key partnerships with Intel over the course of its history.

Back in 2003, for example, Intel invested $450 million for a 5.3% stake in Micron to help the firm develop memory chips that would work well with Intel’s microprocessors.

Then, in 2005, the firms formed a $1.2 billion joint venture to develop NAND flash memory. That’s the kind of memory that now stores all the data in your smartphones and tablet computers.

If that’s all we tapped with our investment in Micron, it still would be huge. But Allied Market Research says NAND flash memory will be a $39 billion market by 2022.

And the story gets better…

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Micron is investing in the next generation of chip building and has begun selling a type of memory that will take smartphone and tablet computing to a whole new level.

And it should have a huge impact on gaming, Big Data, cloud computing, and virtual reality – not to mention AI.

Multidimensional Computing

Launched roughly a year ago in another joint effort with Intel, 3D XPoint is a new platform that looks at memory in a whole new way. This tech uses a microscopic mesh of wires that can be stacked on top of each other to provide computing in three dimensions.

The result is a single system that can handle both memory and storage – and performs both functions better than what’s out there today.

Grand View Research says the market for next-gen memory such as 3D XPoint will reach $3.4 billion by 2020 because of its scope throughout the world’s major tech systems.

In other words, Micron has a lot of long-term upside.

And it’s not doing badly in the short term, either. In its most recent fiscal quarter, Micron said it grew earnings per share by 246%.

With that strong earnings growth, we also get bargain pricing. Shares trade at $56 but are dirt cheap on a relative basis – roughly just five times next year’s earnings.

That’s a nearly 70% discount from the S&P 500’s forward earnings ratio.

In other words, you’re getting an amazing discount on a firm that cuts a wide swath through our tech-centric world.

I believe the stock could double in as little as 30 months.

I base that on the fact that over the past three years, Micron’s earnings have grown an average 31%. That means they should double in just 27 months – and pull the stock price up along the way.

Add it all up and you can see that it’s time to stop worrying about AI.

Instead, cash in on this red-hot trend.

With Micron, we have a stock that can do just that while piling up profits for tech investors over the next several years.

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Source: Money Morning 

Pot Stocks

Marijuana Stocks: Two to Consider, Two to Avoid

Marijuana Stocks: Two to Consider, Two to Avoid

Source: MarihuanayMedicina via Flickr

The marijuana legalization movement is picking up speed. There have been various wins here and there, such as in Colorado and Washington. Uruguay became the first nation in the Americas to permit recreational marijuana usage in 2014. It further legalized marijuana pharmacies in 2017.

However, until now, no major country had legalized consumption on a national level. Marijuana stocks were waiting for a bigger market to come online.

That’s happened now. Canada has opened up marijuana to public usage. Its Senate approved legislation earlier this week which removes the last obstacle to legalized pot. It’s expected that Canadians will be able to consume legal weed as early as October.

Not surprisingly, investors are rushing to get in on the ground floor of this vast new market. Here are some marijuana stocks that could deliver big gains, and others that come with significantly more risk.

Marijuana Stocks to Consider: Constellation Brands

You may know Constellation Brands (NYSE:STZ) as a leading beer and wine company. And that’s true. But Constellation has big plans for the marijuana space in the future. The opening move for that came with Constellation buying a 9.9% stake in Canopy Growth (NYSE:CGC) this past October.

This was an obvious and attractive way to get exposure to the marijuana equity space at an attractive price. Canopy stock was at around $10 back then and is now at around $34.

And there is a bigger strategic plan at work as well. Constellation wants to sell marijuana-infused products itself. The company has said that it’s too early to tell whether marijuana legislation will help, hurt or be neutral for alcohol companies. As a result, it is hedging its bets by selling pot-infused beverages of its own. As the company put it earlier this year:

“Our goal with this organization [Canopy] is to work collaboratively to both understand the cannabis business but also develop unique cannabis-based beverages that will be available around the world as legalities prove those to be an option.”

A Canopy spokesperson suggested that marijuana-infused products, such as beverages, won’t be legal in Canada until next year. However, she went on to add: “That said, we are already preparing for the opportunity to brand and market these products, once federal regulations permit.”

In the meantime, Constellation has its leading portfolio of beer and wines, including brands such as Corona. With STZ stock at 21x forward earnings, this is a reasonable way to get a shot at the marijuana market without taking massive downside risk.

Marijuana Stocks to Avoid: Canopy Growth

Let’s turn from Canopy’s 10% stock owner, Constellation Brands, to Canopy itself. Unfortunately for average investors, Constellation got in at a way better price than we could now.

Last fall, Constellation paid C$245 million (US$184 million) for 9.9% of Canopy Growth. CGC stock is now selling with a market cap of greater than $5.7 billion. That values Constellation’s share at $570 million, or triple their investment in under a year.

As stated above, that was a savvy move on Constellation’s part. But the price of CGC stock today bakes in some outlandish optimism. CGC stock now sells at more than 100x sales. The company sold only $55 million in product last year, but the market values that at more than $5.7 billion.

A 100x price/sales ratio is nearly unheard of in the history of publicly traded stocks. The general rule is to avoid stocks trading above 10x price/sales — maybe, just maybe you can get away with paying 20x for something growing at an incredible rate. But 100x sales is a bridge too far.

Sure, going forward, Canopy will be able to grow its revenues much more quickly. But a flood of competition will hit markets, lowering margins as well. And it’s not like Canopy was earning huge profits on its minimal revenue stream either. CGC stock is a story-driven mania at this point.

Once people double-check the math, they’ll see that Canopy won’t be able to create $5.7 billion in value anytime soon. A holding stake via a company like Constellation is a much safer way to invest, since it is a diversified business, and plans to roll out its own marijuana-infused products. And you don’t have to pay an arm and a leg for STZ stock like you do with Canopy.

Marijuana Stocks to Consider: Alcanna

Alcanna (OTCMKTS:LQSIF) is another marijuana stock worth considering today. Alcanna was formerly known as Liquor Stores N.A. Ltd. and ran, not surprisingly, liquor stores in Canada and the United States. It has realigned its business model in recent months, however. It’s divesting some of the U.S.-based liquor stores to become a more Canada-focused operation.

And, most importantly, Alcanna will now become a marijuana retailer. Alcanna currently operates about 175 liquor stores in Alberta, along with a smaller number in British Columbia. That gives it a nice position in the sales of already heavily regulated goods. That makes it a natural player for building out a marijuana retail business.

The company also earned a sizable endorsement. Aurora Cannabis (OTCMKTS:ACBFF) bought 25% of Alcanna earlier this year for a more than $100-million investment. That gives Alcanna plenty of capital to build out its retail business and a close partnership with one of Canada’s big emerging producers.

There is plenty of risk here. Alcanna had a mixed track record as a pure-play liquor store operator. Adding marijuana to the mix doesn’t guarantee success. But the valuation is reasonable, and Alcanna offers an interesting 4% dividend yield while waiting for the growth story to potentially play out.

Marijuana Stocks to Avoid: Neptune Technologies

Neptune Technologies (NASDAQ:NEPT) is a long-running story stock. Almost a decade ago, the company hyped up its krill oil, extracted from a type of small Arctic crustacean.

Neptune positioned krill oil as a superior alternative to fish oil, which companies such as Amarin(NASDAQ:AMRN) sell. Amarin obtained FDA approval for Vascepa, its fish oil-based pharmaceutical drug, for cardiovascular benefits.

Neptune, by contrast, never achieved similar success. While NEPT stock gyrated widely, krill oil never took off. A fatal factory explosion in 2012 set the company back farther. Last year, Neptune finally threw in the towel on krill oil, selling off its manufacturing business for $34 million. NEPT stock slumped to multiyear lows below $1/share following the news.

However, Neptune wasn’t done. It decided to pivot, not surprisingly, to marijuana. Instead of getting an extract from tiny marine life, the new plan is to extract oil from cannabis. It also has suggested that it may combine cannabis with omega-3 oils, though it’s unclear what potential synergies the two would have in combination.

And NEPT stock flew earlier this week following news that it will partner with Canopy Growth to make marijuana extracts in a multiyear deal. The press release provided little in the way of tangible details. Regardless, it was enough to shoot NEPT stock up to $4, giving it a $350-million market cap.

Could Neptune’s cannabis extracts become a big market? Sure. Is it worth a $350-million market cap for a company with a checkered past and no clear pathway to profitability in the future? Probably not.

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Source: Investor Place