Monthly Archives: July 2018

Options

How to Make A 186% Return on Video Games

Typically, when growth in the video game industry is discussed, it’s all about mobile gaming growth. After all, playing games on smartphones and tablets has been where most of the action has been in recent years, at least in terms of investing.

While casual gamers may still be driving plenty of business in mobile gaming, there’s still ample opportunity in more traditional gaming platforms, such as consoles and PCs. In fact, these traditional platforms may be even more important looking forward as AR/VR (augmented reality/virtual reality) games become more popular (and accessible).

One of the biggest players in the video game industry is Electronic Arts (NASDAQ: EA). EA is mostly known for its big label games, particular sports games and first-person shooters. Just last week, EA posted earnings and had a pretty substantial share price decline after issuing lower than expected guidance.

As you can see from the chart, EA stock dropped something like 6% the day after its earnings miss. However, the stock was having a great year up to that point and probably had become overvalued. The drop in share price may have been exactly the entry point some investors were waiting for.

First off, EA has several big games yet to come out this year which could boost revenue and earnings more than expected. I already mentioned the long-term potential of video games as AR/VR tech becomes better and cheaper. And then there’s the whole e-sports industry. Playing games competitively is an industry that’s growing like crazy and there’s a ton of money to be made in that arena, so to speak.

Here’s the thing…

A size option trader apparently agrees with me and purchased a massive call spread expiring in January of 2019. With EA stock at $132, the trader bought roughly 11,000 January 135 calls while selling the 155 calls for a total debit of $7. That means the trader spent over $8 million on the trade. Clearly, he or she if very bullish on EA over the next half year.

With $7 paid in premium, the breakeven point for the spread is at $142. That same premium is the max loss for the trade. Max gain is at a point anywhere above $155 at expiration, slightly higher than where the stock was before the earnings miss. Max gain is $13, or $14.3 million in dollar terms… that’s also a return of 186%.

I think this a decent trade to emulate. EA may not recover for a few months, but has several potential catalysts which could send the stock higher down the road. The price of the spread is not cheap, but 186% return potential and six months of time is reasonable for the cost.

If you like the trade but want to reduce your costs somewhat, you can narrow the spread. For instance, the January 135-145 call spread only costs $4 but lowers your max gain to $6. You can also pick an expiration which is closer, but I think EA may need the extra time to recover.

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Source: Investors Alley 

Market Preview

Market Preview: Apple and Tesla Earnings Tuesday, FOMC Wednesday

Neither the strong GDP number on Friday, nor the rosy outlook from Caterpillar Monday morning could move the market upward Monday. Facebook (FB) hit new post-earnings lows and Netflix (NFLX) fell almost 6% Monday alone. Many analysts are talking about a possible sector rotation out of growth stocks and into value.

Tuesday and Wednesday may provide some clarity when investors react to Apple (AAPL) earnings after the close. Analysts are not expecting any earth-shattering news from Apple. Charter Communications (CHTR) will report Tuesday morning. Analysts are looking for signs that the spoils from their Time Warner Acquisition will begin showing up in the second half of this year.

Wednesday Automatic Data Processing (ADP), the giant payroll processing company, will give the market more color on jobs. The company reports earnings, and the ADP employment report is released at 8:15am. Everyone will be listening for what Elon Musk has to say Wednesday afternoon when Tesla reports. The company was questioned recently for renegotiating contracts with suppliers. Some saw this as a sign the company would not make sales projections.

The economic calendar is packed Tuesday and Wednesday. In addition to the jobs numbers, Tuesday brings Consumer Confidence. Wednesday morning sees the release of two manufacturing index numbers. Wednesday afternoon the FOMC policy statement will be released. Analysts do not expect the Fed to raise rates. But, if the strong GDP number jolts the Fed to take additional action, the market will likely respond negatively.

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Technology

7 Best Stocks to Buy to Upgrade Your AI Portfolio

Source: Shutterstock

Precious few other industries will lever an indelible impact quite like artificial intelligence. As I mentioned in my write-up for the related field of automation technologies, AI drastically improves efficiencies to unprecedented levels. Moreover, AI will spark new industries, opening up several opportunities. From an investment perspective, AI companies represent some of the best stocks to buy.

At the same time, we must be careful not to conflate hype with practical realities. As MIT Sloan Management Review explains, “Virtually all human achievements have been made by groups of people, not lone individuals.” In other words, innovation, according to the brilliant minds at MIT, is inherently collaborative.

Discussing artificial intelligence conjures up images of humanoid robots that function just like we do, perhaps with stilted, awkward mannerisms. It also brings up the very awkward concept that machines will one day take over our jobs. Robots and AI mechanisms don’t ask for vacations or benefits, nor do they complain to HR for interpersonal issues.

But the true power of artificial intelligence is far more conducive to our way of life. A genuine AI platform ultimately complements human economic and scientific efforts, not replaces them. For instance, AI can be deployed to scan through terabytes of data, extracting useful patterns and insights previously unattainable. Moreover, AI can advance medical understanding on our way to eradicating diseases.

Therefore, proper AI development is nothing something to be feared, but to be embraced. That also goes for AI-related investments. Here are my seven picks for the best stocks to buy within this rapidly-evolving sector.

Best Stocks to Buy in the AI Market: Nvidia (NVDA)

Best Stocks to Buy in the AI Market: Nvidia (NVDA)

Source: Shutterstock

These days, semiconductor and tech firm Nvidia (NASDAQ:NVDA) is mostly known for its graphics processors. However, NVDA is much more than just an indirect way to play the cryptocurrency markets. Since artificial intelligence is so data-centric, its benefits cannot be actualized without the proper physical infrastructure.

To that end, Nvidia promises a dramatic improvement in computer-processor speeds that contradicts Moore’s Law, a principle that states gains in CPU performance sharply declines once technology passes a critical maturation point.

In addition, we all know about the company’s innovations in autonomous driving technologies. While the industry has received a black eye due to high-profile accidents, that’s not going to stop NVDA from further perfecting the burgeoning innovation.

But what makes NVDA one of the best stocks to buy in this sector is its outstanding financials. Investors have plenty of attributes to like, from their cash-rich position relative to debt, or their class-leading profitability margins.

The one knock against NVDA stock is that everybody loves it. It had an outstanding year in 2017, and it’s following it up this year with another strong performance. But if shares take a dip, NVDA is a no-brainer buying opportunity.

Best Stocks to Buy in the AI Market: IBM (IBM)

Best Stocks to Buy in the AI Market: IBM (IBM)

Source: Atomic Taco via Flickr

On surface level, IBM (NYSE:IBM) is the exact opposite of an exciting AI investment like NVDA. Unlike many of its competitors, IBM is part of the technology old guard. That’s a diplomatic way of saying that the company has become irrelevant. Indeed, “Big Blue” has been shedding its legacy business in a bid to get with the times.

That said, the future looks bright for IBM’s foray into artificial intelligence. Their Watson platform is a particular highlight — it utilizes cloud-based predictive analytics to provide key insights and forecasts. One major client among several is Royal Bank of Scotland (NYSE:RBS). To develop their own digital assistant, RBS called on IBM Watson.

Granted, a reason why investors don’t clamor towards IBM stock is that market performance has been disappointing. But from a contrarian perspective, this is more favorable than buying into extreme momentum.

Plus, IBM being different from its peers is a positive. Currently, the company’s dividend yield is a generous 4.3%. At a time when the broader indices hardly generate much excitement, IBM’s sure bet offers an attractive solution.

Best Stocks to Buy in the AI Market: Amazon (AMZN)

Best Stocks to Buy in the AI Market: Amazon (AMZN)

Source: Shutterstock

A few months back, Apple (NASDAQ:AAPL) made headlines as it inched closer to becoming the first trillion-dollar company. At time of writing, Apple has yet to decisively seal the deal. This sets into motion the idea that Amazon (NASDAQ:AMZN) can beat the iconic smartphone maker to the punch.

With a market capitalization of $860 billion, it’s certainly not out of the question. However, the real reason to buy AMZN shares is its robust strengths across multiple industries. We’re well aware of Amazon’s dominant position in e-commerce. But lately, the company has focused significantly on artificial intelligence.

Through Amazon Web Services, or AWS, the e-commerce giant offers machine-learning and deep-learning solutions for its business clients. On the consumer end, Amazon offers smart-speaker devices fitted with the Alexa digital assistant. In fact, the company is so dominant in this sector that it owned 70% to 76% of market share.

True, AMZN stock has enjoyed tremendous momentum, which doesn’t help swaying contrarian buyers. But just consider that last year, AMZN building off its $1,000 price point seemed like a far-fetched concept. Now, it’s looking to conquer $2,000.

Better yet, Amazon has the tools to get there, and beyond.

Best Stocks to Buy in the AI Market: Facebook (FB)

Best Stocks to Buy in the AI Market: Facebook (FB)

Source: Shutterstock

I can’t think of too many companies that are having a worse year than Facebook (NASDAQ:FB). For some time, its Facebook Live platform had faced sharp criticism for indirectly facilitating violent criminal broadcasts. Later, the social-media firm took a massive hit in the markets due to the Cambridge Analytica controversy.

It took a while, but FB eventually got back on its feet. It even gained about 20% for the year … until its second-quarter earnings report happened.

After posting what the Street considered disappointing revenues and subscriber growth, shares plummeted. The fallout was so bad that the company lost between $100 billion and $130 billion in market value.

With such sharp losses, it’s easy to pin the blame on Facebook’s management team. But you also must consider rival Twitter’s (NYSE:TWTR) earnings disappointment. It too lost substantial momentum in subscriber growth that analysts didn’t expect. Obviously, the social-media fallout isn’t exclusively a Facebook phenomenon.

This makes FB one of the best stocks to buy from a contrarian point of view. Facebook is an AI engineer’s dream come true. With a database of over two billion active users, any predictive-analytics program gains immediate credibility if plugged into this network.

No wonder Cambridge Analytica eagerly took advantage!

Best Stocks to Buy in the AI Market: BioXcel Therapeutics (BTAI)

Best Stocks to Buy in the AI Market: BioXcel Therapeutics (BTAI)

Source: Shutterstock

Invariably, any list of best stocks to buy in artificial intelligence will feature a healthy dose of tech firms. That said, AI isn’t limited to computer-centric endeavors. The same advancements in big data and predictive analytics can be incorporated to address the human condition. This is where BioXcel Therapeutics (NASDAQ:BTAI) comes into the picture.

BTAI is a clinical-stage biopharmaceutical firm that specializes in immuno-oncology and therapies towards neurodegenerative diseases. What makes BioXcel stand out is their integration of artificial intelligence into their pharmaceutical pursuits. With their AI platform’s big data capabilities, they can analyze promising or discontinued drugs that didn’t quite meet expectations.

The idea here is to see if an adjustment to the drug’s chemistry, or even the dosage, can spark progress in challenging cases. This process also potentially gives new life to older or less-appreciated therapies.

However, investors must watch out for market volatility. Similar to many other clinical-stage pharma companies, BioXcel doesn’t have the greatest financials. To put it bluntly, BTAI is an all-or-nothing affair. But if you have the steel fortitude to handle the risks, this company has tremendous upside potential.

Best Stocks to Buy in the AI Market: Arotech (ARTX)

Best Stocks to Buy in the AI Market: Arotech (ARTX)

Source: Shutterstock

While AI has the power to heal, it also paradoxically has the power to destroy. Unfortunately, as long as humans will walk the earth, we will have the seemingly uncontrollable urge to kill each other. That’s cynically one of the reasons why defense contractors like Arotech (NASDAQ:ARTX) exists. They help ensure that our losses stay at a minimum.

But dig a little deeper and you’ll discover that Arotech’s AI platforms have wide-ranging applications. Along with their core products and services, ARTX offers world-class combat simulators. Thanks to their extensive AI expertise, Arotech simulators offer military and emergency personnel an opportunity to train in realistic, high-stress environments without the consequences of actual bullets flying.

Arotech’s simulators can be especially helpful for law-enforcement agencies, which have suffered PR crises stemming from discriminatory practices.

ARTX stock will appeal to many contrarians and discount-seekers looking to jump on the next big rally. Certainly, its price warrants its inclusion on a list of best stocks to buy under $5.

However, those who want to bet on ARTX should note its financials. Middling is a fair and appropriate description. The defense contractor has also disappointed in terms of sales growth. That said, Arotech produced a 22% year-over-year revenue lift to $27.2 million in Q1. Therefore, this “cheap stock” could be on the resurgence.

Best Stocks to Buy in the AI Market: Plug Power (PLUG)

Best Stocks to Buy in the AI Market: Plug Power (PLUG)

You may love your gas-guzzling hot rod, but a day will come when all fossil-fuel based vehicles are destined for the junkyard. Increasingly, automotive manufacturers are shifting towards electric vehicles, or EVs. We’re not just talking about boring fare like Toyota’s (NYSE:TM) Prius. As I mentioned several weeks ago, Ferrari (NYSE:RACE) is planning their own supercar EV.

For traditional automotive enthusiasts, this concept is a mind-boggling one. However, New York-based Plug Power (NASDAQ:PLUG) would simply call it the next step in a long-awaited evolution. An alternative-energy company specializing in hydrogen fuel cells, PLUG prides itself on delivering cost-effective solutions.

To be fair, Plug Power isn’t quite a household name. That said, they secured FedEx (NYSE:FDX) as a major client. In conjunction with Workhorse Group (NASDAQ:WKHS), PLUG provided FedEx’s first North American fuel-cell powered delivery van.

Of course, this is a significant victory, but before considering PLUG stock, check out its financials. As you might imagine from its sub-$2 price point, it’s not pretty. However, management showed strong revenue growth in the most recent quarter, so PLUG  may be on the up and up.

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

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Source: Investor Place 

Dividends

3 BDCs to Pick Up from Rules Changes Benefitting Investors

Business Development Companies (BDCs) are the Jekyll and Hyde of the high yield stock universe. My analysis shows most of these stocks as not safe places to hunt for dividends. However, there are a handful that are attractive, high yield income stocks. The Small Business Credit Availability Act passed earlier this year loosened the leverage restrictions for BDCs. These new rules are likely to make the ugly even more unpleasant to own and the attractive BDCs even better income producing investments.

Business Development Companies operate under special rules that allow them to not pay corporate income taxes. They are required to provide investment capital—loans and equity investments—to small and midsized corporations. To retain its pass through tax status, a BDC must pay out at least 90% of net interest income as dividends to shareholders.

The problem with the BDC business model is that these companies make risky loans to businesses that cannot get financial through regular banking channels. At the same time, the companies must pay the majority of profits out as dividends. This means a BDC cannot set up reserves against bad loans. With the risk level of BDC loan customers, loan losses are unavoidable. Poorly managed BDCs experience a steady NAV erosion and are forced to slash dividends. Well managed BDCs have strategies to offset the NAV erosion using portfolio growth and equity investments in client companies.

A further restriction on the BDC business model limited debt to one times equity. That means a BDC with $500 million of equity could borrow another $500 million to own a $1 billion investment portfolio. Using leverage boost the net income per share of equity investors, i.e. shareholders. The Small Business Credit Availability Act allows a BDC to increase debt up to two times equity, effectively doubling the leverage available to these companies. A Board of Directors approval or vote by the majority of shareholders is required for a BDC to increase its debt limit. A one-year cooling off period is required for companies receiving board approval, but BDCs that seek approval via a shareholder vote will be able to make changes one day after a majority vote.

As with most things BDC associated, the new leverage rules will likely result in bad BDCs losing investor money even faster and the good management teams will be able to invest the added debt to produce dividend growth. Here are three of the better managed companies in the sector.

Goldman Sachs BDC, Inc. (NYSE: GSBD) is a newer BDC managed by the famed investment bank. The company launched with a March 2015 IPO. The dividend has been level at $0.45 per share since the IPO.

NAV per share has eroded over the last three years from $19.46 down to $18.10. For its annual meeting in June, the GSBD Board filed a proxy for shareholders to vote on a reduced management fee structure and to increase the company’s allowed amount of leverage. These should allow future growth of the portfolio and dividend.

The shares currently yield 8.4%.

TPG Specialty Lending (NYSE: TSLX) has been a publicly traded since March 2014. The BDC is managed by private asset manager TGP, which has $80 billion under management. The management team has demonstrated excellent discipline in its approach to making portfolio loans. As a result, the company has shown slow but steady NAV appreciation.

TSLX has not yet announced if or when it will take advantage of the new leverage limits. This BDC is unique in that it pays a base quarterly dividend of $0.39 per share and then each quarter if earnings justify it, an add-on dividend is also declared. A special dividend has been paid for each of the last five quarters, totaling $0.28 per share.

On the base dividend rate TSLX yields 8.1%.

Hercules Capital (Nasdaq: HTGC) is an internally managed BDC exclusively focused on making loans and equity investments in the venture capital space.

The company’s loans enabled some of America’s most promising, emerging growth, pre-IPO and M&A companies. It’s equity investments in these emerging growth companies have given Hercules an extra source of profits. For example, eight portfolio companies have completed or announced an IPO or M&A liquidity event so far in 2018.

HTGC has been a publicly traded BDC since 2005. The dividend has been steady to growing since 2018. The shares currently yield 9.1%.

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Market Preview, Uncategorized

Market Preview: Earnings Season Enters Late Innings, But AAPL Still to Bat

After the largest one-day loss of capital by a single stock in history last week with Facebook (FB), investors will be understandably nervous going into the end of earnings season. Monday morning will kick-off with a mix of industrials and tech as Caterpillar (CAT), Seagate (STX) and KLA Tencor (KLAC) report earnings. Analysts are expecting continuing strong numbers from CAT based on continued economic strength and rising commodity prices. Though doing well on the year, Seagate fell sharply after last quarter’s earnings. Investors will be looking for any news on a move to solid state technology many believe the company must make.

The GDP number Friday was strong, coming in at 4.1% growth, but that was not enough to keep the market in positive territory as the weekend approached. Consensus is the large number was due to an avoidance of impending trade tariffs, ant that first-half growth has stolen from second-half numbers. Monday the economic calendar brings a continuation of housing data as Pending Home Sales numbers are released. Those numbers will be followed closely by the Dallas Fed Manufacturing Survey.

Tuesday, the last day of July, we’ll get early numbers from Proctor and Gamble (PG) and Pfizer (PFE) in the morning. Facing “reduced competitor pricing” P&G tanked after earnings last quarter. The stock has regained that loss, but still sits well below where it was at the beginning of 2018.  Pfizer announced a major reorg earlier in the month. Investors will be looking for more color on how this will impact the company moving forward.

Early earnings numbers, as well as the Case-Shiller Home Price Index and Consumer Confidence reports will drive pre-lunch trading. But, by mid-day the market’s attention will turn to earnings from Apple (AAPL), which are due after the close. This is the least interesting quarter annually for Apple, with holiday sales behind it and next year’s lineup yet to hit stores. But, with the impact of the Facebook numbers fresh in their minds, investors may not be willing to hold AAPL shares up going into the close on Tuesday.

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Uncategorized

10 Strong Buy Stocks From the Best Analysts on Wall Street

Source: Shutterstock

Now more than ever, it makes sense to listen to analysts with a proven track record of success. Anyone can claim to be a market expert. Anyone can have an opinion. But that opinion becomes a lot more meaningful when the figures show that this person tends to be right.

Here I turned to TipRanks to pinpoint analysts who really know what they are talking about. These are the analysts that demonstrate the highest success rates and consistently high average returns per rating. We can track the latest ratings from these best-performing analysts to gain an edge on the market.

Plus by searching for stocks with a ‘Strong Buy’ top analyst consensus rating, I know these stocks score big on a Street-wide basis too. Let’s take a closer look at ten of these top stock picks now:

Strong Buy Stocks: Amazon (AMZN)

Source: Amazon

E-commerce king Amazon.com, Inc. (NASDAQ:AMZN) has just held its best-ever Prime shopping bonanza. Despite a few early technical glitches, the event was an unparalleled success. Its fourth annual Prime day lasted 36 hours, up from 30 hours previously, with over 1 million deals globally. This included over double the number of deals on Amazon goods specifically, as well as special Whole Foods Market discounts.

“We estimate that Amazon generated ~$2B in revenue from its fourth Prime Day event this year” wrote top RBC Capital analyst Mark Mahaney (Profile & Recommendations). But the real value is even greater: “We view Prime Day as no only a revenue and GMV driver for Amazon, but also a catalyst for growing its Prime subscriber base, Alexa-enabled device ecosystem, and Private labels.”

He has a $1,900 price target on AMZN- just below the Street average of $1,931. In the last three months, 36 top analysts have published Amazon Buy ratings vs 2 hold ratings. The stock’s biggest supporter is Deutsche Bank’s Lloyd Walmsley. This top analyst has just called AMZN his top ‘net pick for the long-haul. His Street-high $2220 price target suggests 20% upside potential. See what other Top Analysts are saying about AMZN.

Strong Buy Stocks: UnitedHealth (UNH)

United Health Stock

Source: Shutterstock

One of the largest U.S. insurance companies, UnitedHealth Group Incorporated (NYSE:UNH) looks unstoppable right now. The company has just released another round of impressive earnings results. Strong broad-based performance drove total 2Q revenue of was $56.1 billion (+12.1% y/y).

“We believe UNH is nicely diversified and should remain a core holding in all large-cap portfolios” cheered five-star Cantor Fitzgerald analyst Steven Halper (Profile & Recommendations). He has a $300 price target on the stock, indicating over 18% upside potential from current levels.

Crucially, Halper notes that its lucrative Optum tech business continues to account for a large share of earnings. Indeed, all three Optum segments grew earnings at a double-digit rate. Optum plans to sustain this growth into 2019 through digital health products, such as Rally.

Halper concludes: “UNH should continue to execute on its growth strategies and deploy capital efficiently. We believe the shares are attractive at current levels.” Five top analysts have published recent Buy ratings on the stock vs just 1 Hold rating. See what other Top Analysts are saying about UNH.

Strong Buy Stocks: Lowe’s (LOW)

A New Lowe’s Companies, Inc. CEO Could Be Just Enough of a Tweak

Source: Mike Mozart via Flickr (modified)

The stars are aligning for Lowe’s Companies, Inc. (NYSE:LOW), the second-largest Home Improvement specialty retail chain in the US. The company owns over 2,000 retail stores across the US and Canada. And now Oppenheimer’s Brian Nagel (Profile & Recommendations) has reaffirmed his bullish take on the stock:

“Early in 2018, we identified LOW as a Top Pick and our preferred way to play Home Improvement, on the view that recently announced activist intervention could spur a long-overdue strategic repositioning at the chain.”

He continues: “Now, following a string of positive developments at LOW, and with an eye toward 2019, we are increasingly of the opinion that the components are in place to support a potentially meaningful fundamental strengthening at the chain.” Indeed, Nagel’s $140 price target sees the stock spiking 40% from current levels.

Activist investor Bill Ackman recently disclosed a $1 billion bet on Lowe’s, while hedge fund D.E. Shaw Group pressured the company to put three new directors on the Lowe’s board. As a result, the company has a very-experienced new CEO on the way (former J.C. Penney CEO Marvin Ellison).

In the last three months, the stock has scored 7 top analyst buy ratings vs just 1 hold rating. See what other Top Analysts are saying about LOW.

Strong Buy Stocks: Micron (MU)

Source: Shutterstock

Red-hot chip stock Micron Technology, Inc. (NASDAQ:MU) just got even hotter. The company has just announced a savvy Credit Agreement with various lenders. This provides the chip giant with a $2 billion revolving credit facility. The facility matures 5 years after the effective date. And it’s Micron’s potential plans for this new cashflow that has excited top Nomura analyst Romit Shah (Profile & Recommendations).

He comments: “This is really interesting in our opinion because at the analyst meeting in May Micron guided to a target liquidity model in the low 30% range of sales. Adding $2.0 billion in revolving credit to an estimated $8.0 billion in total cash would put Micron’s liquidity at $10.0 billion, or roughly 33% of revenues, exiting the month of August. This, to us, strongly suggests that every dollar of free cash flow could be used to repurchase the stock, which management has repeatedly indicated is cheap at current levels.”

“The punch line is that if earnings don’t grow from the August period, MU could repurchase $10 billion of the stock (15+ percent) over the next four quarters, boosting EPS by an estimated $1.50 year over year,” the analyst concluded.

He has a $100 price target on MU- indicating massive upside potential of over 88%.  This makes the stock extremely appealing at current levels. Plus the data shows that 17 analysts are bullish on MU with just 3 staying sidelined. See what other Top Analysts are saying about MU.

Strong Buy Stocks: Nutrien (NTR)

Source: Shutterstock

This new company deserves a prime place in your investing radar. Nutrien Ltd. (NYSE:NTR) is the world’s largest fertilizer producer, formed through the merger of Agrium and PotashCorp in January. It is now targeting $500 million in post-merger synergies by end-2019. This cash can be returned to shareholders and boost growth.

Plus Nutrien is perfectly positioned for a strong catch-up in US farm activity following a delayed spring and better fertilizer prices. Top Cowen & Co analyst Charles Neivert (Profile & Recommendations) has compared this fertilizer stock to “green bananas,” urging investors to buy before prices surge. He spies a positive supply/demand situation for nutrient producers set to last 18-24 months.

With this in mind, Neivert ramped up his price target from $60 to $63 price target. This translates into 20% upside potential from current levels. The stock has 100% top analyst support right now with 4 recent buy ratings. See what other Top Analysts are saying about NTR.

Strong Buy Stocks: Immunomedics (IMMU)

Source: Shutterstock

Biotech Immunomedics, Inc. (NASDAQ:IMMU) is buzzing right now. The catalyst: a key regulatory approval. The FDA has now accepted the BLA submission for sacituzumab govitecan (IMMU-132) for the treatment of metastatic triple-negative breast cancer (mTNBC). This is for patients who have already received two or more prior therapies for their metastatic disease.

Most encouragingly, the application will now be evaluated under priority review. “The priority review signals the FDA’s appreciation for the unmet need in TNBC, and we expect an approval and early 2019 launch” states five-star Cowen & Co analyst Phil Nadeau (Profile & Recommendations). He adds: “We continue to think IMMU is undervalued for sacituzumab.”

Given the drug’s strong efficacy and acceptable safety profile, sacituzumab has the potential to become a standard therapy in this indication. Consultants believe the therapy “will be embraced by physicians” writes Nadeau.

IMMU is already up 51% year-to-date. However, the $36 average analyst price target suggests a further 46% upside potential still lies ahead. This is with four recent top analyst buy ratings. See what other Top Analysts are saying about IMMU.

Strong Buy Stocks: Gulfport Energy (GPOR)

Source: Shutterstock

Natural gas giant Gulfport Energy Corporation (NASDAQ:GPOR) currently has a whopping ~215,000 net acres under lease in the massive Utica Shale formation. For Williams Capital’s Gabriele Sobara (Profile & Recommendations) GPOR represents a Top Pick in the world of natural gas.

Following a strong second-quarter earnings beat, Sobara reaffirmed his Buy rating and $16 price target (36% upside potential). Production surged 28% in Q2 as drilling expanded in Oklahoma and Ohio. Meanwhile, natural gas prices rose to $2.48 per thousand cubic feet of natural gas, up from $2.15 one year ago. He is now awaiting the earnings call scheduled for August 2.

Sobara concludes: “With the 2Q18 production beat, we believe there is upside to Consensus estimates for 2H18 production…  We continue to view GPOR as a Top Pick for natural gas exposure, especially as it transitions to free cash flow in 2H18.” Five top analysts have published recent buy ratings on this ‘Strong Buy’ stock. See what other Top Analysts are saying about GPOR.

Strong Buy Stocks: Sage Therapeutics (SAGE)

Sage Therapeutics, Inc. (NASDAQ:SAGE) is making leaps and bounds in the treatment of central nervous system disorders. Its most advanced drug is Brexanolone for postpartum depression. Five-star Matthew Harrison of Morgan Stanley (Profile & Recommendations) has just reiterated his SAGE buy rating with a $228 price target (42% upside potential). “Given the lack of standard treatment and the modest benefit available with generic antidepressants, we believe brexanolone can be a [nearly] $1 billion global drug,” the analyst said.

An NDA (new drug application) was submitted to the FDA back in April. If the drug gets the green light, it could be launched as soon as the first half of 2019. The crucial date to keep an eye on is December 19. If the drug receives FDA approval it could easily push shares higher very quickly.

Plus Harrison forecasts more than $2.5 billion in peak sales for SAGE-217, which is currently trials for the treatment of depression, bipolar disorder and insomnia. This is where the company’s real value is. “We see continued de-risking of ‘217 driving SAGE higher,” the analyst wrote.

Luckily so far the chances of success are high as the data has proved ‘robust.’ Note that this stock scores the backing of six top-rated analysts. See what other Top Analysts are saying about SAGE.

Strong Buy Stocks: Alibaba (BABA)

The Safer Way to Play Alibaba Stock

Source: Shutterstock

Can Alibaba Group Holding Limited (NYSE:BABA) do no wrong? The stock has scored consistent support from top analysts. In the last three months alone, 13 top analysts have published BABA buy ratings. This comes with huge upside potential to boot of 33%.

“We believe Alibaba and JD.com will continue to benefit from increasing online/mobile shopping penetration, offline/online retail integration, and China’s emerging middle class” commented Scott Devitt (Profile & Recommendations). This five-star Stifel Nicolaus analyst has a bullish $256 price target on BABA (35% upside potential).

Most encouragingly, he is very optimistic on the stock’s long-term potential. This is because Alibaba is taking the time to invest in ‘omnichannel retail initiatives.’ As part of its groundbreaking New Retail strategy, BABA is bringing tech to the traditional world of retail. Devitt explains “the company is leveraging its data technology to empower its brick-and-mortar retail partners to transform through digitization.”

With the aid of technology, store operators can react to consumer demands in real-time, improve inventory management, and address the evolving demands of customers much quicker than ever before. See what other Top Analysts are saying about BABA.

Strong Buy Stocks: Microchip (MCHP)

Source: Shutterstock

Last but not least we have auto tech specialist Microchip Technology Incorporated(NASDAQ:MCHP). The high-quality chip stock is already a top ten automotive supplier with over 50 components sold into the vehicle.

According to top Needham analyst Rajvindra Gill (Profile & Recommendations), the company is targeting automotive semiconductor growth via embedded systems which are smarter, networked, and more secure. This is particularly relevant for the rapidly growing field of advanced driver assistance systems (ADAS) in self-driving vehicles.

“We would argue that MCHP is one of the leading ADAS suppliers through its broad product portfolio of MCUs, networking, analog, HMI and memory targeting important applications, such as lane departure, front collision avoidance AEB, adaptive cruise control and more” sums up Gill.

He has a $130 price target on the stock. This works out at 39% upside potential from the current share price. Bear in mind this ‘Strong Buy’ stock has received 11 Buy ratings from the Street in the last three months. This is versus only 1 hold rating in the same period. See what other Top Analysts are saying about MCHP.

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Savvy Investor Don’t Get Fooled

When I taught in night school my professor insisted I attend a full-day conference on “Effective Teaching Methods”. The speaker list was full of well accredited academics.

The morning consisted of 3-4 speakers outlining their intellectual theories. They rambled on, under the illusion the audience was enthralled with their brilliance.

The afternoon speaker told a story of a father and young son at a graduation ceremony. The boy looked at the program and asked, “What does BS, MS and PhD mean after their names?”

Dad thought for a moment and said,

“Son, everyone knows what BS is. Well, MS is just more of the same. At the top designation is PhD, meaning piled higher and deeper!”

Most of us roared with laughter as we stood and applauded, while others nervously shifted around in their seats.

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The investor’s challenge

Unfortunately, many investors must sort through too much BS that is attempting to deceive the public.

This week’s reading stack included eleven articles – like this New York Times piece, “Cash-Rich Companies Set Record for Buybacks”. They contained a common theme. Time reports:

“We’re starting to learn what America’s biggest companies are doing with the huge windfalls from President Donald Trump’s tax cuts. And the answer is great for investors – but not so great for workers.

That’s because many companies are returning huge portions of their billions in tax savings to shareholders in the form of share buybacks and dividend increases – not necessarily new hiring and investment.”

CNN Money reported on a speech by recently appointed Securities & Exchange commissioner Robert L. Jackson, Jr. at the Center for American Progress:

“An analysis released Monday by SEC Commissioner Robert Jackson Jr. found that the percentage of insiders selling stock more than doubled immediately after buyback announcements.

…. Daily stock sales spiked from an average of $100,000 to more than $500,000 per executive, researchers found.

“Right after the company tells the market that the stock is cheap,” …. executives overwhelmingly decide it’s time to sell.”

Buybacks have exploded this year thanks to Trump’s tax law, which lowered corporate tax rates and gave companies a break on returning foreign profits.

S&P 500 companies bought back a record $187.2 billion of stock during the first quarter ….

…. The tax law was supposed to encourage companies to spend on job-creating investments. But economists see little evidence so far that the tax overhaul has sparked an acceleration of investments in equipment, factories or other projects.

Jackson, who was appointed by Trump to fill a Democratic seat at the SEC, called on the agency to update its rules to limit executives from using buybacks to cash out.”

Is this a problem or political BS?

Scott A. Hedge, at the Tax Foundation offers a different perspective:

“Much has been made recently about the stock buybacks that companies have engaged in since the enactment of the Tax Cuts and Jobs Act (TCJA). To critics of the tax plan, stock buybacks are a sign that companies are not using the tax savings to either increase worker wages or to invest in new plants and equipment.

…. While the TCJA seems to have made stock buybacks a political issue, (Emphasis mine) little attention has been paid to whether companies are repurchasing more of their own stock today than in past years. That is why an article last week in The Wall Street Journal, “Record Buybacks Help Steady Wobbly Market” (under a paywall), caught my attention.

Despite the headline, the actual data contained in the chart accompanying the article shows that stock repurchases by S&P 500 firms in the first quarter of 2018 are on par with past peaks over the past six years.

We’ve re-created The Wall Street Journal chart in full, except that we adjusted the figures for inflation.

…. no matter how you look at the data it seems to show that the first quarter of 2018 is in no way an outlier when it comes to share repurchases by companies. What has changed is the political environment following the passage of the Tax Cuts and Jobs Act.” (Emphasis mine)

While I’m fed up with the political innuendos, I’ll leave the political debate to others. There is not much we can do about it anyway.

My concern is how do investors cut through the deliberate attempts to deceive and protect their nest egg and retirement income?

Here is a link to Commissioner Jackson’s talk:

“Basic corporate-finance theory (Emphasis mine) tells us that, when a company announces a stock buyback, it is announcing to the world that it thinks the stock is cheap. That announcement, and the firm’s open-market purchasing activity, often causes the company’s stock price to jump, so the SEC has adopted special rules to govern buybacks.”

“In Theory There Is No Difference Between Theory and Practice. In Practice There Is.”– Yogi Berra

The theory behind stock buybacks is the stock is cheap, however today stocks are being bought back for different reasons. Theory and practice are miles apart.

One former client had a rule; earn a minimum of 10% return on invested capital – 5% for dividends and 5% reinvested for growth.

For years it worked well. However, what happens when the business is no longer growing. What if they are not producing close to capacity?

When sales are flat, they may want to invest to improve operational efficiency and reduce their costs. Companies should not invest in their business if they see no real growth on the horizon.

Hewlett-Packard was once like many technology companies, flush with cash, a darling of Wall Street, good profits and high stock prices. They made a series of acquisitions, and many were sold at a loss down the road. They reinvested their capital poorly; their business and investors suffered.

In our 2015 article, “Buyback shares = BS 101” we discussed companies buying back their stock (reducing their number of shares outstanding) to make their Earnings Per Share (EPS) look better. Many borrowed money to buy back their shares at their all-time highs. The BS was not limited to a political agenda, it was an attempt to deceive the stockholders and increase their compensation.

How do investors know if a stock buyback is a good thing?

Fortuna Advisors produced a terrific “2018 Fortuna Buyback ROI Report”. They coin the terms Buyback ROI (Return on Investment) and Buyback Effectiveness. Many companies do a poor job:

Fortuna Advisors introduced Buyback ROI on June 3, 2011 in an article published on CFO.com titled “What’s Your Return on Buybacks?” For the first time, investors and corporate observers could look clearly past the overly simplistic and often misleading Earnings Per Share (EPS) accretion assessment and determine if remaining shareholders benefit from a buyback. (Emphasis mine)

…. All EPS growth is not created equal.

Our research shows that, on average, the EPS growth that comes from reducing the number of shares outstanding is worth significantly less than the EPS growth resulting from revenue growth and operating improvements. (Emphasis mine)
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5 Big Tech Stocks to Buy Instead of Facebook

Is Facebook Inc (FB) Stock a Screaming Buy or a Portfolio Destroyer?

Source: Shutterstock

It’s been a rough two days for investors in social media giant Facebook Inc (NASDAQ:FB). The company’s disappointing second-quarter results caused FB stock to make its way more than 20% lower in after-hours trading on Wednesday, the firm’s largest drop since 2012. The FB disaster has also hit big tech stocks hard, with heavy hitters across the industry all suffering from the fallout. 

For those of us who didn’t expect such a steep fall, the FB loss is a tough pill to swallow. However, it’s important to look on the bright side and follow the advice of investment guru Warren Buffett, “Be fearful when the market is greedy and greedy when the market is fearful.” 

Now a great time to snap up big tech stocks you’ve had your eye on because many of them have seen their share price tick down a few percentage points simply because of FB’s shortcomings. While FB’s poor guidance and uncertain future might cause you to back away from the social media firm, there are plenty of other tech names to scoop up while the sector is struggling.

Here are 5 big tech stocks to start with:

Big Tech Stocks to Buy Instead of Facebook: Micron (MU)

It Is Time to Buy MU Stock on Weakness

Source: Shutterstock

One stock that has come back down to earth recently and should definitely be on your buy list is Micron Technology (NYSE:MU). The memory chip maker has been consistently delivering on quarterly reports and yet investors have kept their cool and remained cautious on the stock because of worries about the overall industry and trade tension with China.

Historically, chipmakers have had to battle against the drawbacks of operating in a cyclical industry. However, with explosive growth in technology, the slow periods that chipmakers used to deal with are shrinking. Tech’s hottest emerging trends like cloud computing, the internet of things, artificial intelligence and self-driving vehicles all require bigger, better, faster memory chips. That means that for the foreseeable future, demand for the chips that Micron produces should be relatively strong.

These worries, which appear to be overdone, have kept MU stock from becoming overly expensive. The stock trades at just 4.5 times its forecasted earnings — a huge discount to the rest of the tech sector. The stock won’t be this cheap for long, so it’s worth putting on your buy list. 

Big Tech Stocks to Buy Instead of Facebook: Intel (INTC)

Source: Shutterstock

Another underestimated tech stock that should be on your watchlist is Intel Corporation(NASDAQ:INTC). While INTC stock didn’t feel much of a burn following FB’s poor results, the company’s share price has been languishing in the mid to low 50’s for the past few months as investors weigh up whether or not the firm has enough momentum to compete in the semiconductor space. 

It’s true that INTC’s shift into becoming a more data-centric firm has put it in direct competition with Advanced Micro Devices (NASDAQ:AMD), but that doesn’t meant there’s not enough room for two semiconductor businesses in the industry. Growth in the tech space over the next decade is likely to produce enough demand to go around, so although it’s worth acknowledging AMD as a threat, Intel looks financially and strategically prepared to cope in a competitive environment. 

INTC has several catalysts coming up that could push its share price higher — one being the firm’s second quarter results, due out on Thursday afternoon. Despite worries about AMD’s advances, Intel looks likely to deliver which will likely send the share price higher. Plus the company has yet to announce it’s new CEO, something that will likely drive the stock higher.

Big Tech Stocks to Buy Instead of Facebook: Alphabet (GOOGL) 

What Ad Revenue Will Tell You About the Future of GOOGL Stock

Facebook’s failure to deliver with its earnings hit FANG stocks hard, which explains why Google parent Alphabet Inc (NASDAQ:GOOGL) lost nearly 2% of its value overnight. Those losses have very little to do with the company’s growth prospects, though.

GOOGL delivered impressive Q2 results earlier, however, with revenue coming in higher than expectations and traffic-acquisition costs significantly lower. The firm was able to grow both its advertising business as well as it’s hardware, cloud-computing and mobile app arm, a good sign for future gains. 

What’s more, the European General Data Protection Regulation, the privacy protection law that weighed on FB’s results, could actually become an ally for Google according to the firm’s management. The law may actually strengthen Google’s position as a market leader, which could help GOOGL continue to grow its business. 

Big Tech Stocks to Buy Instead of Facebook: Garmin (GRMN)

Source: Shutterstock

Wearables are a segment tech investors should be considering and while the obvious choice in this industry might be Apple, Garmin (NASDAQ:GRMN) is worth your attention as well. The firm surprised investors by successfully transitioning from being a navigation systems maker to being a competitive force in the smartwatch space, and the company ranks second to Apple in the wearables market.

Garmin has a loyal following and has kept its offerings focused on what its consumers are interested in- GPS. The company has proven that it can roll with the punches and its devices are classed as some of the most reliable on the market. 

Plus, Garmin offers shareholders something a lot of tech stocks don’t: a respectable dividend. GRMN stock currently pays out a 3.3% dividend yield that investors can rely on for the foreseeable future. Garmin’s payout ratio is just 65%, meaning the firm has plenty of cash to cover its dividend payments even if it goes through a rough patch.

Big Tech Stocks to Buy Instead of Facebook: PayPal (PYPL)

How Paypal Just Upended Square's Growth Plans

Source: Shutterstock

PayPal (NASDAQ:PYPL) has had a bumpy year as investors tried to determine whether the payment processor’s separation from eBay (NASDAQ:EBAY) will have a sizable impact on the firm’s future growth prospects. The stock lost more than 3% overnight, which has brought the stock back below $90 per share.

While the eBay separation is going to hurt PYPL’s business, the damage isn’t going to be as catastrophic as some are predicting and the firm’s other initiatives will more than offset any eBay losses. PayPal has become a force to be reckoned with in the fintech space with 237 million active consumer accounts and 19 million merchant relationships. That huge reach is what makes PYPL so valuable. There’s a compelling case for both merchants and consumers to sign up because everyone is already using the service. 

Plus, there’s a lot of untapped potential in PYPL’s peer-to-peer platform Venmo. Right now the service is still in the early stages and has been eating up a lot of PYPL’s cash, but once it has been fully developed it will allow PayPal to keep a larger percentage of transaction fees and should be a real asset to PYPL stock.

As of this writing, Laura Hoy was long PYPL and FB. 

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Dividends

2 “Fire Sale” Dividends Up to 10% to Buy Now (with upside)

One of the most reliable income-producing sectors has been hit hard over the past year, handing you a terrific shot at outsized dividend yields running all the way up to 10%.

In a moment, I’ll show you two funds that let you grab these huge income streams at a big discount—and one that looks like a strong buy but is way overpriced and headed for a fall. You’ll want to keep that one as far away from your portfolio as possible.

The sector all three of these picks come from is utilities—one of only two sectors of the S&P 500 that’s down over the past year (the other being consumer staples), with a 2.6% overall decline.

The fact that utilities and consumer staples are down tells us one thing: the market has a bigger appetite for riskier stocks on confidence that the economy is expanding, with GDP growth slated to reach 3% by the end of 2018.

But that confidence has resulted in some folks shifting cash away from so-called “boring” utilities—in effect throwing out the baby with the bathwater, as the old saying goes.

And for dividend investors like us, that adds up to a nice buying opportunity.

Because as you can see in the chart below, all four of America’s biggest utilities are having no trouble making their dividend payouts (the exception, Southern Company [SO], saw its payout ratio spike as it paid for an acquisition, but that’s quickly returning to normal):

Stable Dividends? Check.

And if you want more proof that these dividends are ironclad, take a look at the history:

Dividend Growth Is in Their DNA

That’s why utility stocks are often called “orphan and widow” stocks: they’re reliable payers you can buy, forget about and enjoy your dividend checks.

How to Grab Up to 10% Cash Payouts From Utilities Now

Unfortunately, this is where most people get hung up. Because despite their stable cash flows and rising dividends, utility stocks are far from easy to pick. They’re largely regional and, as a result, are exposed to demographic flows and local economic developments that are tough to track.

That’s why the benchmark ETF, the Utilities Select Sector SPDR ETF (XLU), is so popular.

With a 3.4% dividend yield, XLU’s payouts are nearly double those of the S&P 500. But the great news is that we can do even better, doubling XLU’s payouts again by digging into a high-yield corner of the market few people even know exists: closed-end funds (CEFs).

Right now, there are 9 utility-focused CEFs with dividends ranging from 6.4% to 10%, making them all intriguing options. But there are 2 in particular that should be high on your list.

Utility CEF Pick No. 1: This 8.6% Markdown Won’t Last Long

The first CEF is the Reaves Utility Income Fund (UTG), which is trading at an 8.6% discount to NAV after trading at a premium price for most of 2017. UTG gives investors a generous 7.3% income stream, or more than twice the payout of XLU.

That’s not the only thing UTG has going for it. This fund has crushed the benchmark ETF over the last decade, nearly doubling its total return while also giving investors a much higher payout. Bigger returns and a bigger income stream aren’t easy to find—but UTG offers investors both:

An Index Crusher

CEFs with this kind of outperformance are usually priced at a premium to NAV, and given that this one was priced at a premium itself just a few months ago, the time to make a move is now, before its current markdown bleeds away.

CEF Pick No. 2: More Risk, More Reward

In addition to UTG, there’s another utility CEF that is worth considering—although I’ll tell you upfront that there is more risk involved.

I’m talking about the Duff & Phelps Global Utility Income Fund (DPG), which is trading at a 10.6% discount to NAV.

I’m going to be honest: DPG doesn’t have a great history. It’s underperformed the index since its IPO in 2011, although a lot of that underperformance has shown up since 2014:

This Chart Is Ready to Flip

Why the poorer performance?

Well, remember back in 2014, when oil prices crashed? This was great for American utilities, which are net consumers of energy. But DPG is a global utility fund, and a lot of energy providers outside of America are also energy producers, so they’re much more sensitive to oil prices than their US cousins.

But oil is soaring in 2018. We’ve already seen West Texas Intermediate (WTI) prices jump 12.8% this year, and the strong economy probably means prices will go even higher. That could be a boon for DPG, as it benefits from higher consumption and higher oil prices.

Plus, DPG’s luxurious 10% income stream is nearly triple that of the index fund, so you’ll be well compensated by that hefty dividend while you wait for the fund’s discount to close and its NAV to rise.

Now we have to talk about another utility fund that has outperformed the market but isn’t the screaming buy it appears to be. Far from it.

An Overpriced Utility CEF to Avoid

The DNP Select Income Fund (DNP) is another utility CEF that has beaten XLU over the long term, as you can see here:

Another Outperformer

While DNP’s outperformance deserves to be rewarded, the market is going way too far, currently rewarding it with a 20% premium to NAV. Meanwhile, UTG—the first utility fund I told you about—trades at an 8.6% discount! Not only that, but UTG has beaten DNP for a long time, indicating that it is the superior fund.

The bottom line? DNP’s huge premium—and the downside it implies—alone make this CEF a fund to avoid right now.

Why Wall Street Ignores CEFs

At this point you may be wondering why you’ve never the media (and likely your own financial advisor) talk about the big yields and deep discounts in the CEF space, like the two I’ve showed you today.

The answer? They’d rather just talk about what’s popular—big-cap stocks or overbought ETFs. It saves them a lot of research, and they get paid the same amount anyway!

That’s too bad, because the totally inefficient CEF market is serving up some incredible deals on funds paying hugedividends right now, such as …

My No. 1 CEF Buy Now: 810% Gains and 8.4% Dividends in 1 Click!

My favorite CEF to buy right now has crushed the market since inception, with a monstrous 810% return!

1 Chart That Demolishes Conventional “Wisdom”

This is incredible—the kind of gain you might expect from, say, a small-cap tech stock, not a conservative fund like this one.

To give you a little more context, my No. 1 pick is a pharma fund run by some of the smartest minds in the business—researchers and doctors with “boots on the ground” experience zeroing in on the next billion-dollar-plus blockbuster drug.

That alone is reason enough to put this one on your short list.

There’s more, though. Because this dynamic fund also throws off an incredible 8.4% dividend, too!

You’d think a gain and a payout like that would at least get a few folks in the mainstream media talking.

No way. Not yet, anyway.

Why? For one, this low-key CEF is tiny, with just a $391-million market cap, so it gets even less attention than your typical CEF does.

Yet as I write, this fund trades at a 4% discount to NAV. That may not sound like much, but it’s traded at fat premiums MANY times in the past 5 years.

When it does so again, we’ll be locked in for fast 20%+ upside from here, on top of that massive dividend!

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Dividends

Fake News Puts These Two Solid High-Yield Stocks on Sale

In my focus area of high yield stocks, I am regularly reminded how committed to losing money are many high-yield stock investors. Any whiff of bad news has them running for the exits, which drives down share price, which causes more fear based selling, which further drives down the share price. You get the picture. Investors who buy high yield stocks are often new to owning stocks, or less well informed on how stock prices fluctuate. To avoid being a money-losing, fear-based seller of dividend stocks, an investor needs to understand the difference between real and fake news that moves stock prices.

Real news about publicly traded companies is primarily quarterly earnings results and the associated management comments about business operations. Press releases directly from the individual companies count as real news. You may notice that these items come out just once to a few times per calendar quarter for most stocks. This is the information on which buy and sell decisions should be made.

Related: Separating Real News from Fake News in the Stock Market

However, the financial news media is hungry for items to fill websites and financial news networks’ broadcast time. The information from these news outlets come from Wall Street analysts and financial writers who share their opinions and try to predict the future. They have no deeper insight that what an investor can get from the information released directly by the companies.

Predicting future results are really just estimates or guesses. I refer to these forecasts as “fake news” because they do not add any real information to my knowledge about individual companies. When a “fake news” item results in a steep share price drop, I review the real news I know about a company and often recommend using the price decline as a buying opportunity. Here are two stocks that recently were affected this way.

Pattern Energy Group (Nasdaq: PEGI) recently experienced a 12.5% decline when the province of Ontario announced it was cancelling over 750 renewable energy contracts. While Pattern Energy was not singled out, the company has a significant presence with several projects under development in Ontario.

A few days after the big drop, a follow up report noted that none of Pattern Energy’s projects would be affected. However, even though the original cause of the decline has been proven to not affect the company, less than half of the steep drop has been recaptured.

This makes PEGI an attractive purchase now with its stable and growing dividend and 9.6% yield.

Over the course of just one week, the share price of Uniti Group (Nasdaq: UNIT) declined by 20%. The drop was almost entirely due to a Wall Street analyst putting a sell recommendation on the stock with a $15 price target.

The real facts are that UNIT at $17.40 per share is the same company with the same prospects as it was when the share price was $4 higher. The big dividend is not at risk, and this is a company that is growing and diversifying its business operations. UNIT now yields almost 14%. It is likely that the Q2 earnings release in early August will give a boost to the share price.

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