Monthly Archives: December 2018

Market Preview

Market Preview: Interest Rate Fears and Slowing Growth Drive Market Lower

Markets continued Friday’s downward trajectory Monday on fears of an interest rate hike on Wednesday and slowing growth in the overall economy. The Empire State Manufacturing Survey, projected to come in at 21, already down 2.3 points from November’s level, was a much worse 10.9 when it was released Monday Morning. The number had not been this low since mid-2017. The Housing Market Index, which had been expected to rise to 61 from November’s 60, also missed badly coming in at 56. It was amid this backdrop of softening numbers, both in the U.S. and globally, that money managers and market veterans began calling more loudly for a halt to the Fed’s interest rate increase policy. Chairman Powell has been backed into something of a corner after all but pre-announcing the December rate increase in the Fed’s policy statement. Fearing the Chairman has no choice but to implement the rate increase, markets fell across the board. The DJIA was down over 500 points once again, closing off 2.11%. The S&P broke through support levels around 2,600, hitting new lows for 2018, and finishing down 2.08% for the day. And, the Nasdaq, which was above 8,000 in September, closed at 6,753, off 2.27%.   

Fedex (FDX) and Micron Technology (MU) will headline earnings Tuesday. Fedex raised a red flag for analysts a few weeks ago when it decided to replace David Cunningham, a 36 year veteran of the company and head of the Fedex Express business, right before the holiday rush. With approximately 60% of the company’s revenue coming from the Express business, analysts are wary that the unit may be in trouble given the removal of its leader with no explanation given. With earnings falling, investors are looking for some insight into the current tech cycle when Micron reports on Tuesday. The stock traded up to $64 earlier in the year before falling back to earth and its current $33 level. Analysts are expecting 18% year-over-year growth and EPS of $2.94.

Housing starts and Redbook retail numbers will be released Tuesday morning. November housing starts are expected to fall to 1.221 million from 1.228 million in October. Given the miss on homebuilder sentiment, it would not be surprising if the expected housing starts number misses estimates as well. Retail sales numbers are projected to rise 6.6% year-over-year. Tuesday also marks the beginning of the Federal Open Market Committee meeting. While mortgage application and existing home sales numbers are slated for release Wednesday, the day’s economic data will be overshadowed by the release of the Fed’s decision on interest rates at 2pm. While there is a rising chorus railing against the December rate rise, it is still expected that the Fed will increase interest rates by .25% when it announces its decision Wednesday afternoon.

After breaking support at the $42.50 level in late November, General Mills (GIS) has been in a steady decline falling through $37 on Monday. Investors will be laser focused on margins when the company reports earnings on Wednesday. Rising input costs have made profitability challenging for the entire branded consumer food sector. Also reporting Wednesday is Paychex (PAYX). The recent announcement that the company will be acquiring Oasis Outsourcing Acquisition Corp. will drive a portion of the earnings call. Paychex paid $1.2 billion cash for the company and cited potential synergies in both revenue and cost savings. Analysts will be looking for management to flesh out the expected benefits from the merger.

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Dividends

My “Sleeper” Pick for 8.7% Dividends and Big Upside in 2019

Today I’m going to show you why this market isn’t as spooked as you might think. Then I’m going to reveal the 1 sector (and 1 fund boasting an incredible 8.7% dividend yield) that’s a screaming bargain now.

Let’s start with the state of play as I write this.

Here’s a question: of the 11 sectors that make up the S&P 500, how many do you think are negative for 2018?

If you said more than 5, the pessimism of the financial press has tainted your worldview. Take a look at this table:

5 in the Red, 5 in the Green

A close look at the 11 sectors of the S&P 500 is crucial, because we quickly see that 5 sectors are green, 5 are down and 1 is flat for 2018. While the red sectors are down big (financials energy, and materials have all dropped more than 10%), solid returns in tech, healthcare and utilities tell us most regular investors haven’t hit the panic button.

Let me explain.

Remember that there are “risk-on” and “risk-off” sectors. If investors are really worried about a big downturn, they go head-first into the “safe” and usually countercyclical consumer-staples sector—but the Consumer Staples SPDR ETF (XLP) is down 3.8% on the year, and the cyclical Consumer Discretionary SPDR ETF (XLY) is up 4.8%.

There’s a simple reason for that: everyday Americans are buying more because they’re earning more and getting jobs more easily. Therefore, it makes no sense in such an environment to run away from so-called risky assets, because those assets are the ones bagging higher revenues and earnings.

Likewise, tech and healthcare are typically high-risk sectors, with higher P/E ratios, that get sold off when a major market downturn is supposedly around the corner. But the Health Care SPDR ETF (XLV) is up nearly 10%, and tech’s 2.4% gain is after the heavy selloff of Apple (AAPL), on trade-war fears.

The lesson is obvious: while some sectors are suffering a short-term downturn, others are fine, thanks to economic growth of 3% and earnings growth of more than 20%. But the big financial media’s cavalier attitude toward the details has resulted in a lot of news about a market panic that simply isn’t there.

What About the Losers?

Before we get to one of my favorite sectors for 2019 (and that 8.7% yielder I mentioned earlier), let me quickly touch on a couple particularly beaten-down corners of the market. No, we’re not going to bottom-fish here—but these sectors’ misery has a key role to play in the nice price pop (and income) our pick is poised to hand us in the months ahead.

The first is materials, which saw earnings growth fall sharply, to 10%, in the third quarter, largely due to sluggish commodity prices across the sector, which lowers their pricing power because materials companies can’t increase prices of the commodities they sell to factories and property developers. That’s weighed down materials stocks—but it’s been a boon to the sector (and fund) we’ll discuss in a moment.

The other is energy, which has has been hit hard by the fall in oil. Just look at the price action with the Energy Select Sector SPDR (XLE) and WTI oil futures:

Low Oil and Lower Energy Stocks

While that’s bruising for the sector, it’s great for an economy like America’s, where energy demand from consumers and manufacturers is the main engine of growth. So XLE’s 12.7% loss should be seen as the rest of the economy’s gain.

What to Buy Now

That brings me to the sector I want to dive into today: real estate.

It’s a direct beneficiary of lower costs for energy and materials, because both lower property builders’ expenses, resulting in greater inventories for real estate investors and higher profits for real estate developers.

Secondly, the real estate sector has been brutalized because of fears of higher interest rates—fears that are proving to be wrong.

Rate Burden Gets Lighter

Over the last 3 years, the return on the Real Estate Select Sector SPDR (XLRE) has been less than half that of the broader market, for one reason: higher interest rates. Almost 3 years ago to the day, the Federal Reserve kicked off the current rate-hike cycle, and the real estate market freaked out (see the dip in the orange line in early 2016). It has only slightly recovered since—with several “mini-freakouts” along the way.

On Sale Now: An 8.7% Dividend With Upside

Now that rates are set to rise more slowly than previously expected, real estate is a particularly appealing “sleeper” sector, because the market still hasn’t gotten the message. You can compound your returns through a closed-end fund (CEF) like the Nuveen Real Estate Income Fund (JRS).

JRS invests in many companies that make up XLRE, but there’s one huge difference: JRS trades at a 10.2% discountto the market value of the companies it owns, while XLRE trades at the whole market value of its portfolio. So you can get this already very cheap sector at a discount!

Another great thing about JRS? Its income. With an 8.7% dividend yield, this fund trounces the still-impressive 3.6% dividend XLRE provides. So you’ll be pocketing a hefty income stream while you wait for the real estate market to come to its senses.

5 More “Must-Buy” 8%+ Dividends for 2019

Here’s the thing about 8.7% payouts like these: the pundits will tell you they’re unsafe, but that’s nonsense!

The truth is, dividends like these are absolutely necessary if you want to achieve the “retirement holy grail”: clocking out and living on dividends alone. Because when your dividends cover your bills (and then some!) and roll in like clockwork, who cares what Mr. Market gets up to on a day-to-day basis?

This is how everyone should approach retirement investing. And the good news is that there are plenty of CEFs—like JRS—throwing off rock-solid 8%+ payouts that will get you there.

But where do you start? Easy: with the 5 hidden gems (including one CEF paying an incredible 9% dividend) I’ll reveal when you click right here.

And before you ask, no, you won’t give up a cent of upside to get your hands on the 8% average payouts these 5 funds deliver. Take a look at how one of these buys—pick No. 3, to be exact—has manhandled the market since inception:

Market-Crushing Gains and 8.7% Dividends—in 1 Buy!

Source: Contrarian Outlook

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Uncategorized

10 Best of the Best Stocks for 2019

Source: Shutterstock

It’s certainly never a dull moment in the markets these days — or anywhere else for that matter. It’s hard to pick the best stocks with all these headlines tugging them in all different directions. The Chinese economy is slowing down to sub-6% growth. Brexit negotiations are in shambles. President Donald Trump’s political troubles are growing. Europe is putting the brakes on quantitative easing.

The markets are understandably having trouble processing it all. One day China-U.S. trade talks are rallying stocks, but the next day, there’s talk of a global recession and stocks are tanking.

This is when you need quality stocks that aren’t wrapped up in all these issues. This when you need stocks that are moving on trends that are beyond much of this market volatility

The 10 best-of-the-best stocks for 2019 that I feature below are the kind of stocks I’m talking about. All are top-rated picks in my Portfolio Grader and will not only be shelter from this storm but great long-term growth companies as well.

Amazon (AMZN)

Best Stocks: Amazon (AMZN)

Source: Shutterstock

Amazon.com (NASDAQ:AMZN) should be no surprise at the top of this list.

The U.S. economy is driven by the consumer — about 70% of our economy is consumer driven. And few companies are focused on the consumer like AMZN.

Plus, Amazon has a “growth over profits” philosophy that has served it well, even when analysts had their doubts. It means that AMZN is already laser focused on making money in low-margin businesses and fueling its growth with higher-margin enterprises like its Amazon Web Services cloud services division.

It commands a significant premium, but given its track record through tough times, it’s well deserved.

Netflix (NFLX)

Best Stocks: Netflix (NFLX)

Source: Vivian D Nguyen via Flickr (Modified)

Netflix (NASDAQ:NFLX) has stuck to its knitting, unlike many of the other FAANG stocks. While it lost nearly 26% in the past three months, NFLX is still up an impressive 42% year to date. This is where the headlines may mislead some investors.

There’s no doubt that FAANGs like Netflix have been hammered. But the fact is, they’re still some of the best performing stocks in the market today.

What’s more, NFLX stock is continuing to grow its subscriber base in high-potential markets like India, where economic growth isn’t as volatile and barriers to entry are lower than in say, China right now.

ConocoPhillips (COP)

Best Stocks: ConocoPhillips (COP)

Source: Martijn Koster via Flickr

ConocoPhillips (NYSE:COP) is my favorite integrated energy company right now. One key reason is that it’s well diversified across oil and natural gas operations.

While oil has been a victim of overproduction and prices are low, natural gas prices are on the rise. And with winter coming to the Northern Hemisphere, demand is growing in Europe and Asia, where prices are significantly higher than in the U.S.

COP stock recently acquired more natural gas reserves in Canada, so it continues to expand its business in stable countries with hungry markets.

Up 18% year to date, this is solid energy pick that you can count on for the long haul.

Ecopetrol SA (EC)

Best Stocks: Ecopetrol SA (EC)

Source: Shutterstock

Ecopetrol SA (NYSE:EC) is the top Colombian integrated energy company. It has upstream operations — exploration and production — as well as midstream (pipelines) and downstream (refining) divisions for its oil and natural gas reserves.

EC has been operating in Colombia since 1948, but Colombia has had its ups and downs over the decades.

In the past few years, new leadership has brought its long-standing civil war to an end and the drug cartels are significantly less influential. This has meant that the economy is recovering and the middle class is expanding.

EC is a stable energy player in South America, delivering strong growth and a solid 3.5% dividend.

Abiomed (ABMD)

Best Stocks: Abiomed (ABMD)

Source: Shutterstock

Abiomed (NASDAQ:ABMD) is part of the medical device megatrend that is underway across the globe.

ABMD makes the world’s smallest heart pump. It was started by the doctor who invented the first artificial heart.

Today, it has a $14 billion market cap and is gaining business at a rapid pace because it’s a much better alternative to costly surgery and other procedures. When healthcare costs continue to rise, it’s companies like ABMD that benefit the most.

That explains why, in this tough market, ABMD is up 71% year to date. And there’s still plenty of headroom left.

Veeva Systems (VEEV)

Best Stocks: Veeva Systems (VEEV)

Source: Shutterstock

Veeva Systems (NYSE:VEEV) is a cloud provider that operates in a niche space — life sciences.

While you may think about the cloud as simply some remote storage facility that allows people to access information from anywhere, it’s more complex and nuanced than that. It has tiers of access and layers of analytics as well as customer resource management tools and productivity applications. And few sectors need a specialized cloud solution more than life sciences.

With all the regulations, the drug approval process and managing pipelines, as well as research, distribution and marketing, a focused and cohesive system built around these needs is very valuable.

That’s why VEEV has taken off in recent years. It’s up 67% year to date and has plenty of growth left.

China Petroleum & Chemical (SNP)

Best Stocks: China Petroleum & Chemical (SNP)

Source: Shutterstock

China Petroleum & Chemical Corp (NYSE:SNP), or as it’s better known, Sinopec, is China’s leading energy company and one of the top five energy companies in the world.

That’s not bad for a company that isn’t even 18 years old at this point.

Obviously, energy is a key component to the world’s second-largest economy’s economic growth. And it needs a secure source of oil and natural gas because relying on OPEC can get dicey, given the power and influence of the U.S. in the Middle East.

Sinopec is the tip of the spear for China’s energy independence. And there’s little reason to think that Sinopec’s importance is likely to fade in coming years. As a matter of fact, China’s moves into the South China Sea would suggest that energy exploration and production efforts are growing.

Up a respectable 13% year to date, it also throws off an impressive 5.6% dividend.

CenturyLink (CTL)

Best Stocks: CenturyLink (CTL)

Source: Shutterstock

CenturyLink (NYSE:CTL) is a telecom provider that has been around since 1930.

It’s not one of the major players and is more of a player in smaller markets where it can hold sway in rural communities and small towns. It considers itself the second-largest U.S. communications company to global enterprise providers. Basically, that means it’s a major player in the enterprise level marketplace. And this is the focus of the business moving forward.

The consumer market is losing its allure, especially as the mobile age takes over. CTL is now focused on finding its most valuable revenue sources and cutting its low- and no-margin businesses.

At worst, CTL is a good takeover play. At best, there’s a lot of growth and a solid 12.6% dividend to buy your patience.

Square (SQ)

Best Stocks: Square (SQ)

Source: Via Square

Square (NYSE:SQ) would be a fourth grader if it was a human. Yet Square is already a company with a $26 billion market cap and global reach.

SQ stock is up 81% year to date.

That’s a lot of success in just a few years. Granted, Square’s payment processing solutions were up and running before the company went public. And while SQ stock is firing on all cylinders, the financial industry has also started to take its fintech game to the next level, turning mobile banking into a significant force.

The crazy thing is, that its 81% return this year also includes a 30% slide in its stock price during the last three months.

Given the fact that SQ is a game-changer for small- and medium-sized business and there is a lot of untapped growth in these sectors, it is in a great position for the unfolding fintech evolution.

Shopify (SHOP)

Best Stocks: Shopify (SHOP)

Source: Shopify via Flickr

Shopify (NASDAQ:SHOP) is a major player in helping small and medium-sized businesses grow and succeed online. It not only helps people build out their sites, but it also delivers tools to help people manage inventory, develop marketing, track payments and track shipping.

It’s an all-in-one small business system in the cloud.

This niche is growing very quickly as people are looking for extra income, exploring turning a hobby into a business or looking to grow the market for their existing business.

At this point, there are more than 600,000 businesses powered by SHOP that are doing more than $82 billion in sales.

The stock is up 45% year to date and has weathered the stormy market. That should continue for years to come.

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Market Preview

Market Preview: Markets Tumble Yet Again on Chinese Data

Economic data out of China, indicating the country’s economy may be slowing, hit global markets hard on Friday. Industrial output grew by only 5.4% in the quarter, a growth rate last seen in the Chinese economy in 2016. The Chinese statistics bureau reporting the data said, the impact of tariffs in the trade war with the U.S have not yet been felt and are not reflected in the numbers. This may be the case, or it may be a negotiating tool for ongoing trade talks. Either way, markets again traded down on the headline data putting the S&P 500 back into correction territory, down over 10% from its highs. The S&P finished off 1.91%, the DJIA was down 2.02%, and the Nasdaq fell 2.26%. Offering no solace, Goldman Sachs economists stated they belief there is a good chance no trade deal is reached before the 90-day freeze on U.S. tariffs is removed in March. For its part, China has agreed to reduce tariffs on automobiles from the U.S. from the current 40% to 15%. Adding to the market damage, a report out of Reuters that Johnson & Johnson (JNJ) knew for over 40 years that its baby powder contained asbestos sent the stock reeling. Johnson & Johnson strongly denied the claims, but that did little to help investors who had flocked to the stock in recent months as a safe haven.

Tech behemoth Oracle (ORCL) and Red Hat (RHT) are scheduled to report earnings Monday. Analysts are expecting Oracle to report $.78 per share or 11.4% year-over-year earnings growth. The stock has traded flat for most of 2018, and investors don’t expect a big move from the company post-earnings given the recent market pressure on tech stocks. Red Hat is expected to show an earnings increase of 10% on revenue of $823 million.

Monday’s economic data will include the New York manufacturing survey and the housing market index. The prior reading on the housing index was 60. A continued deterioration in housing may spike the number lower, another potential negative for a shaky market. Tuesday analysts will examine Redbook retail data as we enter the final week before the Christmas holiday. Tuesday also marks the beginning of an FOMC meeting, at which most traders believe the Fed will raise rates by one-quarter percentage point. MBA mortgage applications and existing home sales data will be released Wednesday morning. The year-over-year change in home sales released in October showed a decline of 5.1%, putting the damage rising rates have had on housing on full display. Wednesday afternoon will bring the release of the Fed statement on interest rates and, the likely rate increase. The Fed announcement will be followed by a press conference by Chairman Powell at 2:30. Jobless claims, the Philadelphia Fed business outlook, leading indicators, and the EIA nat gas numbers will all be released on Thursday. Friday is a quadruple witching, which usually brings added volatility to the market. Economic data published on Friday includes durable goods numbers, GDP, corporate profits, personal income and outlays, consumer sentiment, and the Kansas City Fed manufacturing index.

Tuesday, investors will examine earnings from FedEx (FED) and Micron Technology (MU). The FedEx numbers are especially interesting to investors as they will serve as a pulse check on holiday spending. Paychex (PAYX) and General Mills will report quarterly earnings on Wednesday. Nike (NKE) and Walgreens Boots Alliance (WBA) are marked on the earnings calendar as reporting Thursday. Morgan Stanley recently came out with a note calling the sports company undervalued here and suggested buying Nike ahead of earnings. CarMax (KMX) is scheduled to close out the third week of December with earnings on Friday.

 

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Dividends

Don’t Miss This High-Yield Stock Paying 150% of Its Normal Dividend

Personally, I get to this point in the month and tell myself to stop spending money. I have been buying gifts, plus stuff on sale from my favorite vendors. If you are in the same boat, or even if you have exhibited outstanding spending discipline through this holiday season, I want to recommend giving your self the gift of a special dividend payment.

Today’s stock will pay a nice special dividend before the end of December and then continue to pay monthly dividends throughout the year. You can think of this as the gift to yourself that keeps on giving.

Main Street Capital (NYSE: MAIN) is a monthly dividend paying business development company (BDC).  The company has also paid semi-annual, supplemental dividends since 2013. The next supplemental payout lands in investor brokerage accounts on December 27 and is equal to 150% of the normal monthly dividend.

To earn this special 27.5 cents per share dividend, you must buy shares at least a day before the ex-dividend date of December 17. That means buy shares on December 16 or earlier. Your new shares will start earning the monthly dividends, with a payment on January 15.

A BDC is a closed-end investment company, like closed-end mutual funds (CEF). The difference is that a CEF owns stock shares and bonds, while a BDC makes direct investments into its client companies. A BDC will have up to hundreds of outstanding investments to spread the risk across many small companies. The client companies of a BDC will be corporations that are too small or too new to be able to issue stock or bonds into the publicly traded markets.

As a risk control factor, BDCs are limited to no more than two times its equity in leverage. This means that if a BDC has $500 million of equity raised from selling shares, it can borrow another $1 billion. The company can then make $1.5 billion of loans or equity investments.

Main Street Capital Stands Apart

Main Street Capital Corp. is really quite different from the rest of the BDC crowd. Since its 2007 IPO, MAIN has tripled the total return average of its BDC peers. Here is a list of some of the reasons why this company stands apart from its peers in the industry:

  • MAIN is internally managed with insiders owning over 2.8 million shares. Co-founder, Chairman, and CEO Vince Foster is the single largest individual shareholder.
  • Main Street is the most conservatively managed BDC in the industry and holds an investment grade BBB credit rating. Investment grade is rare among the BDC crowd and allows Main Street to borrow at a much lower cost of capital compared to most other BDCs.
  • Operating, admin, and management costs are 1.5% of assets compared to 3.2% for the average BDC and 2.7% for commercial banks.
  • Net debt is just 0.62 times company equity, well below the 2.0 times maximum set by law.
  • The share price is about 1.5 times the book or NAV value.

MAIN uses a two-tier approach to its portfolio. This unique strategy allows Main Street to generate a high level of interest income and capital gains from equity investments. In the middle market, MAIN provides debt financing to companies with stable finances and low risk of default.

The rules governing BDCs make it difficult to generate growth. Most companies in the sector experience declining book values and are eventually forced into dividend cuts. Main Street Capital has a different business model that has resulted in dividend growth and share price appreciation. This is a stock that should be in every income investor’s portfolio.

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Source: Investors Alley

Dividends

Earn 12% In A Month On This Twitter Covered Call

Twitter (NYSE: TWTR) is one of those companies which often poses a conundrum to investors. On one hand, the microblogging site has become an essential tool for following breaking news and insights into everything from sports to finance to politics. On the other hand, despite the popularity, the company doesn’t have an obvious path to ramp up monetization of its user base.

Regarding the issue of monetization, the company primarily makes its money on ad revenues. However, Twitter ads get mixed reviews as far as effectiveness. And frankly, the company doesn’t have many alternative for generating revenues outside of ads. Selling/licensing customer data (trends, etc.) is certainly a big growth area, but it has a ways to go to make a real impact on revenues.

On the bright side, Twitter is pretty much a must-have product for anyone who utilizes social networking. Active Twitter users include the President of the US, just about every famous athlete and entertainer, and a multitude of industry experts. For concise and/or breaking news, there’s simply no better source available.

It’s easy to see why investors are bullish on the stock. Yet, it’s equally logical to see the argument from those who may be skeptical on future growth potential. Look no further than Facebook (NASDAQ: FB) to see the potential perils of a public social media company. (Of course, TWTR has its own challenges with how it handles First Amendment issues.)

So how do you trade TWTR if you’re bullish on the stock but are concerned about downside risk?

As I matter of fact, I recently came across an interesting covered call trade in TWTR which provides a nice balance between risk and return. The beauty of covered calls is they can provide a hedge, income, and growth potential all in one trade.

This particular covered call involves selling 2,000 of the January 18th 40 call versus stock at $36.73. In other words, the trader purchased 200,000 shares of TWTR while simultaneously selling the 40 calls 2,000 times. The calls were sold for $1.10 meaning the trader collects $220,000 in premium.

First off, the $1.10 in premium collected also serves a hedge for the long stock. It protects the trader down to $35.63. Moreover, that premium represents a 3% yield on the trade, which expires in just over a month. That represent almost a 36% annualized yield.

In addition, since the trader is selling out-of-the-money calls (at the 40 strike), there is also stock appreciation potential. An additional $3.27 can be earned if the stock goes to $40 or higher by expiration. That’s represent another 9% in gains. All told, if TWTR has a good month, this trade can make as much as 12%. (In dollar terms, the trade can make about $875,000 at max gain.)

If you’re bullish on TWTR but worried about overall market conditions or company specific bad news, this is exactly the sort of trade you want to be making. You earn the 3% yield no matter what. The trade also provides a limited hedge on the stock price if the market sells off. And, you still have an additional 9% upside potential in stock appreciation.

It’s hard to argue with a relatively safe trade that can also produce 12% gains in about a month. If this trade appeals to you, I believe it’s a nice addition to any income-producing portfolio.

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Source: Investors Alley

Uncategorized

10 Stocks That Can Move Higher Whatever Happens

As we move nearer to 2019, market sentiment is growing increasingly cautious. And that’s fair enough. Talks of inverted yield curves and the ongoing U.S.-China trade war certainly aren’t boosting sentiment. But even within these conditions, there are still stellar stocks to buy out there.

I mean stocks with strong fundamentals and high growth potential. And the best part is, you don’t even have to look that far to find them. Morgan Stanley has just released a report revealing its stock picks for 2019. They see 2019 as a year of consolidation for the stock market. Consolidated stocks typically trade within limited price ranges and offer relatively few trading opportunities.

However, the names singled out in the report are capable of growing earnings even if the economy slows and the market tumbles.

Here I pinpoint 10 of the firm’s most compelling stock picks. As you will see all 10 stocks boast a “strong buy” analyst consensus rating (according to TipRanks research tools), and their upside potential doesn’t look too bad either. With that in mind, let’s see why Morgan Stanley is such a fan of these stocks right now:

Alphabet (GOOGL)

Stocks to Buy: Alphabet (GOOGL)

Source: Shutterstock

All’s well that ends well. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) may have endured a rocky trading period recently, but the future remains bright according to Morgan Stanley.

“As the dominant player in paid search, Google continues to benefit from secular growth as advertising dollars shift into digital,” the firm’s Brian Nowak (Track Record & Ratings) said.

Most notably, Google also owns YouTube, the leader in online video advertising. Indeed, Novak sees video advertising expanding nearly 25% from 2017 to 2020 to roughly $22 billion in the U.S. alone.

The Street shares this upbeat outlook. With a “strong buy” analyst consensus, the company’s $1,349 average price target speaks of 24% upside potential ahead. Get GOOGL Research Report.

Amazon (AMZN)

Stocks to Buy: Amazon (AMZN)

Source: Shutterstock

Also on Nowak’s stocks-to-buy list: Amazon.com (NASDAQ:AMZN). “As the dominant player in U.S. eCommerce, Amazon continues to experience secular growth as retail dollars shift online,” the analyst explained.

He believes the e-commerce giant has a “significant opportunity” to capture a larger piece of the roughly $1 trillion worldwide eCommerce market (ex China). This is thanks to 1) the company’s growing logistics network and 2) its expanding Prime membership program.

Indeed, an impressive 37 out of 38 analysts covering the stock are bullish. That’s with a $2,154 average price target (27% upside potential). Bear in mind that while GOOGL stock might be struggling, AMZN is still enjoying strong momentum. Shares are up 40% year-to-date. Get the AMZN Research Report.

Expedia (EXPE)

Stocks to Buy: Expedia (EXPE)

Source: Shutterstock

Let’s stay in internet land for our third stock: leading online travel player Expedia Group (NASDAQ:EXPE). Like other web stocks, Expedia continues to benefit from secular growth as travel dollars shift online.

“The $1.3 trillion global travel industry remains a highly fragmented market and both BKNG and EXPE look well positioned given their scale advantages and portfolio of brands” writes Morgan Stanley’s Brian Nowak.

In all, over the next three years he expects EXPE’s bookings to grow at an aggressive 11% CAGR.

Indeed, while some skeptics may call the stock overvalued, the Street is forecasting a 23% rise in share prices for EXPE. That’s with 12 buy ratings vs three hold ratings over the last three months. Get the EXPE Research Report.

Illumina (ILMN)

Stocks to Buy: Illumina (ILMN)

Source: Konrad Forstner

Genetic sequencing stock Illumina (NASDAQ:ILMN) gets the thumbs up from Morgan Stanley’s Steve Beushaw (Track Record & Ratings). This is a stock that’s already up 55% year-to-date, boosted by the savvy acquisition of Pacific Biosciences in December.

“As the dominant provider of technology to sequence DNA, ILMN stands to benefit from a series of market developments and policy changes that have emerged over the last year,” Beuchaw said.

Here are a few positive catalysts to consider: 1) The success of DNA-driven drug administration in immunotherapy by Merck 2) Stronger global pharma and government funding for DNA analysis 3) Growing consumer interest in DNA-derived applications; and 4) Growing global research funding for genomic research.

In terms of share price, the Street is modelling for 8% upside ahead. This would take this “strong buy” stock to buy to $367. Get the ILMN Research Report.

Intuitive Surgical (ISRG)

Stocks to Buy: Intuitive Surgical (ISRG)

Source: Jon Fingas via Flickr (Modified)

Intuitive Surgical (NASDAQ:ISRG) specializes in robots — robotic surgeries to be precise. Its da Vinci robotic system has already racked up a whopping five million procedures. That’s with 44,000 da Vinci surgeons trained worldwide.

“Intuitive Surgical is the leader in robotic surgery,” states the firm’s David Lewis (Track Record & Ratings) said. The system allows doctors to carry out minimally invasive procedures. It does this by translating the surgeon’s hand movements into smaller, precise movements of tiny instruments inside the patient.

Lewis added: “The company has gained significant adoption within urology and gynecology and is still in the relatively early stages of penetration internationally and within broader procedures (including general surgery).”

With eight buy ratings vs two hold ratings, analysts forecast 24% upside for shares. Get the ISRG Research Report.

National Vision Holdings (EYE)

Stocks to Buy: National Vision Holdings (EYE)

Source: Shutterstock

National Vision Holdings (NASDAQ:EYE) is one of the largest and fastest-growing optical retailers in the U.S. It already boasts 1,000 stores in over 40 states.

“We believe EYE offers a unique blend of defensiveness and growth vis-à-vis its focus on value within the non-cyclical optical retail segment and ~50% unit growth runway,” Morgan Stanley’s Simeon Gutman (Track Record & Ratings) said.

The numbers speak for themselves. As Gutman points out, “EYE has delivered 67 consecutive quarters of positive SSS [same store sales] and is expected to grow square footage ~10% annually over the next several years.”

Plus the upside potential looks very compelling. Analysts see shares exploding by nearly 50% to $49. Get the EYE Research Report.

Palo Alto (PANW)

Stocks to Buy: Palo Alto (PANW)

This cybersecurity stock is primed for success. So says Keith Weiss (Track Record & Ratings). He sees Palo Alto Networks (NYSE:PANW) as well-positioned for future industry trends.

“To garner more effectiveness and efficiency in information security architectures, we believe the key secular trend in security will be the consolidation of spending towards integrated security platforms” revealed this five-star analyst.

And Weiss believes PANW can emerge victorious: “Palo Alto Networks stands well positioned to excel within that trend given its leadership in core network security and growing traction into areas such as Endpoint, Cloud, and Security Analytics.”

Encouragingly, its $240 average price target suggests 24% upside potential for this “strong buy” stock. Get the PANW Research Report.

Pluralsight (PS)

Stocks to Buy: Pluralsight (PS)

Source: Hillary via Flickr

Despite what its name might suggest, this isn’t another vision-related stock. Pluralsight (NASDAQ:PS) is an online education company that provides IT and software video training courses through its website. The company is seeing “exceptional” business-to-business activity, with Q3 with billings growth over 50%.

“We believe Pluralsight is well positioned to help enterprises address the need for IT knowledge while managing an accelerating industry-wide talent gap,” commented Brian Essex (Track Record & Ratings).

He continues, “The platform is driven by machine learning technology that not only enables a more efficient learning process at the individual level but also enables enterprises to efficiently quantify, develop, and manage talent across technology platforms.”

Five analysts have rated the stock in the last three months. All named it a stock to buy. They see 30% upside potential ahead. Get the PS Research Report.

Vertex Pharmaceuticals (VRTX)

Stocks to Buy: Vertex Pharmaceuticals (VRTX)

Source: Shutterstock

Vertex Pharmaceuticals (NASDAQ:VRTX) is a biotech that focuses primarily on cystic fibrosis (CF). Word on the Street: This is a stock with some of the best growth prospects in large-cap biotech.

“The company’s CF therapies Kalydeco and Orkambi collectively generated ~$2.2B in sales in 2017, and a third therapy (Symdeko) was approved in early 2018, which we believe could generate ~$750M in sales for 2018E” comments Morgan Stanley’s Matthew Harrison.

Plus Vertex is also developing a triple combination therapy for cystic fibrosis. According to Harrison, this triple therapy has generated strong late-stage data and “could address a large portion of the CF market.”

In total, 12 out of 13 analysts rate this “strong buy” stock a buy, with 17% upside potential from current levels. Get the VRTX Research Report.

Visa (V)

Stocks to Buy: Visa (V)

Source: Shutterstock

Last but not least we have financial giant Visa (NYSE:V). Trends are looking strong going into 2019.

“Visa is a key beneficiary of robust consumer spending worldwide, the ongoing migration from cash to electronic payments, and broadening merchant acceptance,” sums up Morgan Stanley analyst James Faucette.

This should power the stock higher despite forex headwinds.

“Global Personal Consumption Expenditure and secular growth drivers should support high-single-digit volume growth and low double-digit revenue growth in the near-to-medium term” he adds.  Europe, India and Visa Direct are all potential upside drivers.

All told, 15 analysts rate this a stock to buy with only two analysts staying sidelined. Their average price target indicates 19% upside potential. Get the V Research Report.

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Market Preview

Market Preview: Markets Cling to Gains as Rally is Sold

Markets continued a trend of sell the rallies today, even though the three major indexes finished in the black. News that the U.S. and China were making progress on tariffs, and that President Trump was willing to consider intervention in the detention of the Chinese CFO of Huawei, sent markets soaring after the open. The rally on headline trade news was once again sold as traders turned negative in the afternoon, leaving the DJIA up .64%, the S&P 500 clinging to a gain of .54%, and the Nasdaq up .95%. The tech heavy Nasdaq had been up as much as 2.35% earlier in the day. Investors are running out of time for any meaningful rally in December, and face the prospect of another Fed rate hike next week. Continued unsettling trade news, rate hike fears, a crumbling housing market, and general international unrest, both with BREXIT and riots in Paris, have kept the market on an uneven kilter as 2018 is drawing to an end. Investors can likely expect more up and down trading until some of these major issues are resolved.

Tech earnings will be front-and-center Thursday when Adobe (ADBE) and Ciena Corp. (CIEN) report. Adobe will look to placate investors who have begun to rely on the Saas company to produce ever increasing earnings. Last quarter the company hit another earnings record, increasing earnings 24%, beating both company and analyst projections. Expectations for Ciena are a little more down to earth, with an expected 4.8% year-over-year earnings increase projected. The stock has performed well in 2018, and will look to assure investors who have driven the stock to a 50% gain thus far. Also reporting Thursday is warehouse retailer Costco (COST). Reporting 10% comparable store sales for November late last week, investors are expecting another great number from the membership store as we head into year end.  

Thursday analysts will review weekly jobless claims, import and export prices and the EIA nat gas report. The recent uptick in jobless claims is expected to level off, with claims projected at 228K, down slightly from last week’s 231K. Thursday afternoon the Treasury budget and the Fed balance sheet numbers will be released. While it usually attracts little attention, the Treasury budget may garner mention this week with the possible partial shutdown of the U.S. Government looming in a few weeks. The Fed balance sheet has been in focus lately as the Fed is using a reduction in the balance sheet to tighten monetary policy. The balance sheet has shrunk from a high of $4.5 trillion to just over $4 trillion currently. The Fed shrinks the balance sheet by decreasing the amount of reinvestment it performs from maturing securities. Another $11 billion is expected to be removed from the balance sheet this week.

Retail sales and industrial production numbers will be released Friday. Industrial production, which rose only .1% in October, is expected to rebound slightly rising .3%. Also released Friday will be the PMI composite flash reading along with the Baker-Hughes rig count numbers and business inventories.

Indian multinational ICICI Bank (IBN) is projected to report earnings on Friday. With a $62 billion market cap, the bank has traded relatively flat in 2018. Earnings are expected to come in at $.05 per share. Analysts are also expecting numbers from Telecom Italia (TI) to close out the week. The NYSE traded ADR of the Italian communications company has fallen on hard times this year. The stock is down 26% so far in 2018.

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REITS

This 20.1% Yield is Too Good to Be True (But This 11.8% Payout Isn’t!)

Most dividend investors understandably love the idea of an 8% No Withdrawal Portfolio. It’s a simple yet “game changing” idea that you don’t hear much from mainstream pundits and advisors.

Find stocks that pay 7%, 8% or more and you can retire comfortably, living off dividend checks while your initial capital stays intact (or even appreciates).

Now this strategy is a bit more complicated than simply finding 8% yields and buying them. Granted the recent stock market pullback has benefited investors like us because we can snag more dividends for our dollar. Yields are higher overall, and that’s a good thing.

Next we must smartly select the stocks that are going to pay our dividends securely – without tapping their own shares prices to pay us.

An Ideal 11.8% Dividend Payer That “Pivoted” Properly

As I write to you there are 123 stocks (trading on major US exchanges with market caps above $500 million) that yield 8% or more. A holiday basket of these dividends is going to be a mixed bag, however. While some of these stocks will shower you with quarterly (or even monthly) payouts with price appreciation to boot, others will lose some or all of your cash in price depreciation.

Of our 123 candidates, 99 have not delivered 40% total returns over the past five years. And this is the minimum we ask of an 8% payer – dish us our dividend and don’t lose our initial capital!

Granted this “back of the envelope” study is probably a bit harsh. We’re missing a few elite 8% payers that “graduated” to lower yields thanks to good stock performances. Still, the important lesson here is that 8% payout success is challenging (though not impossible, as we’ll see shortly).

Of these 99 high paying under-performers we have 57 “biggest losers.” These stocks have actually lost their investors money over the past five years. In other words, they have delivered their big dividends yet lost as much (or more) in price. Not good!

And remember, the S&P 500 returned 61% over the time period. So while we can expect our steadier strategy may underperform during roaring bull markets, we would expect a business to at least beat your mattress as a total return vehicle.

Exceptions? Sure. Business models can change, and past performance isn’t necessarily a predictor of future results.

For example a subscriber recently wrote in to ask why New Residential Investment (NRZ) declined in price three years ago. Well, NRZ had a completely different portfolio now than it did then. Let me explain.

Mortgage REITs (mREITs) like NRZ typically buy mortgage loans and collect the interest. Their business model prints money when long-term rates are steady or, better yet, declining. When long-term rates drop, these existing mortgages become more valuable (because new loans pay less).

On the other hand, the mREIT gravy train usually derails when rates rise and these mortgage portfolios decline in value. Historically, rising rate environments have been very bad for mREITs and resulted in deadly dividend cuts.

But NRZ has actually doubled its investors’ money and the value of its own portfolio (its book value) in less than three years. Its secret? Rather than buying mortgages, NRZ has been investing in mortgage service rights (MSRs). This is “the right” to collect payments from a borrower. In other words, the firm doesn’t own these loans – it owns the rights to service these loans.

MSRs tend to rise in value when mortgage refinancing slows down. That’s exactly what happened, and this “pivot” has made many retirement riches. Happy NRZ investors have collected double-digit dividends while enjoying price appreciation to the tune of 151% total returns!

An Ideal 11.8% Dividend Payer

NRZ’s success story is, as discussed, more rare than not in 8%-ville. Let’s now call out a couple of popular “losers” that, despite their high current yields, don’t really belong in retirement portfolios.

2 Stocks Yielding Up to 20.1% to Avoid

Fashion retailer Buckle Inc (BKE) has paid 14.7% of its current share price in dividends over the past twelve months (thanks to a $2 “special” payout). But the dividend well might run dry soon.

Buckle’s sales (the blue line below) have been in a slow-motion nosedive for three years, taking earnings (red line) and free cash flow (FCF, in orange) down with them:

Belt Tightens on Buckle’s Payout

Why are sales suffering? The firm’s revenues are drying up with its retail outlets. Buckle must pivot its business model to sell direct to consumers online in order to survive.

These “death of retail” market stresses, predictably, have driven up Buckle’s payout ratios: in the last 12 months, the company paid out more than it earned in dividends (140% of profits, to be precise), along with 123% of FCF.

I don’t like to see payout ratios above 50% from non-REITs, let alone 100%. This dividend has too high a risk of becoming unbuckled to belong in a No Withdrawal Portfolio.

Government Properties Income Trust (GOV) meanwhile is a real estate investment trust (REIT) that frequently pops up on cute recession-proof dividend lists. Most of the company’s income comes from government entities, so it seems like a smart way to potentially tap Uncle Sam for rent checks.

And GOV’s big dividend usually qualifies itself for No Withdrawal consideration. However its recent run-up in yield is actually a bad thing:

The Wrong Kind of Bull Market

Problem is, this “bull market” in yield has happened because GOV’s stock has collapsed! Its share price is down 66% in five years. Even with the supposedly generous payout, GOV investors have the taste of stale government cheese in their mouths:

GOV Investors Down 46% With Dividends

There are a few reasons GOV has been crushed. First, its stated funds from operation (FFO) have been in decline. FFO per share is 24% lower today than it was five years ago, even though the dividend is the same.

Second, GOV may be overstating its FFO. The firm has been accused of conveniently excluding maintenance-related capital expenditures. Can you imagine old government buildings that don’t require any maintenance?

And finally, even if we give GOV the benefit of the doubt, it still seems to be paying cash it doesn’t have. Its annual dividend of $1.72 per share exceeds its trailing twelve-month FFO of $1.54. A more responsible 90% payout ratio (which is OK for a REIT) would mean a reduced dividend closer to $1.38 per share.

But the market is expecting worse, which is why GOV yields a “beyond contrarian” 20.1%. Stay away from this sketchy situation.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

Pot Stocks

The 10 Best Marijuana Stocks to Buy in 2019

Any cursory look at the markets would reveal that 2018 wasn’t the best year for investors. That goes for speculative assets as well, including marijuana stocks. Although going green has proven net positive for the early birds, the sector tanked heavily during the October selloff. Still, I wouldn’t drop them from your list of stocks to buy just yet.

Despite their well-publicized fall from grace, several marijuana stocks have stabilized from their severe correction. While that’s no guarantee that the industry is done spilling blood, the deflated prices will almost certainly attract speculators. Should enough risk-takers enter the arena, publicly traded cannabis companies will jump higher, even if it’s only a temporary swing.

However, some other factors suggest that marijuana stocks may enjoy a sustained rise. First, none of the big waves currently spooking benchmark indices affect the legal cannabis industry. Whether it’s political unrest in the Middle East, the spiraling protests in Paris or the ugly Huawei controversy, marijuana for now is mostly a North American issue.

Second, medical cannabis potentially offers significant social utility. A stunning Bloomberg article analyzed whether Gilead Sciences (NASDAQ:GILD) made the right business decision in producing a drug that cured diseases rather than managing them. The perception exists that big pharma companies should focus primarily focus on revenue generation rather than medical breakthroughs.

On the other hand, medical marijuana companies have no such quandaries. Because they are typically much smaller outfits, they don’t mind the inability to patent a naturally occurring plant. If anything, an organization that produces a proven, effective cannabis strain would represent a buyout target. This asymmetry challenges big pharma, but makes marijuana-based pharmaceuticals among the best stocks to buy.

While the sector remains risky, the deflated market environment offers attractive deals on these 10 marijuana stocks.

Tilray (TLRY)

Tilray (NASDAQ:TLRY) easily represents the most interesting and controversial picks among marijuana stocks to buy for next year. Within a few months after its initial public offering, TLRY stock pulled a ten-bagger. But as you know, the victory was short-lived, and Tilray came crashing down to earth.

Naturally, several analysts and commentators blasted the company as an unsustainable bubble. Keep in mind, though, that since its IPO, TLRY stock is up over 470%. I wouldn’t dismiss such a performance as a failure. Moreover, shares have stabilized near the $100 level. If this company was as terrible as the bears claimed, I doubt TLRY would ride this support line.

Now, it’s easy to dismiss any individual opinion. It’s much harder when a banking giant like Barclays (NYSE:BCS) increases their position. Clearly, they view TLRY as one of the best stocks to buy in 2019, and they’re putting their money where their mouth is.

Canopy Growth (CGC)

The prior two months have not been for Canopy Growth (NYSE:CGC). Taking a similar route to most other marijuana stocks, CGC dropped 26% in October. The following November appeared promising, building off a sharp burst of momentum. Unfortunately, the rally lost traction and CGC ended up losing double-digits for the month.

But what I like about Canopy Growth is that true to its name, it’s a steady grower. Despite the recent sharp losses, its longer-term bullish trend channel remains intact. I wouldn’t consider hitting the panic button unless shares started to decisively fall below the $25 level. That said, I think the broader fundamentals favor CGC stock.

Tilray has a financial institution backing it. For Canopy Growth, they have alcoholic-beverages maker Constellation Brands (NYSE:STZ). This is a trend that investors, even the skeptical ones, shouldn’t ignore. Big money is increasingly stepping into the cannabis sector, making CGC one of the best stocks to buy despite its well-publicized setbacks.

Cronos Group (CRON)

While most marijuana stocks have struggled to rekindle their prior catalysts, Cronos Group(NASDAQ:CRON) currently stands above the competition. For the month so far, CRON stock has streaked to an amazing 39% lead. Of course, most of that optimism comes courtesy of Altria Group (NYSE:MO).

The iconic tobacco company made headlines when it announced a partnership with Cronos. The deal, worth $1.8 billion, provides CRON with a boatload of cash to further develop its cannabinoid (CBD) products. On the other side of the fence, Altria needs something fresh to reinvigorate its traditional tobacco business.

A key long-term synergy could be the vaporizer market. Vaping CBD e-liquids have taken off in terms of popularity. Altria has attempted to break into the vaporizer market with its own heat-not-burn tobacco products. But with Cronos’ expertise in CBD, Altria has another angle in this sector to work.

In the meantime, feel free to put CRON in your list of best stocks to buy for next year.

Aurora Cannabis (ACB)

Aurora Cannabis (NYSE:ACB) has suffered a disjointed long-term performance in the markets, even compared to other marijuana stocks. In 2017, ACB stock shot from near-obscurity to the toast of Wall Street. This year, ACB has shown flashes of brilliance, but little to show for it overall.

I expect the cannabis sector to wake from its slumber. When it does, the currently embattled ACB has the potential to become one of the best stocks to buy for 2019. The markets really haven’t responded positively to Aurora’s buyout of Farmacias Magistrales. Farmacias made news when it became the first, and so far only Mexican importer of raw materials that contain the psychoactive component THC.

The buyout allows Aurora a viable channel to Latin America’s medical-marijuana market. In addition to Farmacias, ACB has operations in Colombia and Uruguay. Should the industry establish medical breakthroughs in Latin America, advocates will pressure the U.S. to further loosen federal cannabis restrictions.

Auxly Cannabis (CBWTF)

One of the most common misconceptions is that legal-cannabis advocates are only “fronting” to get high. While that use is unavoidable, the botanical industry has several legitimate applications. On the business aspect, several investors assume that all cannabis companies focus on growing weed.

But as Auxly Cannabis (OTCMKTS:CBWTF) demonstrates, marijuana stocks feature the same vibrancy and dynamism as other commodity related investments. Auxly specializes in all areas of the legal-cannabis supply chain, with a primary focus on upstream operations. This involves partnering with companies that grow the actual product.

In addition, CBWTF levers a viable midstream operation. This includes activities such as extraction, processing and branding. It also involves longer-term efforts like research and development.

The biggest advantage for CBWTF to pull this streaming business off is its balance sheet. With a favorable cash-to-debt ratio, Auxly can make key acquisitions and investments while the cannabis market is still young.

Origin House (ORHOF)

Formerly known as CannaRoyalty, Origin House (OTCMKTS:ORHOF) is another cannabis firm that made its name through streaming businesses. And while it still generates some revenue through its initial line of work, ORHOF has become a powerhouse in branding.

The proof is in its utter domination of California. Unbeknownst to me prior to this write-up, the Golden State is the world’s largest legal cannabis market. With a title like that, it’s a wonder how anything gets done around here. Joking aside, Origin House boasts more than 450 California-based dispensaries and more than 50 popular brands.

In other words, if you can make it in California, you can make it anywhere. This bodes very well for ORHOF stock. Last month’s midterm elections proved that legal weed is gaining serious momentum. Inevitably, more recreational markets will open, allowing Origin House to expand its dominating presence.

Marimed (MRMD)

Let’s face facts: Marijuana stocks don’t exactly have the greatest reputation for stability. That goes five-fold for over-the-counter offerings. One notable exception to this rule is Marimed(OTCMKTS:MRMD).

While other sector players hemorrhaged severely during the October rout, MRMD stock actually enjoyed a standout performance, gaining nearly 19%. That said, Marimed eventually gave up those gains and then some. Since the first of November, MRMD is down a little over 17%.

Still, I think it’s fair to say that compared against other marijuana stocks to buy, Marimed has held up well. Heading into the new year, MRMD has the potential to turn heads.

Its biggest advantage is its highly demanded consultation services. Covering everything from licensing application support to facilities management, MRMD provides relevant and critical insights for budding entrepreneurs. Plus in my opinion, Marimed levers one of the brightest and well-rounded leadership teams in the marijuana industry.

Medmen Enterprises (MMNFF)

Marijuana retail outfit Medmen Enterprises (OTCMKTS:MMNFF) suddenly became one of the best stocks to buy in botany around mid-October. Within a matter of days, MMNFF stock skyrocketed over 60%. But like most over-the-counter affairs, Medmen gave up its profits just as quickly.

Since its peak closing price, MMNFF stock has dropped a humbling 53%. I get that most investors will balk at such volatility. However, for the speculator, I sense serious growth opportunities for Medmen.

The company has established itself as a retailer of premium cannabis products. Yet many investors may not appreciate that Medmen is a vertically integrated organization. From its upstream production operation down to extraction, branding and distribution, Medmen essentially controls its supply chain. This is a “farm-to-bong” business at its finest.

As Medmen CEO Adam Bierman stated recently, this structure affords the company generous margin-expansion possibilities. Further, the aforementioned high-profile deals only help validate smaller players like MMNFF stock.

Aleafia Health (ALEAF)

Broader and sector weakness has hurt virtually all marijuana stocks. However, the lesser-known names have experienced disproportionate pain. Unfortunately, this is something that Canadian cannabis firm Aleafia Health (OTCMKTS:ALEAF) knows all too well.

But despite its severe market loss over the past two-and-a-half months, ALEAF stock offers a speculative opportunity for risk-takers. For starters, the underlying company features the largest network of referral-only medical cannabis clinics in Canada. Furthermore, their patient base continues to increase as the industry gains social recognition and acceptance.

Management has also invested heavily in cultivation facilities, targeting an annual growing capacity of 98,000 kilograms in 2019. Most importantly, Aleafia has the substance to back up the outlook. In its most recent third-quarter earnings report, the company increased revenue 36%year-over-year.

Diego Pellicer Worldwide (DPWW)

We’ve arrived at the end of our journey regarding marijuana stocks to buy in 2019. In keeping with my loose tradition, I like to throw in an extremely speculative name. And don’t roll your eyes at me: you know you want to know!

The following idea comes from an InvestorPlace reader named Anthony. He asked my opinion regarding Diego Pellicer Worldwide (OTCMKTS:DPWW). My answer to him is the same one I’m giving to you, which is that DPWW stock is extremely risky. Aside from its distressingly low trading volume and market capitalization, Diego Pellicer lacks financial strength to convincingly pull off its licensing and royalties business model.

However, I’m intrigued with its premium branding business. Not that I would know, but Diego Pellicer specializes in high-class cannabis products. As companies like Origin House and Medmen have proven, cannabis users eschew quantity for quality. That could lead to a surprising turnaround for DPWW stock.

Or you can lose every cent that you put in.

As of this writing, Josh Enomoto is long MRMD and ALEAF.

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