Monthly Archives: December 2018

REITS

3 REITs Increasing Dividends in January

To build momentum from your income stocks going into the new year, consider buying into those REITs that should announce higher dividend rates in the first month of 2019. Each month I publish a list of those real estate investment trusts (REITs) that should announce higher dividend rates in the upcoming months. This knowledge can give you a jump on the rest of investing public, which will be surprised when the positive news is announced.

I maintain a database of about 130 REITs. With it I track current yields, dividend growth rates and when these companies usually announced new dividend rates. Most REITs announce a new dividend rate once a year, and then pay that rate for the next four quarters. Currently about 85 REITs in my database have recent and ongoing histories of dividend growth. Out of that group, higher dividend announcements will come from different REIT companies during almost every month of the year. With the potential of continued Fed interest rate hikes, the prospects of higher dividend payments coming in January will help to offset any share price disruptions resulting from announcements out of the Federal Reserve Board.

My list shows three companies that historically announce higher dividends in January and should do so again this year. Investors will start earning the higher payouts in the new year. But remember, you want to buy shares before the dividend announcement to get the benefit of a share price bump caused by the positive news event.

Here are three REITs expected to raise dividends that you might want to consider:

Apartment Investment and Management (NYSE: AIV) is a mid-cap sized REIT that owns and operates about 140 apartment communities.

About 40% of the company’s properties are in coastal California, with the balance spread across major U.S. metropolitan areas.

Last year, AIV increased its dividend by 5.6%. Cash flow growth has been comparable in 2018, and I forecast an 5% to 6% dividend increase in January.

The new dividend rate announcement will come out in late January with a mid-February ex-dividend date and payment at the end of February.

AIV yields 3.3%.

EPR Properties (NYSE: EPR) focuses its real estate investments in three different business sectors. Primary is the ownership and triple-net leasing of entertainment complexes and multiplex theaters. The second sector is the ownership of golf and ski recreation centers, also triple-net leased. The third sector is the construction, ownership and leasing of private and charter schools.

EPR pays monthly dividends and has grown the dividend rate by an average of 6.3% per year for the last five years.

In 2018 the company was active in both acquisitions and new developments.

The new dividend rate is announced in mid-January, with an end of January record date and mid-February payment. This stock is a long-term recommendation in my Dividend Hunter high-yield investing service.

EPR currently yields 6.2%.

Welltower Inc (NYSE: WELL) is a large cap healthcare sector REIT. The company owns properties concentrated in markets in the United States, Canada and the United Kingdom.

The portfolio is divided into three segments consisting of: Seniors housing, post-acute communities, and outpatient medical properties. Triple-net properties include independent living facilities, independent supportive living facilities, continuing care retirement communities, assisted living facilities, care homes with and without nursing, Alzheimer’s/dementia care facilities, long-term/post-acute care facilities and hospitals.

Outpatient medical properties include outpatient medical buildings. Welltower had increased its dividend every year since 2009 but did not change the rate at the beginning of 2017.

To get back on the dividend growth track, I expect a 2.0% to 2.5% increase to be announced in January.

The announcement will come out at the end of the month, with an early February record date and payment around February 20.

The stock yields 4.8%.

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Market Preview

Market Preview: Progress on U.S./China Trade War Lifts Markets

Markets rallied strongly Monday after President Trump and Chinese President Xi Jinping agreed to a 90 day moratorium on trade tariffs in which the U.S. will hold off on raising tariffs by 25% at the beginning of 2019. Larry Kudlow, the President’s National Economic Council Director, said “If China opens its markets as they promised to do, and they’re going to do it fast according to their promises, we will increase our exports substantially…” Kudlow is well known on Wall Street, and many analysts put faith in his comments over often exaggerated political commentary regarding trade. Markets rallied from the outset Monday morning, gave back some of those gains, and then rallied again near the close. Investors are hoping Director Kudlow is correct and for a quick resolution to the trade issues. If a resolution is not arrived at either before, or soon after, the new year markets will see the 90 day window as simply kicking the can down the road.

Dollar General (DG), Autozone (AZO) and Marvell Technology (MRVL) all report earnings on Tuesday. As Todd Vasos, CEO of Dollar General stated last quarter, “our two-year same-store sales stack for the second quarter of 2018 was the highest in 10 quarters.” The company has been hitting on all cylinders this year, and raised earnings estimates as a result. The stock has been little impacted by the market pullback, and analysts expect another strong quarter from the discount retailer. Autozone earnings are expected to increase 23% year-over-year when the company reports before the bell Tuesday. After selling off earlier this year the stock has regained the $800 level, recently hitting all-time highs. Analysts are looking for another strong quarter, and an update on the company’s aggressive buyback program.

Tuesday, investors will get to take a peak at motor vehicle sales and Redbook retail numbers. The auto sales number is expected to decrease slightly to 17.2 million from the 17.5 reported in October. But both month’s numbers increased dramatically from a summer slump. Wednesday was to see Fed Chairman Powell deliver testimony to Congress’s Joint Economic Committee. But, the passing of President George H.W. Bush, and the declaration of a national day of mourning, means that testimony will be postponed. Stock markets in the U.S. have also announced that they will be closed on Wednesday to honor the nation’s 41st President.  

Wednesday the earnings focus on retailers continues as lululemon (LULU), Five Below (FIVE) and American Eagle Outfitters (AEO) report earnings. Last quarter lululemon handily beat estimates by 44% sending the stock higher yet again after an earnings beat. The stock has performed exceptionally well this year, rising from $80 to around $140. Investors will be looking for the athletic apparel company to provide color on the final few months of the year as we’re in the midst of the holiday season. American Eagle has stair-stepped lower since August of this year. The company has invested heavily in its online operations, and has achieved relatively strong sales numbers from that channel the past few quarters. Analysts will be looking for an update on the progress of the online initiative and what hurdles the company is encountering as it broadens its platform.

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Buy These 3 Growth Stocks in a Sector Shielded From a Downturn

I’ll be the first to admit, when I went looking for stocks that would not be impacted by the trade war between the U.S. and China, or a flip-flopping interest rate policy, I did not think I would end up in the for-profit education sector. I viewed the sector as plagued by shaky financials and remember clearly the bubble and relatively recent collapse of many stocks in the for-profit education space.

The U.S. government’s policy of an “education for everyone” brought out bad actors in the sector who were more than willing to take advantage of the government’s largesse, and enroll students that had very little chance of paying back their educational debt. The resultant shakeout, when the government realized what was happening and pulled back on the lending reigns, left the most aggressive companies, like Corinthian Colleges and ITT, bankrupt.

So why look at these companies now? I found two catalysts as I began to research the companies. First, in the U.S., a more friendly government is in place after what I view as the correct crackdown of the previous administration. And second, the shakeout in the industry appears almost complete with several of the remaining companies touting solid financials and solid growth prospects due to economic and demographic changes.

In the U.S., Education Secretary Betsy DeVos has begun what NPR calls a “regulatory reset on Obama-era for-profit regulations”. One of the most onerous rules on the for-profit institutions in the U.S. is known as the “gainful employment” rule.

The rule in essence requires a for-profit institution to prove the students they enroll can be gainfully employed following graduation. The gainful employment policy is set to expire July 1, 2019, and Secretary DeVos has clearly indicated the Department of Education will not seek to extend the policy. This policy shift should benefit the for-profit education companies.

The companies I believe you should look at, which I list below, also have solid financials in place and are expected to grow substantially. There are two factors driving this growth. First, the companies are increasingly relying on technology, such as artificial intelligence, to educate more people using fewer and more efficient resources. And second, the move to a gig-economy means workers need more education throughout their career than they did even a few years ago. And, in countries like China, the gig-economy, combined with a move away from agriculture, is fueling rapid growth.

Karl McDonnell, CEO of Strategic Education (Nasdaq: STRA) (in early 2018 Strayer Education merged with Capella Education to form Strategic Education) recently said Strategic is, “using technologies like artificial intelligence and predictive analytics today to teach vastly more students with fewer humans and yet, better outcomes.” As this technology gets better, the efficiency should continue to drive cost out of the business model.

A few months ago Forbes reported that by 2020 fully half of U.S. employees will be engaged in freelance work. A McKinsey study examining the same issue, says that also by 2020, the U.S. will need 1.5 million more college educated workers than are available. And it’s not just a U.S. problem, as France is projected to have a shortfall of 2.2 million college educated workers with the European Union expected to have major shortfall issues due to both education and complicated hiring laws.

It’s my view that the for-profit educational institutions, with expertise in distance learning and educating adults who need to upgrade skills, will benefit from this changing job landscape and skills gap.

Here are a few of the companies I believe you should look at for your portfolio.

Grand Canyon Education (Nasdaq: LOPE)

The first thing to strike me about Grand Canyon is the positively sloping operating and profit margins the company has posted. In one year profit margins have risen to 23.6% in the latest reported quarter from 19.3%.

Grand Canyon is also very interesting because of a recent change in its business model. The company split off the “school” into a nonprofit and now Grand Canyon gives investors a services company that provides technology, counseling and a variety of other services to the school.

The services company receives 60% of the tuition from the nonprofit, and importantly can offer the services it provides to other institutions. This should allow the company to grow beyond the confines of being tied to one institution and provide substantially more market to address.

Grand Canyon is projected to grow earnings this year almost 27% and is projected to have a 17% growth rate over the next five years. The company has only a .05 debt to equity ratio and trading around $120 has a book value of almost $24 per share.

New Oriental Education & Technology Group (NYSE: EDU)

The for-profit education market is booming in China. In 2016 40% of the Chinese population was engaged in farming. In the U.S. and Germany, that number is 2% and 10% respectively. As China’s agriculture sector becomes more efficient, a major government initiative, it is projected that 250 million Chinese will leave agriculture and move to jobs requiring a higher education skill set.

As the education market grows in China for-profit institutions are also taking share from public schools. Revenue from 2012 through 2020 for private educational institutions is expected to grow at a compound annual growth rate of approximately 12%. New Oriental Education is poised to take advantage of these favorable demographics and growing market.

In October the company reported a 49% year-over-year revenue increase and a 13% year-over-year increase in student enrollments. The company has no long term debt and expects to increase earnings next year by over 34%.

What is impressive about the company is that it is both expanding rapidly, opening 18 new facilities last quarter, and is also earnings positive during this growth period. As CFO Stephen Yang described in the company’s latest earnings call, New Oriental uses a low cost promotional experiential course offering in the summer to bring in new students and then moves, as of the latest quarter, over 54% of those promotional students into full course offerings.

The stock has pulled back this year after becoming somewhat overheated and now trades at a PE of 36. But, based on the projected earnings growth, the forward PE is projected to be cut in half to just over 18.

Chegg, Inc. (Nasdaq: CHGG)

Chegg focuses on homework help, online tutoring, and scholarships and internship matching. The company is expanding rapidly, and is expected to grow earnings next year over 25%.

The company has been steadily increasing margins with gross margins coming in at just over 74% last quarter. The company appears to be on the cusp of profitability, and is just moving into a more efficient operating model through technology implementations.

CEO Dan Rosensweig discussed the company’s move to a chat-based platform, which allows fewer employees to service more students, in their last earnings call. Rosensweig stated, “With over 40% of college students requiring remediation in Math, English, or both, these are key subjects where we are starting to leverage A.I. and machine learning to expand our product offerings and provide greater support to a broader range of students.”

Employing a business model with a mix of human interaction provided by tutors, combined with a growing reliance on increasingly efficient technology, increases Chegg’s total addressable market as it expands its service offerings.

With a rapidly increasing market, due to the changing way people work and the increasing industrialization of growing economies, for-profit education companies like Grand Canyon, New Oriental and Chegg deserve a closer look. These companies have made it through the recent for-profit education shakeout and are rapidly earning their way back to a spot in your portfolio.

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2 Important Levels to Watch for Nvidia Stock

Nvidia Stock NVDA stock

Source: Shutterstock

Shares of Nvidia (NASDAQ:NVDA) have been hammered since the start of October. The rout in Nvidia stock pained a lot of long-term investors and shaken out, or caused severe losses for, a lot of recent buyers.

NVDA stock suffered a 50% decline in just 35 trading sessions from its early-October highs. Others, like Advanced Micro Devices (NASDAQ:AMD) have fared better, but have also been under pressure.

Despite the beating, Nvidia’s stock price is more a case of a broken stock than a broken company. Admittedly, it has a few issues, but they are more temporary than anything else and it still has several secular tailwinds at its back.

Evaluating Nvidia Stock

Current estimates call for 50% earnings growth this year and nearly 26% sales growth. However, those estimates drop considerably next year, calling for flat earnings growth and just 6% revenue growth. Now, inaccurate estimates can hurt both the bulls and the bears here, but consider how far off analyst estimates were for the upcoming quarter.

Management guided for $2.7 billion in Q4 sales, way below expectations for $3.4 billion. With that kind of miss, we can’t rule out that revenue could come under further pressure through the year. We also can’t rule out that analysts cut their estimates too much over the next five quarters.

That said, Nvidia has its share of issues. Mainly there was a false sense of demand for graphics chips thanks to cryptocurrency mining. Even though Nvidia had crypto-specific options, these miners were using all the chips they could get their hands on. That led to management, analysts and investors believing that demand was much strong than it really was. Once that crypto-fueled demand faded, it left NVDA with a glut of inventory, which will hurt business over the next few quarters.

For short-term investors, that likely takes Nvidia stock off their watchlist. For long-term investors though, that opens the door to opportunity. Nvidia is still a leading force in the artificial intelligence revolution and its new ray-tracing technology is unrivaled. It has solid growth in gaming and monstrous growth in the datacenter. Its professional visualization segment is no slouch and while small now, its automotive unit continues to churn out impressive growth, too.

Trading NVDA Stock

chart of NVDA stock price
Click to Enlarge Trading at 21 times this year’s earnings isn’t expensive when we have 50% growth. However, with flat growth next year, that valuation may concern some investors.

When in doubt, I side with the company’s quality, which is top notch. Further, my outlook for Nvidia stock isn’t the next five to eight quarters, it’s the next five to eight years.

With that said, the valuation is only part of the equation. What do the charts say?

Nvidia stock has been locked in a costly downtrend that it’s still not out of. That sets up the first level we need to watch. Over the 21-day moving average and downtrend resistance, and NVDA stock may be able to get some bullish momentum.

If it can, look to see if it can hurdle its November high and make a push back to $194. At that level, Nvidia will fill its earnings gap and hit its 38.2% Fibonacci retracement level from the October highs to the November lows (that’s also the 2018 high/low range).

The other level to watch comes on the downside. Specifically, let’s see how Nvidia does in this $140 to $145 level. Although it shot below it last month amid its post-earnings pummeling, it’s been serving as a level of stability for the name.

If it can hold up there, long-term investors may add to their position. Should it fail as support, the $134 lows are in play. Below that and perhaps $120 becomes possible, a big breakout level in 2017.

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Market Preview

Market Preview: Markets Take Another Beating on Trade Fears

Markets finished the first week of December on more of a Grinch footing than in a hoped for Santa Claus rally. Suffering another beating across the board, all the major indices finished in the red with the DJIA down 2.24%, the S&P 500 off 2.33%, and the Nasdaq faltering 3.05%. The arrest of Huawei CFO Meng Wanzhou, who is also the daughter of the Chinese company’s founder, threw a wrench into U.S./China trade negotiations. Ms. Meng, CFO of one of China’s largest companies, has been charged with fraud in misleading U.S. banks regarding transactions executed by them on Huawei’s behalf. The transactions were in direct violation of U.S. sanctions on Iran. The surprise arrest, as Ms. Meng changed planes in Canada, throws into turmoil yet again talks on trade tariffs between the two superpowers. It did not help markets when early Friday separate high level White House representatives, both involved in the trade talks, gave opposite views on what the 90 day freeze on tariffs means to the overall negotiations. It appears investors are in for a rocky ride into 2019 as the trade issue seems to become murkier by the day.  

Monday will bring earnings from Casey’s General Stores (CASY) and Stitch Fix (SFIX). Casey’s has missed earnings estimates 6 of the last 8 quarters, and the market is in an unforgiving mood for companies that miss estimates lately. Positive results last quarter, as reported by CEO Terry Handley, were driven by higher fuel margins, operating 105 more stores and cutting employee hours worked. As the company grows analysts will be looking for a stabilization of operating margins which have been in a steady decline since 2016. Stitch Fix will be looking to redeem itself after an early October earnings report that basically cut the stock in half over the next few trading sessions. While sales and active customer growth metrics both increased by over 20% last quarter, expectations were for much higher numbers. Though the company grew profit margins in the quarter, investors were more concerned with the active customer growth rate. Analysts will again be focusing more on customer growth than earnings when the company reports Monday.

The Labor Department will release the JOLTS numbers, which track job openings and offer rates on Monday. With somewhat weaker than expected job numbers on Friday, the JOLTS number will take on added emphasis. Scheduled for a 12:30pm release Monday is the TD Ameritrade Investor Movement Index. The index measures investor sentiment by looking at what activity retail investors are engaging in within their brokerage accounts. The report will be especially telling this time around given the extreme volatility in the market the past few weeks. Tuesday we’ll see small business optimism data, PPI, and Redbook retail data. Mortgage application data, CPI, and Atlanta Fed business inflation expectations will all be released on Wednesday. Inflation expectations, which came in at 2.2% year-over-year last month, may be falling as growth is expected to slow. Thursday investors will see the release of jobless claims, import and export prices, and the EIA natural gas report. We’ll close out the week Friday with industrial production numbers, retail sales, PMI composite flash numbers, and business inventories. Manufacturing is expected to pick up an additional .3% month-over-month.

American Eagle Outfitters (AEO), Dave and Buster’s (PLAY) and DSW, Inc. (DSW) will give us a feel for the retail market when they report earnings on Tuesday. DSW broke through support levels Friday reaching prices it has not seen since June. Wednesday Nordson Corp. (NDSN), Tailored Brands (TLRD) and Oxford Industries (OXM) will take the earnings stage. Thursday, heavy-hitters Adobe (ADBE), Costco (COST) and Cienna (CIEN) will take the center ring. Adobe has rewarded investors handsomely this year, up around 40% even after the recent pullback in the stock. Lee Enterprises (LEE) is scheduled to close out the earnings week on Friday.

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Pay No Commissions When Loading Up on These 3 Stocks

I like to get a sense of what is going on in global markets to help me guide you through a path to profits.

And there is one item that caught my eye that I’m sure isn’t being reported by media outlets, such as CNBC. That is, after powering ahead of global rivals for much of the summer, the U.S. stock market has been struggling to continue outperforming since the peak in late September. The chart below illustrates that point.

Other markets, which have been beaten down, are starting to outperform. For example, in November, the Hang Seng index in Hong Kong soared by 6.1%. Such a rebound is not surprising when you consider the battering it took because of the U.S.-China trade war.

The recent relative outperformance of some foreign markets had me thinking again about those foreign stocks you can buy in the U.S. in the form of an ADR (American Depository Receipt) and how you can buy some of these through the Robinhood brokerage firm for zero commission!

Robinhood Revisited

Robinhood is still growing rapidly. It added about 3 million accounts over the past year, bringing its total number of customers to 5 million, which is more than twice the big three incumbent discount brokerage firms combined. And it remains the only venue that offers trading on stocks, options and cryptocurrencies all in one place.

I first told you about it adding ADRs back in September. At that time, Robinhood announced it was adding about 250 ADRs from Japan, China, Germany, the U.K. and elsewhere. ADRs of companies from France will be added in the coming months. A quick definition of ADRs is that they are stocks of foreign companies that trade and settle in the U.S. market in dollars, allowing investors to avoid having to transact in a foreign currency.

Robinhood co-founder and CEO Vlad Teney told CNBC at the time, “We looked at what customers were searching for and not getting. It [adding ADRs] allows customers to get some exposure outside of the U.S.”

The company found its users wanted access to global stocks by looking at its own search data. Robinhood’s staff has access to what people are typing into the app’s search and looking to trade. Names such as Nintendo, Adidas, BMW and Heineken continued to pop up. The company used similar reasoning in February when it decided to add cryptocurrency trading after users repeatedly searched for bitcoin.

As someone that owns a good number of foreign stocks personally, this was fantastic news. This move made investing in overseas blue chip stocks easy, safe, and cost-efficient. While there are hundreds of quality foreign companies to choose from on Robinhood’s platform, let me briefly highlight for you three of them…

Nintendo

If you have children, you no doubt have heard of the Japanese gaming company Nintendo (OTC: NTDOY). It is doing well and recently announced its best quarterly results in eight years! It reported operating profits of ¥30.9 billion ($27.2 million) for the July to September quarter, up 30% on the same period a year earlier.

Its recent success has been due in large part to the popularity of its Switch console. Nintendo said that over the April to September half it had sold 5.07 million units of the Switch console, adding that it would maintain its full-year sales target of 20 million units by the end of the financial year ending March 31, 2019.

And despite a visibly slower pipeline of blockbuster titles this year, sales of Switch games reached 42 million in the April to September period, almost double what was sold in the first half of the company’s previous fiscal year. And its next blockbuster – Super Smash Bros Ultimate – is only being released on December 7. Despite this, the highest ranked title in Amazon’s list of the best-selling games of 2018 is Super Smash Bros. That suggests there have been a lot of pre-orders and that means it could be a record-breaking hit.

With the games industry tilting towards the huge Asian market – UBS expects gaming revenues in Asia to grow 9.5% annually to $200 billion in 2030 – Nintendo seems well-positioned.

Naspers

One company that many U.S. investors have never heard of is South Africa’s Naspers (OTC: NSPNY). Yet, it is perhaps the savviest venture capital investor in the world. It is best known for taking a major stake in China’s tech giant Tencent (OTC: TCEHY) back in 2001 for a mere $31 million. That stake grew in value to $175 billion earlier this year!

If there is one thing I love as an investor, it is buying something on the cheap. And Naspers is that. The entire current valuation of Naspers is valued at about $25 billion less than just its stake in Tencent! And all its other investments in technology companies around the emerging world are valued at nothing – you’re getting them all for free!

It comes down to the same old Wall Street bugaboo – its analysts are either too lazy or not smart enough to understand Naspers business. Its business is very successful, posting a 39% rise in half-year earnings. The earnings of $1.7 billion in the six months ended in September were driven by Naspers’ classifieds business becoming profitable as well as Tencent generating stronger profits. The company touts a 22% internal rate of return on non-Tencent investments since 2008, including a stake in Flipkart of India which was sold to Walmart earlier this year.

Africa’s largest company has begun to tackle the steep discount in its share price to its net asset value. As part of tackling the discount, this year Naspers announced plans to spin off its African pay-TV arm and it did raise $10 billion from selling off some of its Tencent shares, reducing its stake to 31%.

I look forward to its spinoff of its very successful pay-TV arm Multichoice, which is Africa’s Netflix and more. Its services include sports broadcasting and South Africa’s Dstv, reaches 13.5 million households on the continent and generated profits of 6.1 billion rand ($409 million) during its latest fiscal year.

Nestlé

For more conservative investors, there is the world’s largest food and beverage company, Switzerland’s Nestlé (OOTC: NSRGY), which was founded as a baby food manufacturer in the 1860s. Today, Nestlé’s four priority markets are coffee, bottled water, pet food and baby food.

I suspect that someday the company will be making some large divestitures. One of these will likely be its frozen foods business, which controls a 29.6% share of the U.S. market. Another may be its consumer nutrition and consumer healthcare division.

Already, Nestlé has said it plans to spin off or sell its skin health business. In the latest streamlining measure by CEO Mark Schneider, Nestlé said it had decided the future of Nestlé Skin Health, which analysts said could be worth as much as 7 billion Swiss francs ($7 billion), laid “increasingly outside the group’s strategic scope”.

The division had sales of 2.7 billion Swiss francs last year and makes prescription items, anti-wrinkle creams and other consumer healthcare products. Nestle said it would “explore strategic options” for the business, which could include a sale, spin-off or even a stock market listing. Possible buyers could include consumer or pharmaceutical groups.

Nestlé said that the planned sale or spin-off would “sharpen its focus” on food, drinks and “nutritional health products”, led by its top brands including KitKat chocolate bars, Perrier bottled water and Purina pet food. The decision to abandon the skin health business I believe reduces still further the strategic case for Nestlé selling its 23% stake in the French cosmetics giant, L’Oreal (OTC: LRLCY).

There you go – three high-quality foreign stocks you can buy for zero commission at Robinhood.

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Dividends

7 Dividend Titans Trading Like Growth Stocks

Source: Steve Buissinne via Stock Snap

Investors are often on the lookout for a fourth-quarter swoon starting in October. Sometimes it comes to fruition and other times it does not. This year though, it most certainly has and the volatility has lasted about two months. It’s left investors fleeing growth stocks, gobbling up dividend stocks and looking for shelter.

And we may not be out of the woods yet. That’s particularly true if the trade situation with China doesn’t improve. The White house had announced a trade war cease fire after a meeting at the G-20 summit, though the exact details of the agreement are not entirely clear.

It helps that the Federal Reserve is walking back its rate-hiking outlook. Investors are feeling more comfortable that the Fed will not hike us into a recession, although skepticism remains.

Even though GDP is growing nicely, consumer spending is red hot and unemployment is low, the stocks that are outperforming are all ones we’d want to own during a recession. That’s not a great development, particularly as investors dump FANG and multiple sectors into bear market territory.

It has been an ugly showing to say the least, but can we get back on the right track? Let’s take a closer look at a few dividend stocks trading like growth stocks.

Johnson & Johnson (JNJ)

Dividend Stocks: Johnson & Johnson (JNJ)

Source: Shutterstock

Dividend Yield: 2.5%

Johnson & Johnson (NYSE:JNJ) did stumble from over $138 to $132 in early October, but it didn’t take long for investors to find comfort in this long-time dividend stalwart.

Johnson & Johnson pays out a 2.5% dividend yield, has a payout ratio below 50% and has raised its annual payout for 56 consecutive years. When the economy falls on hard times, it’s hard not to like a consistent payout like that.

With JNJ, we get a rock-solid balance sheet and a dividend we know we’ll collect. On the charts, we were buyers last week on a test of the 50-day moving average. That proved to work out well, with shares quickly bouncing from this level.

But can they work their way up and past the recent high near $148? If JNJ can’t do that, we’ll have a lower high on our hands and will have to see if uptrend support (blue line) can keep it afloat. Below $140, JNJ losses a bit of its luster.

McDonald’s (MCD)

Dividend Stocks: McDonald’s (MCD)

Source: Shutterstock

Dividend Yield: 2.5%

Some fast-food and fast-casual names have been on fire and McDonald’s (NYSE:MCD) is no exception.

Yielding a similar payout of 2.5%, McDonald’s has raised its annual payout for more than four decades. It’s another name that does well during a recession. Part of that is the dependable yield, the other is a dependable (although not necessarily healthy) burger.

Further, its stock has been dependable too. While Amazon (NASDAQ:AMZN), Netflix(NASDAQ:NFLX) and Apple (NASDAQ:AAPL) have all fallen by 20% or more from peak to trough, MCD is quietly up about 10% from the beginning of October.

It’s outperforming its peers, major market indices and most equities during the last eight weeks. This one has been on fire, clearing its previous all-time high near $175 made in January before settling back a little on the latest bout of market weakness.

The tough part with McDonald’s is, what happens if growth stocks come back to life?

So long as it’s over the 21-day moving average and uptrend support, I don’t see a reason to get too defensive. Fall below that mark though, and this play could lose some momentum. Long-term investors don’t have much to worry about, but short-term traders hiding out in this dividend stud might want to think twice if it goes below this level.

Coca-Cola (KO)

Dividend Stocks: Coca-Cola (KO)

Source: Leo Hidalgo via Flickr (Modified)

Dividend Yield: 3.2%

Coca-Cola (NYSE:KO) is another one showing signs of exhaustion. While the company has done a great job to transform itself over a multi-year effort, one has to wonder how long the show can go on.

Despite the roughly 6% rally over the last two months — tepid compared to MCD — Coca-Cola shares still yield 3.2%.

Earlier this month we suggested some covered calls for investors who are comfortable with that options strategy. As we see shares pulling back and stagnating in this upper-$40s area, that trade is playing out well.

But what do investors do now? This stock has been in a narrow trending range over the last five years. While KO did flirt with a breakout of this range, it’s still within it now. Coca-Cola has held up too well over the past two months to consider bailing on it on a whim. On a decline, look for $46 to keep big KO afloat. Above $50 and look for this one to keep on chugging.

Procter & Gamble (PG)

Dividend Stocks: Procter & Gamble (PG)

Source: Mike Mozart via Flickr (Modified)

Dividend Stocks: 3.1%

Like KO, the turnaround efforts are working for Procter & Gamble (NYSE:PG) — at least, they’re working for PG stock.

Even after accounting for a notable dip in early October, shares of Procter are still up 17% over the last eight weeks. It’s hard to complain about that kind of performance, particularly as investors continue to collect a 3.1% dividend yield.

This name has not only dished out a dividend for more than 60 years, but also raised its annual payout each year through that span. That’s incredible when you think about it.

With that said, Procter & Gamble is putting in the same lower-high look that JNJ is. Of course, that move would be negated if PG stock can soon rally to take out its highs from earlier this month. If not though, investors have to be thinking about a slight to moderate pullback.

On a decline, look to see how PG holds up near $90. This level acted as resistance back in January 2018 and December 2017. Look for it to now act as support. Further, uptrend support  is just below this mark. I wouldn’t worry too much (from a trading perspective) unless PG fell below the 50-day.

Verizon (VZ)

Dividend Stocks: Verizon (VZ)

Source: Shutterstock

Dividend Yield: 4.2%

Also a “lower high” candidate, Verizon (NYSE:VZ) is chopping around near its highs.

My gut tells me that the next few weeks could either be an acceleration higher for these dividend names or a rotation out of these stocks and back into traditional growth stocks. Which one it will be, I’m not sure. These “lower highs” show investors’ hesitation in the charts as well. Ultimately, the performance of the major indices will likely be the deciding factor.

Despite Verizon’s roughly 13% rally over the last two months, shares still yield about 4.2%. In that time, the 50-day moving average has become a pretty solid indicator of support.

Should it fail, look for a decline into the mid-$50s, down near the $56 level.

If you’re not in VZ, I would wait for this potential pullback to materialize. In the meantime, consider going long AT&T (NYSE:T). It has a much larger yield at 6.5% and has raised its dividend for 33 consecutive years (triple the length of Verizon). Plus, it just laid out a promising roadmap for its earnings and free-cash flow for 2019.

Plus, its dividend is almost never this high.

PepsiCo (PEP)

Dividend Stocks: PepsiCo (PEP)

Source: Shutterstock

Dividend Yield: 3.2%

Have I said “lower high” enough? By now I’m sure you’re getting the picture. Long-term investors shouldn’t worry about it too much, but short-term traders should consider the possible rotation ramifications here.

But as they say on Wall Street, the trend is your friend until it bends. With PepsiCo (NYSE:PEP), there has been no such bend. We were buyers during its May decline and that move has paid big dividends — no pun intended.

Holding up over the 21-day moving average and uptrend support, this 3.1% yielder has been trading incredibly well. Below these levels and we likely get a dip down to the 50-day moving average. Below that and we’ll likely see the 200-day. That said though, I don’t anticipate this chart falling apart anytime soon.

If anything, I’m looking for a breakout over this $118 to $120 range. Same with Coca-Cola? Now that’s something to ponder.

Realty Income (O)

Realty Income (O)

Dividend Yield: 4.1%

As if the first six names on this list weren’t an obvious indicator, the performance by Realty Income (NYSE:O) and other REITs is a major sign that investors are seeking high-quality income.

Why? Because even with a more hawkish Fed, investors are flocking to real estate. That’s right. The same worry that took these names down big in Q4 2017 and gave them a major hangover to start 2018 is now seemingly absent from investors’ minds.

As we worry about further rate increases, REITs like Realty Income continue to grind higher. Of course, when we zoom out it makes more sense. With rising rates comes a stronger economy and with a stronger economy comes better performance from businesses, which are the tenants to companies like O.

They don’t call O “The Monthly Dividend Company” for nothing, either. Still yielding over 4.1%, this dependable company has been depositing rising “rent” checks in investors’ pockets for more than 20 consecutive years.

Its stock price has been showing similar dependability as of late and we sure are glad we were pounding the table on this name (and two others) back in the summer. O stock is now up about 16% over the last eight weeks. Can it keep pushing?

The hope is that it can pierce through this level and hold onto at least $63 to $64 as support. Given its hot run through and with a rate hike likely looming in December, a decline down to the $60 area wouldn’t be surprising (or unhealthy).

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Bear

Stocks Are on Thin Ice – Here’s What’s Lurking Underneath

The markets took a break for the funeral of former U.S. President George H. W. Bush, and I’d bet most investors are grateful for the pause in the “Groundhog Day,” Yogi Berra “déjà vu all over again”-type action we’ve been going through since, yes, October.

Yeah, the market just did what it did just last month; the FAANGs rolled over and played dead, only to come roaring back for a seemingly strong push up north and, just when things looked brighter, tanked again.

Rally and swoon, rally and swoon… While there is still a fighting chance for the old bull, it’s looking increasingly grim.

We’re rapidly getting to the point that investors who are unprepared or out of position could be in some serious danger.

That’s why I’m looking so closely at these specific numbers…

There Are Bearish Signs… and Very Bearish Signs

We’ve just notched a lower high. That’s a bearish sign.

If we break down from here, like we did just a couple of weeks ago, and make new lows, that’s a very bearish signal.

The Dow and S&P 500 were both scant millimeters away from doing that at Tuesday’s close – the day after a fairly healthy rally.

If, when the bell rings in a couple of hours this morning, stocks catch the bid and resume an upward crawl, we might be out of the woods. But the futures gains we saw Wednesday morning were essentially peanuts, so I’m not betting that way.

The market looks like nothing so much as a wounded bull in a one-sided bullfight. Has the matador drawn his sword to administer the coup de grace to this old bull?

Maybe. It all depends on the big indexes holding – and building – on the following levels.

Here’s What I’m Watching Closely Right Now

The Dow Jones Industrial Average: If stocks fall to 24,000, we’re going down to 23,500 in a New York minute. If that’s the case, this bull market is probably done.

indu

The S&P 500: The broadest and most significant index was sitting at just above 2,700 at Tuesday’s close. There’s important support at 2,600 – if we break that… get ready to see the S&P test 2,550 in a heartbeat. Below that? Yikes – support is all the way down at 2,400.

spx

The NASDAQ Composite: This tech-heavy group of stocks can be notoriously twitchy when volatile winds blow. There’s support at 7,000, then 6,800, and at 6,500. Below that… we’re looking at the prospect of a bear run that could last a shockingly long time.

compq

The FAANG stocks themselves are worth keeping an eye on, too, because they figure so prominently in the minds of investors, which makes them a major driver of that all-important market psychology.

Facebook Inc. (NASDAQ: FB) has support in the neighborhood of $115 and $120. If shares fall below that, it’s going to be uglier than it’s been… and it’s already been mighty ugly.

Apple Inc. (NASDAQ: AAPL) can lean on support at $160, then $140. If the stock should slip below that, then something’s truly wrong with investors’ hopes and dreams.

Amazon.com Inc. (NASDAQ: AMZN) has support at $1,400, $1,375, and $1,200. Any lower, and it’s “Look out below!”

Netflix Inc. (NASDAQ: NFLX) is looking at support levels at $200. Anything lower than that, and it really is anyone’s guess.

Google parent Alphabet Inc. (NASDAQ: GOOG) has support in the region of $1,000 to $980. Its next support is all the way down at $900. If by some weird twist of fate Google gets to those basement levels, the markets themselves should look more like a smoking crater in the ground.

If that’s the case… well, the bright side is, there will be bottom-fishing opportunities like we haven’t seen since 2009.

In the meantime, build up a healthy cash position – 10% to 20% – to stay safe and jump on any potential opportunities. Be very careful about taking any big long positions you can’t escape – yes, “escape” is the word – in a heartbeat, and look for opportune moments to get short with puts or even short-selling shares.

These levels aren’t where we are… yet. They’re where we could get to. Beware – you’ve been warned.

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Source: Money Morning

Pot Stocks

Why Aurora Cannabis Stock Needs the U.S. to Make a Comeback

Source: Shutterstock

Aurora Cannabis (NYSE:ACB) has continued its downtrend. Following its principal product achieving legal status across Canada, ACB stock and its peers have seen a brutal selloff.

With ACB losing about 50% of its value over the last six weeks, feelings of hunger for marijuana stocks have given way to paranoia. Legalization might have killed the buzz in Canada. Still, other countries appear poised to loosen their cannabis laws. With that, Aurora could benefit from new rounds of reefer stock madness, particularly if the United States rescinds marijuana’s Schedule I designation.

Legalization Killed the Buzz on ACB Stock

To be sure, official legal status in Canada has become a classic “sell the news” occurrence for ACB stock. ACB along with peers such as Canopy Growth (NYSE:CGC) and Tilray(NASDAQ:TLRY) have sold off over the last six weeks.

This makes little sense on some levels. Canada finds itself in the midst of a shortage of weed that could last months. Interest has also emerged in unexpected places such as the cosmetics industry. Yet, these normally bullish signs have not stopped ACB from falling. As a result, ACB stock has begun to flirt with its 52-week lows.

This offers both good and bad news for owners of cannabis stocks. Investors need to accept the reality that marijuana hype for Canada has ended. Moreover, as more countries loosen regulations on cannabis, more marijuana stocks will emerge. With a greater supply of marijuana stocks, demand for the same few Canadian marijuana equities naturally falls.

Investors should also remember that legalization will make marijuana stocks boring. Their long-term future will probably resemble that of tobacco or alcohol stocks such as Altria (NYSE:MO) or Canopy-investor Constellation Brands (NYSE:STZ). Such a future will likely consist of dividends, slow but steady profit growth and unremarkable price-to-earnings (P/E) ratios.

Countries Like the U.S. Could Bring Back the Hype

That said, every developed country has to first get to this point of legal status. I believe full legalization will sweep the developed world, including the U.S. I also expect this period will inspire a new wave of hype similar to what we saw in Canada before mid-October.

A removal of marijuana’s Schedule I designation in the United States could set that trend afire. Such a move coming from its neighbor to the south would offer a particular benefit to ACB stock and its Canadian peers. With that federal roadblock removed, foreign companies, such as Aurora could participate. This, of course, would probably inspire the interest needed to bring investors back into ACB stock.

So the question becomes when to buy? With the stock still trending downward, now may not serve as the best time. ACB stock currently trades at around $5.50 per share. With 11 Canadian cents (8.3 cents) per share in profit for this year, the stock may appear expensive. Still, the profits speak to the stability of Aurora Cannabis stock.

Also, Wall Street forecasts a profit growth rate of 145.8% for this fiscal year (2019) and 27.3% in 2020. This massive rate of increase lessens the risk of paying a high multiple. Once ACB stops selling off, it should position itself to benefit from the next wave of marijuana hype.

The Bottom Line on ACB Stock

Stock price growth could easily return to ACB stock, especially if the United States chills out on their strict marijuana laws. The massive drop in ACB and other Canadian cannabis stocks following legalization indicates that the stock growth in its home market has lost its buzz. While legalization tends to make cannabis stocks boring across the board, most countries have not yet achieved full legal status.

This brings opportunities for new rounds of reefer stock madness in other countries. With Aurora’s proximity to the U.S. market, this becomes especially true south of the Canadian border. A removal of Schedule I status in the U.S. would open up new production and sales in a nearby market nearly ten times its size. This could set up ACB stock for new highs.

As the stock continues to fall, investors need to watch and wait. However, if ACB forms a floor, or if the U.S. opens up on the federal level, prepare for new highs.

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Source: Investor Place

Market Preview

Market Preview: Markets Slammed on Trade and Slowing Growth Fears

Markets were closed Wednesday to honor President George H.W. Bush, but that didn’t stop investors from dropping stocks like hot potatoes on Tuesday. Markets came under massive selling pressure after it became clear that the reported trade deal with China isn’t quite as done as investors believed on Monday. Markets fell across the board with all the major indices trading down over 3%, and the Nasdaq again taking the brunt of the selling, fell 3.8%. Investors fear the tariff war will not be resolved as many had believed just Monday, and that the combination of global economic slowing, with the trade war, will pull markets lower in 2019. While the futures markets are up as of Wednesday afternoon, the market has been demonstrating a classic bear trading pattern for several weeks. Strong openings are often sold into, resulting in slow declines throughout the day.

Thursday Broadcom (AVGO), Kroger (KR) and Ulta Beauty (ULTA) report earnings. Broadcom has been inching higher since the October selloff, but was battered in the Tuesday market swoon, down over 4%. Monday, the company announced a partnership with HCL Technologies  (HCTHY) as Broadcom’s preferred training and professional services partner which analysts will be anxious to hear about on the earnings call. Ulta has disappointed investors the past few quarters as the company has reported falling sales and profitability. Analysts are looking for a more positive report from the company on Thursday, and are hoping operating margins have ticked up after challenging inventory and remodeling costs last quarter.

With markets and the federal government closed Wednesday, Thursday brings a full slate of economic numbers. Scheduled for release is the Challenger job cuts report, ADP employment report, jobless claims, productivity and costs, the PMI services numbers, factory orders, and the ISM non-manufacturing index. Analysts are expecting the addition of 175,000 new jobs and jobless claims to come in at 225,000, a slight downtick after the number has been rising the past few months. The PMI services index is expected to decrease slightly to 54.4 from an October reading of 54.8. Friday investors can pour over the employment situation numbers, consumer sentiment, and wholesale trade numbers.

 

Big Lots (BIG), Johnson Outdoors (JOUT) and Vail Resorts (MTN) close out earnings for the first week of December on Friday. Big Lots stock has been in negative territory almost all of 2018, with it’s one positive being that it did not fall much further in the recent market tumble starting in October. The discount retailer is in the middle of a store remodeling plan that will see approximately 200 of its stores receiving a facelift through 2019. Vail resorts should be off to a strong winter season as favorable weather patterns should boost early season sales. The stock is up nicely in 2018, even after a pullback in the recent market selloff. Analysts will be looking for an update on season pass sales as the company has been focusing more firepower on selling customers a season long experience as opposed to one-off ski weekends.  

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It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
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