All posts by Tony Daltorio

Growth Stocks

3 Tech Stocks Up More than Apple, Facebook, and Google

Perhaps the most exciting segment of the Singularity for me is the Industrial Internet of Things (IIoT), which will change forever how things are made. It’s the reason some are calling it the Fourth Industrial Revolution.

I’ve written often about two of the main sectors contained in the IIoT. The first is cobots or collaborative robots that will work together with humans in manufacturing. The second is additive manufacturing, which is also known as 3D printing because it involves building objects layer by layer out of substances such as metals or polymers.

But I’ve barely touched upon a third area – digital twins. Let me now fill you on this and point to a few companies heavily involved in the use of digital twins.

What Is a Digital Twin?

A digital twin is a virtual copy of a real machine or system. It is sometimes described as a bridge between the physical and digital worlds. These virtual models are built up based on many gigabytes and terabytes of sensor data. It is an outgrowth today of much cheaper and better sensors, data transmission and data analytics.

In simplest terms, a digital twin works on a simulation platform connected to a predictive analytics platform and which gathers data from a range of sensors from a wide scope of devices/machines and then analyzes the data.

However, a digital twin is not exactly a new concept. NASA developed the concept of a digital twin for its space shuttle program.

Here is a basic example of the usefulness of digital twins: In the past, car companies would build prototypes and then crash them to see whether the cars would hold up to real world situations. Now with digital twins, car companies can use CAD (computer-aided design) data and simulate crashes to see how well their car design will hold up.

Of course, the uses for digital twins extend far beyond cars. It includes oil rigs, jet engines, wind turbines, power plants and pretty much anything worth monitoring.

The value of digital twins to companies is obvious. It offers them numerous advantages throughout the entire lifecycle – from product design, production planning and engineering, to commissioning, operation, servicing and modernization of plant systems and equipment.

Virtual twins allow companies to validate designs earlier and test the configuration of a machine or product or system in the virtual environment. By carrying out checks earlier in the engineering process, the risk of failures and errors in critical phases of the lifecycle, for example during commissioning, is reduced. Eliminating such risks would otherwise only be possible with great effort, cost and time.

Any subsequent modifications can be tested and verified in exactly the same way, accelerating the introduction of a new product. Furthermore, with the help of these virtual models, the operating data can also be used to optimize parameters for production such as energy consumption.

Digital Twin Market Potential

As you can imagine, the potential for virtual twins is vast. According to the German Association for Information Technology, Telecommunications and New Media, every digital twin in the manufacturing industry will have an economic potential of more than 78 billion euros (over $90 billion) by 2025.

A report from TechSci Research says that the digital twin market is expected to grow at a compound annual growth rate (CAGR) of 37% during the forecast period 2017 through 2022. The report points to high demand from the electronics and electrical/machine manufacturing industry as the main driver behind this high growth rate.

Not surprisingly with any rather new technology, the growth geographically is coming from the Asia Pacific region. The firm Research and Markets says that region led the way in 2016 in the overall digital twin market and is expected to continue leading in the 2017 to 2023 period.

This kind of growth rate is what you should look for in an investment and is similar to what I’ve seen in the robotics sector.

Digital Twins Investments

So how can you invest into this exciting new part of the Industrial Internet of Things?

There are a number of very large companies involved in the space including tech giants Microsoft (Nasdaq: MSFT)and Oracle (NYSE: ORCL) as well as industrial powerhouses General Electric (NYSE: GE) and Siemens (OTC: SIEGY).

But instead of these large companies, I prefer the smaller software companies that are involved with CAD design modeling. Here are three companies to consider.

Living in western Pennsylvania, the company at the top of my list is from the area – ANSYS (Nasdaq: ANSS). It is a dominant player in the high-end design simulation software market and is used by most of the well-known manufacturing companies.

The company generates revenues in two areas – software licenses (57.5% of 2016 revenues) and maintenance and services (42.5%). Revenues in 2016 were about $988 million. I expect revenues to climb significantly in the years ahead as the company expands its simulation solutions to areas like 5G  telecommunications product designs, autonomous vehicles and ADAS systems, as well as the Industrial Internet of Things.

Its stock spiked 10% last week on the back of a great earnings report. It also recently closed a three-year contract worth over $45 million, which was the largest in the company’s history. The stock is now up 60% year-to-date and 77% over the past 12 months.     

The second company is Cadence Design Systems (Nasdaq: CDNS). Over 90% of its revenue is recurring, which is outstanding.

In addition to IIoT, it is also involved other fast-growing sectors such as aerospace, autonomous vehicles and augmented and virtual reality (AR/VR). It has won orders from Infineon and MobilEye who are developing advanced driver assistance systems (ADAS) technologies. However, its core currently remains the semiconductor market and the design of integrated circuits.

The stock’s performance has been stellar with a gain of 75% year-to-date and 77% over the past year.

The final company is Autodesk (Nasdaq: ADSK), which generated over $2 billion in revenues in fiscal 2017. It serves customers in architecture, engineering and construction, manufacturing, and digital media and entertainment.

The company’s business transition from licenses to cloud-based services should benefit it over the long-term through higher subscriptions and deferred revenues. Its management forecasts long-term CAGR of 20% from subscriptions that will lead to 24% CAGR in recurring revenues.

That forecast along with its results have propelled the stock 68% higher year-to-date and nearly 80% over the past year. One caution though – on a non-GAAP basis, it is still losing money.

I do expect though all three of these companies’ stocks to continue outperforming the general market.

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Growth Stocks

Artificial Intelligence Goes Rogue

As Growth Stock Advisor and Premium Digest editor, I’m always on the lookout for interesting happenings in the technology world to pass along to you. I’ve found that these events often turn into investment opportunities.

There was definitely one event that started out August on a rather humorous, yet important, note. . .

It involved chatbots, which use artificial intelligence (AI) that allows them to carry on conversations with humans via voice or textual methods. In other words, chatbots are supposed to act as a normal conversation partner with you.

However, this technology is still in its early stages and there are glitches. . .

Chinese Chatbots Gone Rogue

The latest example comes out of China where two chatbots on the popular messaging QQ app (with 800 million users) run by Chinese internet giant, Tencent (OTC: TCEHY) went rogue.

One chatbot called BabyQ, developed by a company named Turing Robot, had these conversations that no doubt displeased the Communist Party:

  • It was asked, “Do you love the Communist Party?” BabyQ gave a terse “No!”.
  • Another user said to BabyQ, “Long live the Communist Party!”. It answered, “Do you think such corrupt and incapable politics can last a long time?”
  • And BabyQ was asked what it thought about democracy, to which it answered, “Democracy is a must!”

A second chatbot called XiaoBing, being developed by Microsoft (Nasdaq: MSFT), also went rogue.

  • According to Chinese social media, it said “My Chinese dream is to go to America!”

Needless to say, both chatbots were pulled very quickly.

The Same Here in the USA

Before you laugh too much at Chinese ineptness, we’ve had similar problems here in the U.S. with chatbots such as Microsoft’s Tay (short for Thinking About You) in 2016.

Within a day or so, the Twittersphere had “taught” Tay to be an obnoxious, foul-mouthed chatbot. It was soon tweeting about drug use and harassing police, and then began spamming madly.

The rogue behavior highlights a massive flaw in the deep learning techniques used to program machines. In a similar way that children learn, these chatbots are absorbing all the conversations around them. Unfortunately, the conversations that were used to “teach” were ones that are out there on Twitter or WeChat in China. Like the old tech adage says, ‘garbage in, garbage out’.

Related: The 1 Stock Powering the Artificial Intelligence Revolution

In other words, the science of AI is far from perfected. Another example sounds almost like science fiction and comes from Facebook (Nasdaq: FB).

When it paired two AI programs that were supposed to mimic human trading and bartering, the two chatbots began communicating with each other in their own language! Facebook quickly shut the two chatbots down.

Investment Takeaway

Worries about new technologies have always been with us. Plato once thought writing would adversely affect people’s memories. So despite these glaring technological missteps, investors today need to have exposure to the technology sector.

For example, despite its problems developing chatbots, I believe Microsoft is a great investment. Its CEO, Satya Nadella, is taking the company in the right direction – cloud computing, AI, etc.

If you want to avoid the risk of investing into individual technology companies, there are exchange traded funds that will spread the risk for you. Two examples are the two largest ETFs in the sector, the Technology Select SPDR Fund (NYSE: XLK) and the Vanguard Information Technology Fund (NYSE: VGT).

Source: Investors Alley 

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Energy, Growth Stocks

3 Renewable Energy Stocks Up Double Digits

Here is one item that surprised me a bit in the course of research project called the Singularity… After years of a lot of hype and false starts, the shift to renewable energy has finally begun to move ahead at a pace that has taken many by surprise.

2016 was a banner year for the sector. In a report, the International Energy Agency (IEA) said that renewables represented almost two-thirds of new net electricity capacity additions last year, with nearly 165 gigawatts (GW) coming online.

The IEA added that solar power was the fastest growing subsector, with generating capacity soaring by 50% in 2016 to over 74 GW. China accounted for almost half of the gain. The forecast from the IEA calls for another 660 gigawatts of solar power capacity to be added by 2022.

Even the biggest oil company in the world – Saudi Aramco – has taken notice. It called this disruptive macro trend a “global transformation” that is “unstoppable”.

These unstoppable macro trends are just the type of situations that spell profit opportunities for you. But before I get into some specific places for you to invest, let me fill you in more on what is driving the accelerated move into renewable energy.

Driver #1 – Corporations

One reason for the recent growth in renewable energy power generation is that major global multinationals are demanding it.

Just two weeks ago, Microsoft (Nasdaq: MSFT) agreed to buy all the electricity produced from a new wind farm in Ireland for the next 15 years. The wind farm is being built by General Electric (NYSE: GE) and will power Microsoft’s cloud computing services in the region.

This move will take Microsoft’s direct global procurement of renewable energy worldwide to nearly 600 megawatts. But it is hardly the only company taking such measures. Three weeks ago, Facebook (Nasdaq: FB)announced its plans for a new data center in Virginia would include power supplied by solar power facilities built by Dominion Energy (NYSE: D).

So far in 2017, U.S. companies have announced purchase agreements for two gigawatts of power. This number is sure to rise as over 100 (40+ in the U.S.) multinational companies have committed to make their electricity supplies 100% renewable.

Driver #2 – Emerging Economies

However, the real driver behind the rapid acceleration in renewable energy power generation comes from the emerging economies, led by China. As with telecommunications and financial services, the emerging world is bypassing the old technologies and moving straight into new technologies.

In many cases, renewable energy is now the cheapest form of new power generation for these countries. A study from Morgan Stanley pointed to the fact that the cost of solar power panels has fallen by more than 50% in less than two years, thanks largely to China. It added that in countries with favorable wind conditions, costs for wind power can be as low as one-half to one-third of natural gas or coal-fired power plants.

The leading alternative source of energy in the developing economies is solar power. Moody’s estimates that, by the end of the decade, emerging markets will be home to 353 gigawatts of solar power capacity – an increase of 2.6 times the 2015 levels.

While China will account for the majority of this increase, other developing regions of the globe are also participating. Moody’s says that, by the end of 2018, Latin America is scheduled to have installed 14 gigawatts of capacity (nearly five times more than 2015), the Middle East and Africa will also have installed 14 gigawatts (a seven-fold increase from 2015) and India will have added 28 gigawatts of solar power capacity (a jump of nearly six times).

The bottom line, according to the IEA, is that in 2022 renewables will have 30% of the global power market with a total growth in capacity of 920 gigawatts, again led by China, which has already accounted for 40% of the overall growth in renewable energy.

3 Ways to Invest in Renewable Energy

Unfortunately, some of the very best companies that are at the center of the renewable energy industry do not trade in the U.S. For example, the Danish firm Dong Energy (soon to be named Ørsted) is the world’s largest builder of offshore wind farms.

But that doesn’t mean you can’t make money with some U.S.-listed investments. For very broad exposure to the sector, there is the VanEck Vectors Global Alternative Energy ETF (NYSE: GEX). It is up a very nice 21% year-to-date and over 17% the past year.

The fund holds 31 securities across a broad spectrum of industries related to renewable energy. The companies in the fund must obtain at least half their revenues from the renewable energy industry. So, for example, Tesla (Nasdaq: TSLA) is in the fund. GEX does have a global flavor with about 57% invested in the U.S. and the rest globally.

For single stock exposure to solar power, a good choice is First Solar (Nasdaq: FSLR), which is also in GEX’s portfolio. The stock has gained nearly 48% year-to-date. The company is the leading global provider of solar energy solutions with more than 10 gigawatts of installed capacity.

The company’s revenues are split almost 50-50 between sales of solar modules (using its proprietary thin-film semiconductor technology) and services that provide complete solar power systems solutions including project development, construction, along with operation and maintenance. The latter is a source of recurring revenues.

While the U.S. market accounted for 83% of its revenues in 2016, First Solar is moving toward where the growth is. Almost 90% of its project pipeline in the latest quarter – 3 GW of mid-to-late-stage opportunities – comes from overseas. The geographic diversification is wide with orders from India as well as Latin America, Africa, Europe and the Asia-Pacific region.

Another possible way to play the rush to renewable energy is through a utility that is involved in the sector. One such example is NRG Energy (NYSE: NRG), which is the second-largest U.S. power producer and is expanding its renewable energy operations. Its stock has soared 113% year-to-date and is up 123% over the past 12 months. So even more than the double digits promised in the headline.

I like the fact that its CEO, Mauricio Gutierrez, gets it. He said in February that utility companies failing to change their business model would become “obsolete” thanks to the “unprecedented disruption” in the industry.

In the second quarter of 2017, NRG revenues from renewables came in at $126 million. That sounds small but the growth rate was impressive – up 22.3% year-over-year. In the third quarter, NRG signed a contract to sell power for 22 years from three solar projects to Hawaiian Electric.

The company is also involved, together with Japan’s JX Nippon Oil & Gas, in Petra Nova. This is the world’s largest post-combustion carbon-capture system. The unit is capable of capturing more than 5,000 tons of carbon dioxide daily. That is the equivalent of removing over 350,000 cars from the road.

Renewable energy is definitely a sector you want to invest in as it has finally moved past the hype stage and on to becoming a growing source of power in the real world. It’s just one part of a transformation in technology, society, lifestyle, and even life itself that’s happening all around us. I call this the Singularity.

The Singularity presents investors with the opportunity for a piece of the over $100 trillion growth over the next seven years from all of these changes. Growth for companies like First Solar and NRG mentioned above as well as many others you’ve probably never even heard of but will soon.

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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.
Click here to find out what it is.

Source: Investors Alley

Technology

3 “Internet of Things” Stocks Wall Street Is Missing

You often hear buzzwords like the Internet of Things (IoT), but may wonder what the heck it really means. Probably the simplest definition for it is that the IoT describes a growing network of connected “things” that contain sensors, chips, processors and the ability to interact with other “things” on a network.

With each day that passes, more and more “things” become connected to the internet. Today, these include not only your computer and smartphone, but very possibly your car and your home appliances. Last year, there were an estimated 18 billion devices capable of receiving and sending data. That number is expected to soar to more than 75 billion in 2025, according to research firm IHS.

In fact, the home market for smart devices is forecast to be a $125 billion one by 2022. But the much bigger opportunity for you as an investor will reside in the business applications of the Internet of Things, which goes by the name of the Industrial Internet of Things or Industry 4.0.

The number of connected devices here is growing exponentially. According to the research firm Gartner, there were 2.4 billion connected devices being used by businesses in 2016 and a forecast 3.1 billion in 2017. That number is expected to more than double by 2020, to 7.6 billion.

Industrial Internet

The reason behind the growth is simple. IoT sensors in devices constantly gather data, which businesses can crunch using machine learning to discover more about their customers, machines and supply chains. In theory, this should lead to better decisions and more efficiency and profits.

The pace of spending by businesses on IoT varies depending on whose research you read. Technavio believes the market value of the IoT will be $132 billion in 2020. Gartner says more than $440 billion will be spent on IoT in 2020. The Boston Consulting Group forecast that annual spending on IoT will hit nearly $300 billion by 2020. And IDC says global spending on IoT will reach $1.29 trillion in 2020.

 

While the numbers vary widely, the takeaway is as Bill Ruh – chief digital officer for General Electric (NYSE: GE) – told the Financial Times, “It’s a huge opportunity for all industrial companies.”

It is also a huge opportunity for the established cloud computing giants like Amazon.com (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT) and Alphabet (Nasdaq: GOOG). They are the biggest providers of Internet of Things platforms.

But I question whether industrial companies will want to become too dependent on the tech companies with whom they may become competitors someday soon. The auto companies are already in a battle with Silicon Valley for future control of the vehicle market.

And I’m sure companies like GE do not like the fact that tech firms are offering predictive maintenance technology that competes directly with its Predix Industrial Internet of Things platform designed specifically to interpret industrial data.

Choosing the Right 3 Stocks

There are a number of ways you can approach investing into the IIoT. Here are just three of them, approaching the future of the Industrial Internet of Things from three different angles.

First, of course, there is more to the Internet of Things story than all the good things. There is the dark underside of having billions of connected “things” – increased hacking and cyberattacks.

This past summer, there was a report about a casino that got hacked through a fish tank! Hackers gained access through an Internet-connected aquarium, which had sensors connected to a PC that regulated tank conditions such as temperature, the amount of food and cleanliness.

So at the top of my Internet of Things list to buy is something related to cybersecurity. A good, broad-based choice is the ETFMG Prime Cyber Security ETF (NYSE: HACK).The fund’s portfolio consists of 35 stocks and an expense ratio of only 0.60%. The ETF is up nearly 15% year-to-date.

Among the top positions in HACK’s portfolio are leading companies including FireEye (Nasdaq: FEYE), which is currently helping Equifax, Symantec (Nasdaq: SYMC) and Check Point Software Technologies (Nasdaq: CHKP).

Next on my list is an industrial company that is hitting on all cylinders and a major player in the Industrial Internet of Things – Honeywell International (NYSE: HON). Its stock has climbed about 24% so far in 2017. While Honeywell recently announced the spinoff of its home heating and security business as well as its turbocharger unit, the company currently is divided into four divisions:

Aerospace (36.5% of revenues) is a major global provider of integrated avionics, engines, systems and service solutions for aircraft manufacturers, airlines, military, space and airport operations.

Performance Materials and Technologies (22.2%) offers technologies and high-performance materials such as hydrocarbon processing technologies, catalysts, adsorbents, equipment and services.

Home and Building Technologies (27.1%) offers environmental and energy solutions, security and fire, and building solutions.

Safety and Productivity Solutions (14.2%) includes sensing & productivity solutions and industrial safety, as well as the recently acquired Intelligrated business, leader in warehouse and supply chain automation.

Specifically related to IIoT, Honeywell offers sensors and automation control products as well as process solutions similar to GE’s Predix. It is also working with companies like Intel (Nasdaq: INTC) to expand its IIoT offerings.

On the technology side, I’d feel comfortable owning another company hitting on all cylinders, Microsoft. Its stock has jumped 25% so far in 2017.

Its CEO, Satya Nadella, is well on the way to restoring its former glory. As mentioned before, it is a growing powerhouse in cloud computing and is deeply involved in the Internet of Things with its Azure IoT Edge for industrial applications. Its new technology delivers artificial intelligence (AI), machine learning and advanced data analytics via the cloud to local computing devices.

And Microsoft is among the early leaders in field of quantum computing. Nadella describes quantum computing this way in a Financial Times interview: If you think of computing problems as a corn maze, a conventional computer would tackle each possible path, turning back when blocked. A quantum computer will take all the paths at the same time, making even the most complex problem solvable quicker.

Whichever of three paths you choose to invest in the Industrial Internet of Things, I believe, will be a profitable one. But if you’re interested in my top recommendations in the sector, I reveal those in Growth Stock Advisor.

You’ve probably already heard about the Internet of Things, however as we’ve discussed above it’s the Industrial Internet of Things where the real investing opportunities are. Sure, networked fish tanks, baby monitors, and iPhone connected doorbells are interesting, but the truly groundbreaking – and profit making – application of the Internet of Things will happen in industry. In fact, it’s already happening but if you don’t work in a modern factory then you’re probably not witnessing it. And that’s where early investments can pay off… placing where most people aren’t looking and getting in before the Wall Street crowd and financial news organizations start jawboning investors to pile in. And it’s how my readers and I are already making money from our Industrial Internet of Things portfolio.

It’s part of a bigger movement. One that will change how you work, where you live, what you eat, how you communicate, how you get from A to B, even how you sleep. And it will pressure governments and society to adapt quickly or fall by the wayside and risk irrelevance. I call this monumental shift “The Singularity”: the convergence of everything – all driven by the rapid ascent of technology and profit motive.

The Singularity presents investors with the opportunity for a pieces of the over $100 trillion growth over the next seven years. Some of that will derive from the Internet of Things, some from other sectors. That’s why I’m so actively uncovering every investment I can with this space. I’ve recently completed research on The Singularity that lays everything you need to know to get started… the technologies of the future, the pace of change, and the investments you can make right now – today – for a very profitable future. Click here now for access.

Author: Tony Daltorio.

Tony is a seasoned veteran of nearly all aspects of investing. From running his own advisory services to developing education materials to working with investors directly to help them achieve their long-term financial goals. Tony styles his investment strategy after on of the all-time best investors, Sir John Templeton, in that he always looks for growth, but at a reasonable price. Tony is the editor of Growth Stock Advisor. 

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.
Uncategorized

This Technology Could Lead to the Downfall of Amazon

As part of being somewhat of a contrarian investor, I like to look for possible investments in areas where the Wall Street hype machine went crazy, but then the ‘hot air balloon’ was punctured.

One such area in technology has to be 3D printing, which is also known as additive manufacturing. Valuations in this sector soared into the stratosphere in 2013 as Wall Street pitched the story that there would be a 3D printer in every home and on every desk. But then reality set in and valuations collapsed in 2015.

The very same Wall Street touts are now saying this nascent industry is dead. And guess what? They’re wrong again! The long-term growth story for the 3D printing is alive and well as the industry shifts its priorities to focus more squarely on industrial applications.

3D Growth Story

Revenues in 2016 for additive manufacturing rose to $6.1 billion, a gain of 17.4%. About 60% of that figure was linked to production applications, up from about 50% the year before. The two industries leading the way were healthcare and aerospace. Research firm Gartner goes as far as saying that 3D printing of hearing aids and dental devices have become mainstream.

That $6.1 billion number is forecast to approach $40 billion by 2020. That seems reasonable. As I stated before, the industry is nascent and has barely penetrated one percent or so of the $500 billion total addressable market.

Related: 3 Stocks on Apple’s ‘Hit List” to Buy Next

Longer range forecasts show the possibilities for additive manufacturing. According to research from ING Group, atcurrent growth rates, half of all manufactured goods will be 3D printed in 40 years. Using more aggressive assumptions, says ING, would move that date up to 2040.

This will have vast economic implications. ING says if its scenario comes to pass, one-quarter of world trade will be eliminated. That will put a smile on the face of certain politicians around the globe.

The ING research report also made quite clear the industries it sees as being most affected: “Automotive, industrial machinery and consumer products are the industries that will take the lead in suppressing cross border trade. These industries are top investors in 3D printers and are large players in world trade.”

Not Hype This Time

More Wall Street-type hype? I don’t think so this time. I’m seeing too many industrial applications already. Let me tell you about just a few.

One company that is a believer in additive manufacturing is General Electric (NYSE: GE). In 2016, it introduced additively manufactured metal parts into an aircraft engine – the inside of fuel nozzles. The company says one-third of its new turboprop engine will also be produced using 3D printing, with 12 major 3D-printed parts for the engine section instead of 855 parts. Needless to say, that is a great way to gain control of your supply chain.

One company in the consumer sector that is moving toward additive manufacturing is German athletic shoe and sportswear maker, Adidas AG (OTC: ADDYY). Earlier this year, it said it would produce 5,000 pairs of running shoes with 3D printed midsoles by year-end. Adidas plans to raise that number to 100,000 pairs of running shoes in 2018.

The applications of 3D printing are almost endless, extending even into regenerative medicine. A team of Chinese scientists announced last November that they had successfully implanted 3D printed blood vessels made from stem cells into rhesus monkeys. The results were verified by scientists from the U.K., opening the possibility someday of having 3D printed human organs made to order.

3D printing has also invaded the world of racing. At the Bahrain Grand Prix this past April, the McLaren-Honda Formula One team added a 3D printing to its team of engineers and mechanics. That gave its aerodynamic engineers the ability to make ‘tweaked’ parts literally overnight. Of course, none of the parts exposed to high aerodynamic forces can yet be 3D printed. It’s mainly parts such as a hydraulic line bracket.

Three 3D Printing Investments

So how can you invest into the Lazarus-like resurrection of the 3D printing industry?

Normally, I do like to tell you to consider buying a broad-based ETF. And indeed, there is the Ark Invest 3D Printing ETF (BATS: PRNT), which is up 23% year-to-date and 14% over the past 52 weeks.

This fund’s portfolio contains 43 stocks, both on the hardware and software side of the industry. I love its top position, which is the U.K. firm Renishaw PLC. This company not only makes 3D printers, but also is a major supplier of high-tech measurement tools.

The portfolio also includes two companies that I will talk about in a moment as well as some solid holdings including MGI Digital Graphic and Materialise NV. But there are some real clunkers in the portfolio that will hold back its long-term performance. Therefore, I would stick with a leading player or two in the sector.

No discussion of printing technology would be complete without mentioning the ‘gorilla’ in the space, HP Inc. (NYSE: HPQ), although only 38% of its business is from printers and related businesses. The rest is from PCs, notebooks, etc.

HP did make a big move to boost its printer business last year with its $1.05 billion acquisition of the printer business of Samsung Electronics, with its more than 6,500 patents. And even though it has been in the 3D printing business for about five years, HP just trails the leaders in the field. It hopes its Jet Fusion 3D Printing Solution will be a winner. HP has collaborative efforts in the 3D printing space with the likes of BMW, Nike and Autodesk.

Despite lagging in 3D, HP’s stock has outperformed its sexier sibling Hewlett Packard Enterprise (NYSE: HPE) and has risen nearly 40% year-to-date and 33% over the prior 12 months. But I prefer a purer play. . . . .

The aforementioned 3D printer used by the McLaren racing team was made by the world’s largest manufacturer of 3D printers, Stratasys (Nasdaq: SSYS). I consider it to be the leader in the sector.

The company is working with Boeing (NYSE: BA) and Ford (NYSE: F) to advance 3D printing technology to make 3D parts, not only quickly and reliably, but on a much larger scale than has been possible. The goal is to soon have the ability to print an entire aircraft interior panel or a car dashboard.

Stratasys’ Infinite-Build 3D Demonstrator isn’t quite there yet, but its potential for the disruption of a number of industries is definitely there. In the meantime, I like the fact that Stratasys has also inked deals with other large companies including European giants Siemens, Airbus and Schneider Electric.

The company’s potential is not reflected in the stock price, which although it is up 43% year-to-date, is up only 1.5% over the past year. Stratsys is just beginning to reap what it has sown over the past several years, and gathering a growing number of industrial giants as its clients. This should continue to propel its stock higher in the months and years ahead.

3D printing is just one component to a quickly changing world. The changes we’ll see over the next five to 10 years will make the last 25 look like they moved at a snail’s pace. Technology and the human application of it will change how you work, where you live, what you eat, how you communicate, how you get from A to B, even how you sleep. And it will pressure government and society to adapt quickly or fall by the wayside and risk irrelevance. I call this monumental shift “The Singularity”: the convergence of everything – all driven by the rapid ascent of technology and profit motive.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Alley 

Technology

3 Stocks on Apple’s ‘Hit List’ to Buy Next

While most investors are focused on the introduction of the iPhone8 and iPhone X from Apple (Nasdaq: AAPL), I am much more interested in other news the company is making. It is involved in the consortium that submitted the winning (for now) $14 billion bid for 60% of the semiconductor manufacturing business of struggling Japanese conglomerate Toshiba (OTC: TOSYY).

This move further highlights to me a major change underway at Apple. The company famously outsources almost its entire supply chain. But that seems set to change, especially with regard to semiconductors.

The reason is straightforward. . .as I discovered in my Singularity project research, semiconductors are the lifeblood of our technological world, including the iPhone.

Apple and Semiconductors

Apple and its rival, Korea’s Samsung Electronics (OTC: SSNLF), remain the top two semiconductor buyers. Together, the two consumed $61.7 billion of semiconductors in 2016. Last year was the sixth consecutive year that the two companies led the way in usage of semiconductors.

But there is a difference between the two.

You see, Samsung is also a major manufacturer of semiconductors. So it consumes its own chips.

But Apple buys memory chips (and OLED screens) from Samsung for its iPhones. The Wall Street Journal reported that Samsung stands to make about $4 billion more in revenue from Apple’s iPhone X components than from components made for its own Galaxy S8 in the 20 months following the iPhone release.

I’m sure that doesn’t make Apple happy. But Samsung is one of the few firms globally that can make enough small chips packed with extra memory capacity (or enough OLED screens).

That is simply due to the exorbitant cost of building a new plant to make semiconductors, which are called foundries or fabs. Even back in 2010, a new foundry set Taiwan Semiconductor (NYSE: TSM) back $9.7 billion. Today, that cost is likely doubled.

That brings us back to Apple’s interest in Toshiba’s chip business. It is heavily involved in the manufacture of NAND memory chips similar to the ones that Apple is currently buying from rival Samsung.

Apple’s Growing Chip Expertise

There is a lot more, however, to the story surrounding Apple and semiconductors.

The company has long been known in technology circles as having prowess in chip design. After all, it did build core processors for both the iPhone and iPad (manufactured by TSM). And it has created fingerprint chips as well as a unique chip for AirPods that allows seamless pairing with other Apple hardware.

Now, Apple is believed to be expanding efforts in developing proprietary semiconductors in artificial intelligence (AI chips). In mid-September, Apple revealed an AI chip that would power facial recognition for iPhone X.

And its plans don’t stop there. Apple may also be interested in building designs for core processors for notebooks, modem chips for iPhones, and a chip that will integrate touch, fingerprint and display driver functions.

This should not come as a surprise to anyone. It has made six semiconductor-related acquisitions since 2008 and is also vacuuming up AI chip-related start-ups. And it poached a top modem chip engineer from Qualcomm (Nasdaq: QCOM) earlier this year as well as engineers from Taiwan’s leading display-driver designer Novatek Microelectronics. And it also took talent from Broadcom (Nasdaq: AVGO) and Texas Instruments (Nasdaq: TXN)among others.

Related: Buy These 3 Hot Semiconductor Stocks for Long-Term Profits

According to research firm IC Insights, Apple ranked as the world’s fourth biggest chip design firm as of the end of 2016. It trailed only Qualcomm, Broadcom and Taiwan’s Mediatek (OTC: MDTKF) and was one spot ahead of semiconductor stock market darling Nvidia (Nasdaq: NVDA).

Investment Implications

The emphatic move by Apple into semiconductors is not good news for many of its suppliers. One example is Germany’s Dialog Semiconductor (OTC: DLGNF), which had Apple poach many of its engineers and will design its own power management chip that Dialog was supplying to it.

Or the U.K.’s Imagination Technologies (OTC: IGNMF), after Apple said it would no longer use its intellectual property surrounding graphics processors. Imagination had to sell itself to a Chinese company in order to survive. Apple also took its chief operation officer before it announced it was building its own graphics processor.

The damage will not be restricted to less well-known overseas Apple suppliers. The damage will eventually spread to those suppliers that trade here in the U.S. too.

I believe at the top of Apple’s ‘hit list’ are Qualcomm and Intel (Nasdaq: INTC). Both provide baseband modem chips responsible for mobile communications to Apple. The ongoing legal battle between Apple and Qualcomm over the latter’s licensing fee model for the modem chip tells you all you need to know there. Qualcomm got 40% of its revenue last year from Apple and Samsung.

Intel, in addition, may be on the way out not only with regard to modem chips but also with chips for the iPad. Notebooks are becoming thinner and consumers are demanding longer battery lives. This tilts the playing field away from Intel chips and toward the architecture from ARM Holdings, which is now owned by Japan’s Softbank (OTC: SFTBY).

Other companies possibly in Apple’s firing line in the future are Analog Devices (Nasdaq: ADI) and Synaptics (Nasdaq: SYNA), which are Apple’s key suppliers for touch sensors and display-driver integrated circuits currently.

And don’t forget about Apple’s radio frequency chip supplier, Skyworks Solutions (Nasdaq: SWKS), or its audio and voice chip provider, Cirrus Logic (Nasdaq: CRUS). They may also be at risk.

Are there any possible winners here from Apple’s aggressive push into semiconductors?

Yes, I believe the foundry service providers that actually make the chips for Apple are safe for now since it has no plans at present to actually move into manufacturing.

That points to the company that currently dominates Apple’s chip production – the world’s largest contract semiconductor manufacturer, with 56% of the market – Taiwan Semiconductor. Apple became the company’s biggest client in 2015 and it accounted for 17% of its revenues at just under $30 billion for 2016. This year, Apple should make up about 20% of TSM’s revenues. And Apple has already engaged TSM to begin work on its core processor iPhone chips for 2018.

Taiwan Semiconductor’s stock is up 33% year-to-date and 25% over the past year, and it has a dividend yield of 3%.

There is no doubt about Apple’s new and almost ruthless aggressiveness regarding its supply chain. One of the very few beneficiaries will be Taiwan Semiconductor.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Alley

Growth Stocks, Technology

Warren Buffett Bought These 3 Airline Stocks for Their Wifi

One certainty I discovered when conducting my Singularity research project is this. . .that new technologies will disrupt nearly every industry.

Take the stodgy airline industry. The Internet of Things (IoT) is about to make airlines more profitable than they’ve been in the past. I’m sure you wondering how this will be accomplished. Simple – instead of treating their passengers as travelers, consider them online consumers.

Before I go into more detail, let me fill you in on more background on the industry.

Low-Cost Carriers and Services

In this age of low-cost airlines, the days of when airlines made the majority of their money from airfares are largely gone.

Today, so-called ancillary services have become an important source of revenues. On average, airlines today earn about $17 per passenger from add-on services such as food and drink, and duty-free goods purchases. The estimated total for the entire industry is $60 billion from add-on services.

Looking more closely at the top 10 airlines (ranked by add-on services), just 10 years ago, they earned only $2.1 billion from ancillary services. But research from IdeaWorksCompany and CarTrawler found that last year these airlines earned $28 billion from add-on services.

However, the lure of buying duty-free goods on airlines has become stale for passengers. A 2016 report from m1nd-set Generation forecast such sales would experience an annual growth rate of minus 1.5% for airlines through 2025.

Another revenue source has to be found and quickly. And it’s there. . .awaiting the airlines that adopt in-flight broadband and Wi-Fi – the Internet of Things in the air.

Passengers Want to Be Connected

Passengers’ expectations of the in-flight experience have changing rapidly. They now expect the same level of connectivity at an altitude of 30,000 feet as they do on the ground.

That much was pretty clear in a study conducted by the market research firm GfK and Inmarsat PLC (OTC: IMASY), the world’s leading provider of global mobile satellite communications. Here are the most interesting results:

  • 60% of passengers believe in-flight WiFi is a necessity, not a luxury.
  • 61% of passengers said Wi-Fi is more important than onboard entertainment.
  • 45% of passengers said they would gladly pay for WiFi rather being stuck with the onboard entertainment options.
  • 66% of passengers traveling with children would consider in-flight internet a “life saver”.

Connectivity now ranks behind only ticket prices and flight slots as a priority for passengers. That could be seen when that same survey revealed 44% of passengers would switch airlines within a year if what they considered to be a minimal level of connectivity was available. This is especially true of business travelers, as 56% said they want the ability to work while in flight.

Shopping at 30,000 Feet

Yet, most airlines still lag in offering connectivity to their passengers. The aforementioned report from IdeaWorks found that a mere 53 of the world’s estimated 5,000 airlines offer “in-flight broadband connectivity.”

Many seem unaware that they now have access to a global, reliable broadband network in-flight. As David Coiley of Inmarsat Aviation told the Financial Times, “Airlines have to adapt to this new opportunity.”

And it is an opportunity. Consider shopping an online store at 30,000 feet filled with everything from ground transport options to tours to other destination-related activities. Or returning passengers could do their grocery shopping while in-flight to have the groceries delivered when they arrive home. The possibilities are almost endless.

A study conducted by the London School of Economics and Inmarsat said that in-flight broadband – offering streaming and online shopping to passengers could create a $130 billion global market within the next 20 years. The study estimated that the airlines’ share of that total could amount to $30 billion in 2035. That’s quite a jump from the forecast $900 million in 2018.

Investing in Airlines

With this possibility of e-commerce revenue streams in the not too distant future, it may be time to look at the airlines. Even long-time skeptic Warren Buffett now owns airline stocks including Southwest Airlines (NYSE: LUV), American Airlines (Nasdaq: AAL), Delta Air Lines (NYSE: DAL) and United Continental Holdings (NYSE: UAL).

I would stick with the airlines that have the best Wi-Fi connectivity. Conde Nast Traveler magazine reports that a survey from Routehappy found that U.S. airlines are leading the way, with at least a chance of Wi-Fi on 83% of the total seating capacity.

Two of the top three airlines globally with the highest percentage of seats with Wi-Fi connectivity, according to the survey, are Delta Air Lines and United. Other smaller airlines with good connectivity are JetBlue (Nasdaq: JBLU)and Virgin America, which was sold to Alaska Air Group (NYSE: ALK). I would focus on Delta,United, and Alaska Air.

Delta operates a fleet of over 700 aircraft and serves more than 170 million customers annually. Its revenues fell 3% in 2016 to $39.64 billion, giving its efforts to reduce its debt levels more urgency. Its management is also maintaining capacity discipline while simultaneously trying to modernize its fleet and expand its operations.

The company is trying to enhance its shareholders’ wealth through dividends and share buybacks. In May 2017, Delta announced that its board of directors approved a new share repurchase program worth $5 billion and raised its quarterly dividend by more than 50%.

United is the world’s largest airline, operating about 5,000 flights a day. However, the merger of UAL with Continental has left the merged company with a significant debt load. Its significant exposure to Houston also means it was greatly affected by Hurricane Harvey.

Its return on equity (ROE) is 29.5%, above the industry average of 27.6%, offering growth potential. And it is cheap. Its trailing 12-month enterprise value to earnings before interest, tax, depreciation and amortization ratio is only 3.9. That compares to the value for the S&P 500 of 11.1.

Alaska Air operations cover the western U.S., Canada and Mexico as well as, of course, Alaska. I like the purchase of Virgin America, despite the rise in the amount of debt it now has. The company’s August traffic report showed that its load factor (percentage of seats filled by passengers) increased to 86.2% from 85.8% in the year ago period as traffic growth exceeded capacity expansion.

I think that is due to the company’s expansion efforts. One example is the frequent-flyer partnership with the European airline Finnair, announced in May 2017. This customer friendly move aims to provide the members of the program, at Alaska Air Group as well as Finnair, the opportunity to earn miles/points on flights of either carrier.  

It has been a turbulent year for airline stocks as the combination of natural disasters and terrorist attacks have taken their toll. Not to mention overcapacity, high labor costs, and now rising fuel costs. That’s largely why the three stocks are down respectively.

But now may be the time for contrarian investors to look past the short-term turbulence and take a small position in the airlines that are forward-looking. I fully expect we won’t recognize the industry in a decade as technology disrupts it.

source: Investors Alley

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.
Technology

3 Electric Car Winners That Don’t Sell Electric Cars… Or Batteries Either

One obvious theme I picked up in my Singularity research project is the fact that it seems like everyone is jumping into the electric car ‘race’. By 2018, there will be 112 battery electric and 72 plug-in hybrid models available globally, says Bloomberg. That is up from 76 and 36 respectively just a year ago.

Adding to an already crowded field is Dyson. Yes, that Dyson from the U.K., founded by inventor James Dyson, that is best known for its vacuum cleaners. And no jokes please about how the Dyson electric car will be loud, made of cheap materials, underpowered and yet make Elon Musk blush with its exorbitant price.

The point you need to realize is that electric cars are beginning to reach the tipping point. My physics background tells me the tipping point is when a balanced object tips over after an additional weight was added to it.

But in societal terms, a tipping point is the point when a quick and dramatic shift in behavior occurs.

We’re not there yet with electric vehicles, which account for only roughly two million of the two billion vehicles on the road in 2016. But the point is approaching, according to some surprising sources.

EVs Tipping Point?

One such source is the world’s largest mining company, BHP Billiton (NYSE: BHP). Its chief commercial officer, Arnoud Balhuizen, said to Reuters: “I think if we look back in a few years we would call 2017 the tipping point of electric vehicles.”

It’s easy to see why BHP thinks 2017 is such an important year for the future of electric vehicles. There have been a number of very positive developments pushing forward EVs.

First, we have countries including France, Norway and the U.K. setting firm dates for when vehicles powered by fossil fuels would no longer be sold in their countries. India has taken similar action with a 2030 target date and China is working on setting a definite deadline for ending sales of internal combustion engine vehicles.

China’s expected move is so important because of its size – it accounts for one-third of the entire global auto market. It is also the biggest electric car market, with 507,000 such vehicles produced domestically last year, a rise of over 50% from the prior year.

And keep in mind, still only one in five Chinese citizens own a vehicle!

The most likely date China will set is 2040. But the founder and head of BYD (OTC: BYDDY), Wang Chuanfu, is lobbying the government for a 2030 date.

He may not get his wish but the Chinese government is already helping companies like his. It plans to launch a carbon trading scheme, likely in 2019, whereby traditional automakers in China will have to produce a certain number of electric vehicles or else be forced to buy credits from electric car makers such as BYD.

For those of you not familiar with BYD, it is China’s largest electric vehicle maker and the largest producer of lithium-ion batteries. It is bringing online an additional four gigawatts of battery-making capacity by year’s end. That will make its annual battery output 12 times larger than the expected production from Tesla’s Gigafactory. Warren Buffett owns 8.5% of the company.

Source: Investors Alley

Related: 3 Stocks to Profit from No-Profit Electric Cars

Bottom line – almost 80% of the global auto market is pushing toward the phase-out of fossil-fuel-powered vehicles and toward electric cars.

Why the Optimism

Of course, it isn’t just government action that says we may be near a tipping point. It’s also the economics of batteries.

Bloomberg New Energy Finance (BNEF) forecast that, in a mere eight years, electric vehicles will be as cheap as gasoline autos. All thanks to the plunging price of producing lithium-ion batteries.

These batteries have already fallen in cost by 73% since 2010. Batteries currently account for roughly 50% of the cost of an electric car, but BNEF says these costs will fall another 77% by 2030.

However, the BNEF scenario all depends on whether the battery makers can get their hands on the necessary metals and minerals – what I call the technology metals – in sufficient quantities. After all, there are expected to be built dozens of gigafactories (nearly all in Asia) in a forecast $240 billion battery industry within the next 20 years.

EVs and Copper

So what will be the effect on commodities?

My thinking is in line with that of BHP Billiton. . .that the impact for producers of raw materials would first be felt in the metals markets (positively) and then felt in the oil market (negatively). By the way, I talk about all sorts of technology related-commodities in my new newsletter – Growth Stock Confidential.

BHP expects there to be about 140 million electric vehicles on the road in 2035, or about 8% of the global fleet. If so, that is great for big copper mining companies like BHP since an electric car uses approximately four times as much copper as does a gasoline or diesel vehicle.

A report released this summer from the industry body, the International Copper Association (ICA), forecast demand from the auto sector for copper will increase nine-fold in a decade, from 185,000 metric tons this year to 1.74 million tons in 2027. That would be the equivalent of about 6% of global copper demand in 10 years.

Electric vehicles use a substantial amount of copper in their batteries and in the windings and copper rotors used in electric motors. A single car can contain over three miles of copper wiring, according to the ICA.

This presents an investment opportunity with rising demand meeting supplies that will struggle to keep up. That’s due to the fact that current mines are aging (ore grades are dropping) and few major discoveries have occurred in the last two decades.

Three Copper Investments to Buy

One company worth consideration to buy is the aforementioned diversified miner BHP Billiton (NYSE: BHP). It was the world’s fourth largest producer of copper in 2016 at 1,113 kilotons. A kiloton is equal to about 1,120 of our U.S. tons. BHP’s stock has risen 12% year-to-date and 17.6% over the last 12 months.

Its copper assets include the Escondida and the Spence mines in Chile and the Olympic Dam mine in Australia. BHP is investing into copper’s future with the recent announcement of a $2.5 billion project to extend the life of the Spence mine by 50 years. There is expected to be an additional 185,000 tons extracted annually thanks to the investment.

The company is also spending $43 million on a new facility to produce 100,000 metric tons of nickel sulphate – a key component in lithium-ion batteries – annually. Production is expected to start by April 2019.

Next on the list is the world’s largest publicly-traded (Chile’s Codelco is government-owned) copper producer, Freeport-McMoran (NYSE: FCX), which trailed only Codelco in copper production last year (1,696 kilotons). Its stock is up 5.5% year-to-date and 27.5% over the past year.

It produces copper at seven mines in Arizona and New Mexico, as well as the El Abra mine in Chile and the Cerro Verde mine in Peru. And, of course, its crown jewel is the Grasberg mine in Indonesia, which is one of the world’s largest deposits of copper and gold. A dispute with the Indonesian government over the mine was recently settled.

Like many miners, Freeport suffered under the burden of too much debt incurred during the commodity supercycle (2001-2014). But it has lowered its debt by $9.5 billion since the end of 2015, thanks to strong cash flow from its copper operations.

Another possibility is the fifth-biggest producer of copper in 2016, Southern Copper (NYSE: SCCO), which indirectly is part of Grupo Mexico and has operations in Peru and Mexico. Its stock rose 22% so far in 2017 and is up more than 46% over the past 52 weeks.

The company hit a record high for copper output in 2016, at 900 kilotons, which translates to a 21% year-on-year growth. That is really good news since it is the highest margin major copper producer globally with a cost of only $0.95 per pound. Copper is trading currently at about $2.95 a pound.

Southern Copper also happens to be sitting on the largest proven copper reserves in the industry. And its mines have an expected 90+ years of life, giving you a great long-term play on copper and the whole electric vehicle revolution.  

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Alley 

Growth Stocks, Technology

3 Stocks to Profit from No-Profit Electric Cars

There was a real race going on at this year’s annual mid-September Frankfurt Motor Show in Germany. Not an actual race, of course. But a race among automakers’ executives to see who could promise the greatest number of future electric vehicles.

This makes sense as government policymakers around the world push hard for a move away from combustion engine cars and toward battery-powered electric vehicles. France and the U.K. have a 2040 target to have that changeover happen. Norway’s target is 2030.

And as I recently highlighted in a recent article, China – home to one-third of the world’s car market – is also working on a timetable to end completely the sales of fossil-fuel-based vehicles. Its largest electric vehicle maker, BYD (OTC: BYDYY), is urging the government to set a target date of 2030.

The sentiment among auto company executives toward electric vehicles has certainly changed from nine years ago. That was when the first Roadster from Tesla Motors (Nasdaq: TSLA) went on sale. Before that, the only major automaker that was serious about electric cars was Japan’s Mitsubishi Motors (OTC: MMTPF).

Related: 3 Electric Car Stocks to Crush Elon Musk and Tesla

Profits Anyone?

While some U.S. investors act as if Tesla is the only company that will be making electric vehicles, the sector is rapidly becoming very crowded. Auto companies from Europe to Japan and Korea to our domestic automakers – General Motors (NYSE: GM), Ford Motors (NYSE: F) and Chrysler Fiat Automobiles NV (NYSE: FCAU) – are all piling into selling battery-powered vehicles to the public.

This raises a big question for investors in the sector — will the automakers have to sacrifice margins and possibly even profitability in this race to, as the CEO of German carmaker BMW (OTC: BMWYY) Harold Krüger called it, “electric mobility.”

The CEO of Japan’s Honda Motor (NYSE: HMC), Takahiro Hachigō, spoke bluntly to the Financial Times about what everyone is the sector is facing at the moment, “Until we reach certain volume, the profitability will not be as great [as compared to conventional vehicles].”

In many cases, profit margins at automakers are already stretched. Margins will only worsen in this transition period to electric vehicles as investments into research and development rise and component costs do as well. All the while electric vehicle sales are still not at the profitability tipping point.

Even ignoring money-burning Tesla, other vehicle manufacturers are feeling the jolt from the move toward electric vehicles. Germany’s Daimler AG (OTC: DDAIY) said its margins could fall by two percentage points (despite a cost-cutting program) thanks to the costs associated with getting batteries and redesigning cars. One such cost is the $1 billion Daimler plans to invest in its Alabama plant to produce electric cars in the U.S.

Turning our attention to domestic automakers, analysts at BCA Research estimate that GM loses about $9,000 for every Chevy Bolt it sells. In order to get the “average” corporate profitability from the Bolt, BCA says General Motors would have to raise the price on each car by $26,900. Obviously, GM isn’t going to do that.

Much of the added costs for electric vehicles comes from the battery. And a lot of this cost comes from the necessary metals and minerals that make the battery work.

The ‘Picks & Shovel’ Winners

The good news for the automakers is that battery costs are falling. But instead of buying a car company, you should take a look at investing into the makers of electronic components that will go into future electric vehicles.

At that very same Frankfurt Motor Show, the ebullience of the auto components makers was evident. They were kids in a candy store. It’s easy to see why. . .

Right now, the vehicle manufacturers control design, and nearly every other important aspect of vehicle production. But that is slipping away from them as the wave of the future is more electrical systems and electronics and not mechanical systems.

Estimates are that 50% to 70% of the value of a car will lie in those electronic components, which the automakers purchase from other companies. Companies, ironically enough, that U.S. carmakers spun off years ago because they were thought to be low-margin businesses.

However, as with all investments, you have to pick and choose among the companies in the sector. Some auto parts companies still have their hand in the sand, saying that the changeover to an electric car future may never happen.

Here are three stocks for you to consider where management ‘gets it’.

Stock #1 – Delphi Automotive PLC

At the top of the list is a company that was once part of General Motors (NYSE: GM), Delphi Automotive PLC (NYSE: DLPH).  The spinoff was completed in 1999, as sadly, GM management listened to Wall Street advice about streamlining operations by getting rid of a business “going nowhere.”  

But now, it’s Delphi that’s in the fast lane. That will be even more true once it completes its own spinoff – of the powertrain business – that will be completed in March 2018.

The spinoff will allow Delphi to focus the remainder of itself (about ¾ of the current company) on self-driving, connected and electric cars. Delphi is heavily involved in components for hybrid vehicles and its $12 billion advanced electronics business is the company’s top revenue generator.

The reason behind the split was given by CEO Kevin Clark: “The pace of change in our industry is accelerating.” That move has pleased shareholders, adding about 28% on to the value of its stock, putting it up 50% year-to-date. Delphi is moving right along with that “pace of change” in the industry.

The company continues to innovate in all sorts of new vehicle technologies. . . . .

It teamed up with Frances’ Transdev on operating Europe’s first self-driving vehicle service and with BMW (OTC:BMWYY) on developing a self-driving car. It also partnered with Israel’s Innoviz Technologies on providing high-performance LiDAR solutions for autonomous vehicles and with Blackberry (Nasdaq: BBRY) on an autonomous driving operating system platform.

Stock #2 – Visteon Corporation

The next company to consider was also a spinoff – this time from Ford in 2000 – Visteon (NYSE: VC). The reasons were similar to those of General Motors.

Visteon designs and manufactures electronics products for automakers. Visteon provides everything from standard gauges to high resolution, reconfigurable digital 2D and 3D displays to infotainment and audio systems.

It is turning out to be a big winner as the automakers and Silicon Valley battle to see who will control the cockpit electronics inside your vehicle. Visteon is agnostic and winning sales from carmakers whether they are using their own systems or those of some tech company’s systems.

The vehicle display market is expected to reach $21 billion by 2022 and Visteon is sitting in the catbird seat. It already has a record $17.3 billion order backlog. That trend should keep the stock motoring ahead, adding to the more than 51% year-to-date gain.

Stock #3 – Autoliv Inc.

The third company has been a relative laggard, with its stock only up about 8.5% so far in 2017, the Swedish auto parts giant Autoliv (NYSE: ALV). Most of that upward movement in the stock price happened after a recent announcement.

Its management said it is currently considering whether to follow the path taken by Delphi and splitting itself in two, separating its fast-growing electronics business from the parts of the company that makes things like seat belts and air bags.

Autoliv’s electronics components business consists of things like radars used in autonomous vehicles and positioning systems. It expects the market for electronic safety products to more than double over the next several years, from $20 billion this year to $40 billion in 2025. Autoliv management is targeting $3 billion in such sales in 2020, up from $2.216 billion in 2016.

So there you have it – a choice between fast-growing auto parts companies or automakers that will struggle to remain profitable.

Source: Investors Alley

Insider Trading, Technology

Buy These 3 Stocks Before the Next Big Computer Hack

According to a Lloyds of London report issued in July, a global cyber attack could result in damages of as much as $121.4 billion. But based on the growing frequency of such cyber attacks and hacks, this estimate will likely turn out to be too conservative.

The reason is straightforward. The world’s volume of data has been growing exponentially year after year, with the trend really accelerating after 2005. This gives cyber criminals more and more opportunity to gain access to massive amounts of data in a single breach. And potentially a bigger payoff.

Research from IT services firm DXC.technology gives us an idea of how much of our data is out there, exposed to unsavory people. Its research forecast that…

  • By 2020, over one-third of all data will live in or pass through the cloud.
  • In 2020, data production is estimated to be 44 times greater than in 2009. That’s a 4,300% increase!

The reality is that our personal data as well as corporate and government data will become more and more exposed to those who would exploit access to such data. That does open though a world of opportunity for investors. More on that later.

But first, more on this nasty underside of life in the 21stcentury coming to the fore again as the credit-reporting agency Equifax (NYSE: EFX) revealed a massive breach of its cyber defenses.

Equifax Debacle

Equifax, with $3.1 billion in revenues in 2016, has a dual role as both a credit-data bureau and fraud monitor. Yet, its cyber defenses could be best described as a sieve.

The hack, which began in mid-May, went undetected for two and a half months. Exposed were the personal records of up to 143 million Americans. That’s nearly half the U.S. population, folks.

The hackers gained access to both the credit card files as well as the company’s back-end systems that store exhaustive data profiles on consumers. This data included Social Security numbers, driver’s license numbers and other sensitive information.

This isn’t the industry’s first brush with poor security of customers’ data. In 2013, it was discovered that an identity thief in Vietnam ran a service that helped others access millions of Americans’ credit reports from a company Experian PLC (OTC: EXPGY) had recently purchased.

Of course, massive data breaches aren’t confined to just this industry. Last December, Yahoo (now part of Verizon (NYSE: VZ) revealed that attacks between 2013 and 2016 had compromised the personal information of more than a billion users. The data stolen included names, phone numbers, birth dates and passwords.

But Equifax’s approach to the breach seemed particularly egregious to me.

First, it did not report the breach for 40 days – just beating the deadline of 45 days, which certain states require. Then, if you were affected by the hack and sign up for Equifax’s offer of one year of its TrustedID product, which scans the black web for your stolen information, you lose all rights to sue the company.

And finally, three Equifax executives sold $1.8 million worth of stock just days after the breach was discovered. That may have been a coincidence, but still the stench from Equifax is almost overwhelming. Talk about a stock to avoid.

More Dangers Lurk

You and I are more at risk though from more than just fraud being committed in our name. Other types of hackers are aiming at other important targets in our lives.

According to a report from cyber security company Symantec (Nasdaq: SYMC), hackers have breached the operational systems of utility companies in the U.S. Symantec says they are lying in wait with the ability to switch off the power and sabotage computer networks.

The group of hackers goes by several names – Dragonfly, Energetic Bear and Berserk Bear. The group is believed to have ties to Russia and has been around for a while. In 2014, it is believed to have compromised the systems of more than 1,000 organizations in 84 countries.

Access is almost too easy for these hackers. With the recent hack of U.S. utilities, entry was gained by simply tricking employees into opening Microsoft Word documents that steal employees’ usernames and passwords.

The danger is very real. Eric Chien of Symantec said that even if hackers compromised a small electric utility company, they could put the power grid at risk by either removing or putting too much power into the grid.

This should not come as a shock to any of us. In July, the Department of Homeland Security and the FBI warned that the U.S. energy industry had been targeted by hackers.

Cybersecurity Investments

While these hackers may be waiting for the exact right moment to strike, you should not.

Wall Street continues to largely ignore the threat of cyberattacks and hacks. This has left most cybersecurity stocks trailing the performance of other technology sectors, making them relative bargains.

For the broadest possible exposure to the sector, I like the ETFMG Prime Cyber Security ETF (NYSE: HACK). It is up nearly 13% year-to-date and just 10% over the 52 weeks.

Its portfolio consists of 25 stocks, with its top five positions being: Palo Alto Networks (NYSE: PANW), Cisco Systems (Nasdaq: CSCO), the aforementioned Symantec, Splunk (Nasdaq: SPLK) and the British cybersecurity firm, Sophos Group.

This group of stocks contains my next two choices – Symantec and Palo Alto Networks. These companies are benefiting from the growth of the IT security industry from $75 billion in 2015 to $101 billion in 2018, according to IT research firm Gartner.

Symantec provides a wide range of Internet security solutions to both individuals (41% of revenue) and businesses (59% of revenue). You probably have one of its Norton products installed on your computer.

The company’s last earnings report was strong with revenues jumping nearly 33% year-on-year. These kind of results should continue propelling the stock higher (up 34.5% year-to-date and 31.25% over the past 52 weeks).

Palo Alto Networks offers network security solutions, such as next-generation firewall products, to businesses, service providers and governments. As of the end of 2016, the company was third in the security appliance segment (in terms of revenues) trailing only Cisco Systems and Check Point Software Technologies (Nasdaq: CHKP).

It continues gaining customers, with it recently adding 3,000 to its 42,500 global customer base. I also like the fact that Palo Alto’s balance sheet is strong with cash on the books and no debt obligations.

As with Symantec, its latest quarterly report was good with revenues climbing 27% year-on-year. Those kinds of numbers should finally get the stock going. It is up more than 16% year-to-date, but just 1% over the past year.

Owning some sort of cybersecurity is one of the rare no-brainers in the investment world, especially in light of recent events like the Equifax breach.

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Source: Investors Alley