Technology

2 Reasons You Need to Dump Apple Now

Apple (Nasdaq: AAPL) just set a record for the most profitable quarter in the company’s history. Not surprising since Apple executives said in November that they were expecting its “biggest quarter ever” and a return to double-digit revenue growth for the first time in years.

But not all is well with the world’s largest company by market capitalization. One needs look no further than the stock’s relative performance to the S&P 500 index over the last three month period. Apple has been a definite laggard.

I expect that relative underperformance to continue. Here are two reasons why:

Reason #1 – Overpriced iPhoneX?

Apple may have made a classic mistake and priced the new iPhoneX too high, thinking its fans would pay any price for its phones.

This phone is the first from Apple with an organic light-emitting diode (OLED) display. It also features facial recognition and wireless charging. But many complain it lacks groundbreaking new technologies when compared to some of Apple’s previous models. In other words, the same old complaint under the leadership of Tim Cook – a lack of innovation.

The iPhoneX price starts at $999 here in the U.S. And in the very important China market, the cost starts at a whopping $1,334! This is crucial since, in December, the flagship Mate 10 Pro from China’s Huawei was launched at a starting price of just over half the cost of the iPhoneX. In the latest survey of Chinese consumers, Apple still lags Huawei in what brand their next smartphone purchase will be. As recently as 2015, Apple was named by twice as many consumers as Huawei was.

What really caught my eye though was the article last week in the Nikkei Asian Review that revealed Apple had told its Asian suppliers it was slashing its production target for the iPhoneX by half for the first three months of 2018. Production was slashed because sales had failed to meet Apple’s lofty expectations. If sales are faltering, that means the whole Wall Street tale about the iPhoneX supercycle was a myth.

And let’s not forget that there continues to be intensifying competition in the premium smartphone market. Alphabet (Nasdaq: GOOG) officially closed its $1.1 billion deal with HTC Corp., adding more than 2,000 smartphone specialists in Taiwan. This is expected to help Google chase Apple in the increasingly cut-throat premium handset market.

Reason #2 – Smart Speaker Delay

In relation to the entire innovation question, I do wonder what Apple’s next act will be after the iPhone? The iPhone is still responsible for about 70% of the company’s revenues.

One bright hope was the smart speaker market. After all, Apple’s Siri was the leader in the virtual assistant space. But it has now taken a back seat to smart speaker products from both Google (Home) and, of course, Amazon.com (Nasdaq: AMZN)and Alexa. Amazon’s Echo speaker was launched in 2014 while we still wait for Apple’s entry.

Apple’s HomePod smart speaker will finally be launched on February 9, after missing the Christmas selling season. But unlike the debut of the iPhoneX, Apple Watch Series3 or AirPods, pre-orders for the HomePod have not sold out ahead of the launch date.

That is likely due to the relatively high price tag (again). The HomePod will sell for $349 while you can get a speaker from Amazon for $50 to $150. This market will be extremely important long-term as the hub in many people’s homes. Canalys Research forecast that sales for smart speakers will soar by 70% in 2018 to 56.3 million. In other words, it is the biggest consumer electronics products since the smartphone.

Performance will matter when it comes to the virtual assistants in our homes.

Tests comparing Alexa to Siri to Google Home’s assistant have shown Google the winner in general knowledge with Siri performing the worst. And when it comes to shopping, Alexa was tops with the HomePod again bringing up the rear. The only areas where the HomePod came out on top was in regard to privacy and music.

Apple’s Future

Another growing negative for Apple is that sentiment toward the company has shifted, albeit slightly so far. The whole incident regarding the company intentionally slowing down its older devices was handled very poorly. So poorly in fact that now Apple faces a wave of class-action lawsuits as well as regulatory inquiries from both the Department of Justice and the Securities and Exchange Commission.

Money-wise, the investigations will be nothing Apple can’t handle. But the danger is there of a major sentiment shift against Apple from both the public at large and the investment community.

If sentiment further shifts, you may see Apple’s stock continuing to underperform the general market.

For me, that turns the race between the stocks of Apple and Amazon into a very real one. Already, Amazon is within $190 billion and closing very rapidly. . .the gap at the end of 2017 was $326 billion. And I expect to close further in 2018, unless Apple begins to innovate again, justifying the premium pricing on its products.

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Source: Investors Alley 

Technology

Apple Inc.: So Much For The iPhone Supercycle

Apple Inc.’s (NASDAQ:AAPL) earnings report was certainly awaited with trepidation from investors. And yes, it was justified. The fiscal first-quarter was fairly mixed. So far today, AAPL stock is off about 3.86%.

But keep in mind there had already been ample selling off. Over the past few weeks, AAPL stock has gone from $180 to $163. (And is now about $161).

So let’s take a look at the quarter. Earnings rose 16% to $3.89 a share, up from the Wall Street forecast of $3.86 per share. As for the top line, the revenues jumped by 13% to $88.3 billion, which beat the consensus of $87.28 billion.

But there were two big-time issues with the quarter for AAPL.

First there was the guidance. For the current quarter, the company expects revenues to range between $60 billion to $62 billion. However, analysts were looking for a more robust $65.73 billion. There was also disappointment with gross margins. AAPL predicts they will be 38% to 38.5%, below the Street’s 38.9%

Next, the company showed weakness with the iPhone. Note that units sales reached 77.3 million, down from 78 million in the year-ago quarter. Oh, and Wall Street was looking for 80 million.

But this should be no surprise. AAPL was late with the launch of the iPhone X. And besides, there weren’t as many must-have features to gin up demand, especially in light of the hefty $999 price tag.

AAPL Stock And The iPhone

AAPL has been working hard to expand its revenue base. The “Other Products” segment — which includes the Apple Watch, Apple TV and AirPods — posted an impressive 36% increase in revenues to $5.5 billion.

There was also strength in the services business — including the App store, Apple Pay and Apple Music — which saw revenues rise by 18% to $8.47 billion. So Apple is certainly having a lot of success monetizing its base of 1.3 billion phone users.

Yet the diversification efforts have not been without issues. Just look at the HomePod — Apple’s smart speaker. The company delayed its launch, which meant missing the all-important holiday season. The result was that rivals like Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc(NASDAQ:GOOGL) have been able to capitalize on this massive opportunity.

Now despite all the diversification efforts, the fact remains that more than two-thirds of revenues come from the iPhone. So the sluggishness with unit volumes is definitely worrisome.

For the most part, the anticipated “upgrade supercycle” just never materialized.

Bottom Line On Apple Stock

Already analysts are getting cautious on AAPL stock. For example, KeyBanc Capital Markets’ Andy Hargreaves has noted: “Soft iPhone sell-through suggests a saturated market and the lack of gross margin upside reduces our view of potential profit growth.” His price target on Apple stock is $178 and he has lowered his rating from overweight to sector weight.

Now it’s true that AAPL has a massive cash hoard, which will likely mean more share buybacks and dividends increases. There may even be some interesting acquisitions.

What’s more, AAPL stock is at a reasonable valuation. Consider that the forward price-to-earnings ratio is at 13X. By comparison, Facebook Inc (NASDAQ:FB) is at 22X and GOOGL trades at 23X.

But again, the iPhone is what matters for AAPL stock. And for the most part, it looks like there will not be much momentum — which means that the shares may wind up languishing for awhile.

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Source: Investor Place

Uncategorized

Where to Invest For the Next Correction.

My grandfather, William Paul Smith was an ordinary dairy farmer with a degree in common sense. One of his favorite sayings was, “It’s the same thing, only different.” 70 years ago, he warned me not to throw rocks at a wasps’ nest. As I cried and put ice on the sting, he explained what happened always happens – and I got stung! I thought I was different – and could outrun a wasp – and had to learn the lesson the hard way.

His sage wisdom does not just apply to children. Why is it that many lessons are constant, yet even as adults, we choose to ignore warnings and learn the hard way?

“The four most expensive words in the English language are this time it’s different” – Sir John Templeton

Good friend Chuck Butler, writes for Dow Theory Letters, a terrific publication. Chuck recently asked, “Will This Time Be Different?”

His headline reminded me of my grandfather. Warnings are appearing regularly – are they being ignored?

Subscribers are concerned. Mike L. recently asked:

“What do you think will happen with the dollar and today’s retirement plans if bonds tank, no one buys our debt, and other nations continue to conduct trade deals without using the reserve currency, etc.?”

Chuck warns:

“I’m only going to say this once … This is all headed for a Minsky moment. … A Minsky Moment is when a market fails or falls into crisis after an extended period of market speculation or unsustainable growth. I’ve moved that over to debt accumulation instead of a market.”

I contacted Chuck. Will the Minsky Moment appear in the stock or bond market? What can individual investors do to avoid getting stung?

DENNIS: Chuck, on behalf of our readers, thank you for taking your time for our education. Let’s get right to it.

Before I get into specific questions, you discussed a ratio of household net worth to income. I’ve never heard of that before. Can you explain it, and what it means for our readers?

CHUCK: Dennis, thank you for inviting me to share my opinions and thoughts from many years of investment experience with your readers. I get a kick from doing these interviews, just so you know!

Anyone with a home mortgage falls into this ratio… Basically, you take the house’s value, (easily obtained from Zillow.com) and you subtract what you owe on it. Simple, right?

Add up all of your income and divide it into the net worth figure you just calculated. The higher the number the higher the risk. If the house’s value falls, the income could be eaten away with just mortgage payments or increase the chance of defaulting on the mortgage.

Before we got crazy with home values in 2004-2007, this ratio was around 5.1%. In 2007 it peaked to 6.5%, and we all know what happened then. Lo and behold right now it’s 6.75%!

Some pundits and economists are saying, “This time will be different”… I just cringe when I hear those words!

DENNIS: I’ve noticed a lot of ads encouraging people to refinance their homes while rates are still low, suggesting they can take some of the equity and pay off their credit cards. That only works if they cut up the damn credit cards. If millions of consumers refinance, basically taking equity out of their home, what impact will that have?

CHUCK: In 2005, I told my readers that consumers were using their houses like ATM machines, taking equity out of their homes to buy SUV’s, big screen TV’s, and fancy clothes. That was all fine until the house values began to fall, and now the consumers owed more on their house than it was worth.

Never in a million years would I have thought that we would again fall for that idea that house values will never fall, especially so soon after the last crisis and collapse. But here we are again…. And it’s all going to end up just like the last crisis, but this time, it will be worse, because we never cleaned out the excesses of the last boom period.

Banks and financial institutions have more derivatives on their books now, than they did before 2007…. Like your grandfather said, same thing, only different…and worse.

DENNIS: Our mutual friend, Dr. Lacy Hunt echoed your remarks about consumer credit growing at the fastest rates in 16 years when he recently wrote:

“Consumer spending, the economic heavy lifter of U.S. economic growth, has expanded by 2.7% over the past year…. Real disposable personal income rose by only 1.9% over the past year. It was only the ability to borrow that supported the spending increase. In economic terms,borrowing is a form of dissaving.

…. the only period in which the saving rate was lower than it is today was 1929-1931…” (Emphasis mine)

Chuck, I know you call it the “stupid” Consumer Confidence Index. It’s currently 94.4, which is doggone high. Consumers are so confident, they are “dissaving” at a historically high pace.

You are warning a lot of overconfident investors they may get stung – and badly! If debt is the issue, wouldn’t the Minsky Moment start in the bond market?

CHUCK: It just may do that Dennis. You see a Minsky Moment happens when everyone is complacent about the assets and thinks that nothing bad could happen, so they get overconfident and decide to take on more risk. At that point, the Minsky Moment is just around the corner.

What could cause a Minsky Moment in bonds? Well, think about this for a minute. The U.S. Fed has been a very large bond buyer since the first round of Quantitative Easing began in 2009. They bought boatloads of both U.S. Treasury bonds and Mortgage-backed bonds. Look at their balance sheet, it increased five-fold to over $4.6 Trillion in 2017.

The Fed announced a “tapering” in 2015, but they kept buying Treasuries to replace bonds that matured. Late last year they announced that they were going to stop buying bonds altogether. No replacement bonds, no auction window buying.

The question was… “Who is going to take the Fed’s place”? Well, there has been no one, to date, and the 10-year Treasury yield has risen from 2.05% on Sept. 8, 2017, to 2.65% on Jan. 18, 2018. That’s just the beginning, in my opinion!

The Fed may not be the only “no show” at the auction window. China is considering slowing down their Treasury purchases or halting them altogether! Guess who else has been slowing down their Treasury purchases? Saudi Arabia, and Russia… Oh-no! Say it ain’t so, Joe!

This is the Minsky Moment for bonds…no big Central Bank buying, will drive yields much higher. It could easily be followed with another Minsky Moment for stocks.

When interest rates hit historic lows, money flooded into the market as investors were desperately searching for yield. As yields rise, the tide will quickly turn, and mom and pop stock investors will take the risk out of their investments and go back to bonds.

DENNIS: One final question. Many of our readers are clearly seeing the signs, fearing a Minsky Moment is inevitable, but not sure about imminent. They don’t want to get hurt. When the Minsky Moment eventually happens, I believe it will be different – it will be uglier than most investors have seen in their lifetime.

What advice would you give our readers to protect themselves?

CHUCK: Well, you know me well enough Dennis that you could answer this question for me! But here it goes…

First of all, the dollar is going to be held hostage by all this chaos, expect high inflation. Diversify into euros, sterling, Aussie dollars, kiwi and some others would be prudent. In addition, either a new purchase of up to 20 to 25% of your investment portfolio in Gold & Silver, or an increase in your holdings.

I feel that Gold & Silver are going to replace all the hoopla of Bitcoin, and I also feel that once that happens there will be supply problems, thus raising the prices of these metals even higher.

There is a positive side. Those who heed the warnings will be presented with some terrific buying opportunities.

I thank you for allowing me to give my opinions and thoughts, Dennis. You have very astute readers, and I’m sure they will hear the calls to take defensive moves in their investment portfolios. As I said before, I get no kick from champagne, flying too high with some gal in the sky, is my idea of nothing to do, but I get a kick out of writing for you!

DENNIS: (chuckles) That was clever! Chuck, once again, on behalf of our readers, thank you.

Both Chuck and Lacy Hunt clearly point to similar warning signs of previous “Minsky Moments” where millions of people lost a lot of money. The same thing, only different?

We have a new generation that’s not been stung badly enough and learned a lesson. The warnings are there for all to see – some will heed them, take precautions, diversify, keep debt under control, keep stop losses current – and take advantage of some great opportunities when they appear. Others will ignore the warning signs. Why do so many of life’s lessons have to be learned the hard way? You can’t outrun a wasp!

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Source: Investors Alley 

Uncategorized

10 Secret Stocks Top Investors Are Betting On

Top Investor Stock: Tesla (TSLA)

Top Investor Stock: Tesla (TSLA)

Tesla’s big ambitions and disruptive potential have clearly struck a chord with top investors. This volatile auto stock boasts a “Very Positive” investor sentiment. Over the last 30 days, the best-performing investors have increased their TSLA exposure by no less than 10.8%.

But the Street does not share this optimism — quite the contrary. Right now, the stock has a hold analyst consensus rating with only six recent buy ratings. This is versus eight hold and nine sell ratings. Meanwhile, the $309 price target suggests big downside potential of 10% from the current share price.

Top Jefferies analyst Philippe Houchois has just slashed his 2018 revenue estimate for Tesla by 14%. He has also cut his fiscal 2018 Model 3 delivery forecast by 35% to just 175,000 units. In a bearish report (entitled “Another Curve Ball”) the analyst reiterates his “sell” rating and $240 price target (30% downside).

And he isn’t feeling overly impressed by CEO Elon Musk’s new merit-based compensation package. Houchois says the new deal sends “mixed messages” and is “overly incentivized on valuation multiples rather than financial performance.”

Top Investor Stock: Allergan (AGN)

Top Investor Stock: Allergan (AGN)

Irish based Allergan Plc. (NYSE:AGN), maker of Botox, has a “Very Positive” signal from top-performing investors. Indeed, top investors have upped their exposure to this pharma giant by almost 3% over the last 30 days. Plus, investors who hold AGN on average dedicate 4.3% of their portfolio to the stock.

Perhaps these top investors are onto something. We can see that Barclays’ Douglas Tsao has just upgraded Allergan from “hold” to “buy.” The move comes with a bullish $230 price target (28% upside) up from $220 previously. Tsao’s shift in sentiment, after over three years on the sidelines, comes from the company’s market-leading Botox position. A survey of physicians revealed that patients are much more satisfied with Allergan’s Botox than rivals Dysport and Xeomin.

Overall the stock has a cautiously optimistic “Moderate Buy” analyst consensus rating. These analysts (on average) see the stock rising 18% to hit $212 in the coming months.

Top Investor Stock: Apple (AAPL)

Top Investor Stock: Apple (AAPL)

Top investors still have faith in the market-leading power of iPhone maker Apple Inc.(NASDAQ:AAPL). Both in the last week and in the last 30 days, top investors have upped their Apple shareholdings (by 0.5% and 3.9% respectively). Plus Apple tends to make up a considerable chunk — 9% — of these portfolios.

However, the Street is not quite as bullish on AAPL stock as it used to be. The consensus is no longer “Strong Buy” but “Moderate Buy.” Analysts believe iPhone X sales peaked early and say Apple will guide for a lower March quarter than previously expected.

With this in mind, top Atlantic Equities analyst James Cordwell downgraded AAPL to “hold” with a $190 price target. He explains:

“This better than anticipated supply means that a greater proportion of demand was able to be served in the December quarter, leaving March quarter expectations (which were predicated on significant pent-up demand) for ~20% iPhone unit growth now looking somewhat aggressive (~20% iPhone unit growth).”

Top Investor Stock: Applied Materials (AMAT)

Top Investor Stock: Applied Materials (AMAT)

I am very bullish on chip equipment maker Applied Materials, Inc. (NASDAQ:AMAT). And I am not alone. Top investors are also piling into the stock, which also has 100% Street support right now. Indeed, in the last three months, no less than 11 analysts have published buy ratings on AMAT. Most promisingly, their average price target of $69 indicates upside potential of over 28%.

The No. 2 analyst on TipRanks, B.Riley FBR’s Craig Ellis has just met with AMAT management. He left the “upbeat” session with renewed conviction. Ellis explains why here: “We expect Memory spending sentiment to improve through 2018, and with that, we expect large-cap Semi Caps like AMAT (and KLAC and LRCX) to enjoy multiple expansion even as sell-side EPS grind higher.”

As for AMAT specifically, he says “AMAT’s vast portfolio breadth and large revenue scale positions mgmt well to frame industry spending potential and we sense CFO Durn remains justifiably upbeat.” Indeed, Ellis’ $71 price target indicates big upside lied ahead of 28%.

Top Investor Stock: Netflix (NFLX)

Top Investor Stock: Netflix (NFLX)

Netflix, Inc. (NASDAQ:NFLX) has just experienced a beautiful quarter. The company posted very strong earning results for Q4, suggesting that 2018 is going to be a key inflection year. And we can see from the screenshot above that investors love NFLX stock as much as they love its content. Not only are investors seriously upping their NFLX holdings, they also dedicate a relatively big portfolio proportion to this stock (4.9%).

A slew of price target increases show that the Street is also growing increasingly bullish on Netflix’s potential. Currently, the stock has a “Moderate Buy” analyst consensus rating.

Top RBC Capital analyst Mark Mahaney just ramped up his price target to $300 (11% upside potential). He says: “We believe secular demand for internet TV is ramping rapidly globally, and Netflix has positioned itself extremely well to benefit from this, with a compelling value proposition to consumers.”  He notes that the company’s guidance for Global Streaming Revenue of $3.59B in Q1 2018 implies very impressive 43% Y/Y growth.

Top Investor Stock: First Solar (FSLR)

Top Investor Stock: First Solar (FSLR)

Top investors are snapping up First Solar, Inc. (NASDAQ:FSLR) stock — with shares up a whopping 118% over the last year. Indeed, this solar panel maker represents a savvy tax play according to Roth Capital’s Philip Shen. U.S. President Donald Trump looks set to impose a new 30% tariff on fully assembled solar panel imports from abroad. As a U.S. manufacturer, First Solar’s panels will be exempt from these new import taxes. The result: a golden opportunity for FSLR to boost U.S. sales and margins.

Apparently First Solar is already seeing sales soar as utility customers rush to complete orders before the tariff imposition.

From a Street perspective, this “Moderate Buy” stock has only 10% upside ahead. However Shen’s $80 price target suggests a more agreeable 19% growth potential.

Top Investor Stock: Incyte (INCY)

Top Investor Stock: Incyte (INCY)

Investors aren’t giving up on pharma stock Incyte Corporation (NASDAQ:INCY) anytime soon. Shares may be down 20% in the last three months, but the stock is still trending high with the market’s top players. We can see that these investors are happy to take a low speculative position and see what unfolds.

The pharma sells Jakafi for bone marrow disorders and boasts a deep and promising pipeline, leading to sustained takeover speculation.

Luckily best-performing analysts are also very bullish on INCY, with seven recent buy ratings. Given the pullback in prices, these analysts now see the stock spiking a massive 60% to $150 in the year.

Take five-star Leerink analyst Michael Schmidt. He believes that concerns over Incyte’s cancer treatment epacadostat, its most advanced late-stage pipeline candidate, are overblown. INCY is developing epacadostat with Keytruda. He is reassured by management confidence in recent data and, as a result, reiterated his buy rating earlier this month.

Top Investor Stock: Nvidia (NVDA)

Top Investor Stock: Nvidia (NVDA)

With Nvidia Corporation (NASDAQ:NVDA) shares exploding by an incredible 125% in the last year, it’s no surprise that top investors are feeling super bullish. In the last 30 days alone, the number of top portfolios holding NVDA is up by 4.4%. Not only that, these investors dedicate a sizable portion (almost 8%) of their portfolio to this fast-growing chip stock.

However, Susquehanna analyst Christopher Rolland isn’t convinced that the party can last. He calculates that NVDA benefited from approx. $500 million Ethereum-related GPU sales in Q4. This would boost Q4 results and near-term guidance. But ultimately, he sees substantial longer-term risks resulting from this unsustainable mining profitability.

In contrast, Vivek Arya — a five-star analyst — singles out Nvidia as a top pick. He ups his price target to $275 (11% upside). Arya believes there is 1) a large-scale upgrading opportunity 2) continued strength in crypto and 3) upside in high-performance computing. Note that Arya’s approach is paying off with an eye-dropping 94% success rate and 102% average profit across his NVDA stock ratings.

Top Investor Stock: Boeing (BA)

The world’s largest aerospace company, Boeing Co (NYSE:BA) has a “Very Positive” top investor sentiment right now. But with shares on a tear this year, upside potential seems relatively limited (according to the Street’s average price target). However, the stock does boast a “Strong Buy” analyst consensus rating. And top Cowen & Co analyst Cai Rumohr isn’t backing down anytime soon. He has just ramped up his price target from $320 to $415 (22% upside potential).

According to Rumohr: “Strong demand, a favorable production outlook, and above-average est. Tax Act benefits suggest 2018 CFPS [cash flow per share] near $23, ramping to $28 by 2020.” He explains that the $415 price target is based on a 2018 cash flow yield of 5.5%; and — the best part for investors — adds “we can envision a $455 potential valuation on 2019 cash flow.”

Top Investor Stock: Alibaba (BABA)

Chinese e-commerce king Alibaba Group Holding Ltd (NYSE:BABA) ticks all the boxes. Both top investors and the Street love this fast-growing stock. In fact, in the last eight months, BABA has received 100% buy ratings from the Street. And even with the stock soaring, analysts still see further upside potential ahead. Five-star Oppenheimer analyst Jason Helfstein has a $230 price target on BABA (7% upside).

He explains why he is such a fan of BABA here: “Alibaba remains one of our top picks in our coverage universe as the company continues to execute well in driving growth in core commerce, with a strong opportunity to improve monetization.”

Indeed, Helfstein sees big potential for Alibaba’s online-offline Hema retail stores. Customers can shop, dine and order grocery delivery from their mobile phones in-store and use Alipay to pay.

Helfstein anticipates Alibaba having 30-40 of its Hema stores in each of China’s major cities. This is a big deal when each hypermarket can serve up to roughly 50k consumers.

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Source: Investor Place

Technology

3 Companies Working to Destroy the Blockchain with Quantum Computing

It pays sometimes to listen what comes out of the annual meeting of the world’s elite at Davos, Switzerland. This year was a prime example.

Satya Nadella, the CEO of Microsoft (Nasdaq: MSFT), gave the stark warning that the world is rapidly “running out of computing capacity”. He added that Moore’s Law – the maxim that the power of computer chips doubles every two years – is “rapidly running out of steam.”

Nadella said the problems the world faces today need superfast quantum computers to solve them. As the head of the company’s quantum computing team, Todd Holmdahl, said to the Financial Times, “We have an opportunity to solve a set of problems that couldn’t be solved before. On a classical computer, they would take the life of the universe to solve.”

This is breakthrough technology that will change our world, making quantum computing (a subject I’ve touched on previously) a topic worth revisiting.

Related: Here’s Where to Invest in The Promise of Quantum Computers

Quantum Computers

Building a quantum computer has stumped scientists and engineers for about 35 years due to the complicated physics involved.

Qubits – the basic units of quantum information – are highly susceptible to ‘noise’ and therefore error. For qubits to be useful, they must achieve both quantum superposition (a property something like being in two physical states [0 and 1 in computing] simultaneously) and entanglement (a phenomenon where pairs of qubits are linked so that what happens to one can instantly affect the other, even when they’re physically separated). These delicate conditions are easily upset by the slightest disturbance, like a slight vibration or a fluctuating electric field.

Quantum computers will be particularly suited to factoring large numbers (making it easy to crack many of today’s encryption techniques and probably providing uncrackable replacements), solving complex optimization problems, and executing machine-learning algorithms. And there will be other applications no one has yet even thought about.

The cracking of encryption techniques may even push current blockchain technologies to the dustbin of history quickly. More on that later.

Until now, scientists have only been able to build fully programmable five-qubit computers and more fragile 10- to 20-qubit test systems. Neither kind of machine is capable of much. But the head of the quantum computing effort at Alphabet (Nasdaq: GOOG), Harmut Neven, says his team is on target to build a 49-qubit system perhaps within a year.

That would be close to the minimum target set by scientists of around 50 qubits. This 50 qubit target isn’t an arbitrary one. It’s a threshold, known as quantum supremacy, beyond which no current supercomputer would be capable of handling the exponential growth in memory and communications bandwidth needed to simulate its quantum counterpart. In other words, the top supercomputer systems can currently do all the same things that five- to 20-qubit quantum computers can do, but at around 50 qubits this becomes physically impossible.

The Threat to Blockchain

Before I tell you about some of the breakthroughs in quantum computing coming from the likes of Microsoft, let me first fill you in on the greatest threat to blockchain out there. It’s not regulations, it’s quantum computers. Let me explain…

Much of the allure of blockchain comes from its security benefits. The technology allows a ledger of transactions to be distributed between a large network of computers. No single user can break into and change the ledger, making it both public and secure.

Public key cryptography uses a pair of keys to encrypt information: a public key which can be shared widely and a private key known only to the key’s owner. Anyone can encrypt a message using the intended receiver’s public key, but only the receiver can decrypt the message using their private key. The more difficult it is to determine a private key from its corresponding public key, the more secure the system is.

Even if today’s supercomputers tried to figure out what the private key is, it would take it an estimated 785 million times longer than the age of the universe. In other words, it’s impossible. But with quantum computers possibly 100 million times faster than classical computers, they could possibly break today’s public key cryptography, rendering the blockchain technology that relies open to hacking and obsolete.

So naturally research into quantum-resistant cryptographic systems has already begun at places like the National Security Agency (NSA). But I doubt these systems will be available before the advent of quantum computers.

Breakthroughs Around the Corner

That is thanks to efforts from companies like International Business Machines (NYSE: IBM), Google and Microsoft, which make quantum computers likely and commercially viable within several years. Previous estimates were that quantum computing was still decades away.

But two impending milestones – from Microsoft and Google – will show that the frontiers of theoretical physics are quickly being turned into practical reality. Google’s revelation involves that aforementioned machine that will be the first demonstration of quantum computer solving a problem that is at the very limit of what is possible for a classical computer.

IBM has been a pioneer in the field and actually achieved a working qubit in 1998. It announced in December a long list of partners to help it develop practical applications for the technology. The partners include a number of universities, government research institutions and major companies, such as JPMorgan.

I would say that IBM is ahead of Google in that it has already programmed a supercomputer to simulate a quantum machine with more than 50 qubits. A feat, I might add, most did not think was possible.

Both Microsoft and IBM are offering simulations of quantum computers that run on today’s “classical” machines, while IBM is also giving its partners access to a rudimentary quantum system.

Microsoft’s Different Approach

Now let’s focus on Microsoft, which began working on producing a working qubit (quantum bit) 12 years ago. And now finally, it is “imminently close” to announcing that it has reached that goal.

I find Microsoft the most interesting of the three leaders in quantum computing because of the unique approach it is taking. It apparently has developed a type of qubit that effectively fragments electrons. That means the same piece of information is held in multiple places at the same time. If one part of the qubit goes through quantum decoherence, the information it contained is not lost.

This will likely lead to a more stable system than its competitors’ systems. Microsoft will likely need only one qubit compared to 1,000 or 10,000 (mainly unstable) qubits.

For me, if Microsoft does indeed reveal that working qubit, it will place them ahead in the race for quantum computing supremacy. It would be my choice as a major future beneficiary of quantum computing.

But don’t forget about Google and IBM, as well as Intel and the Canadian private firm, D-Wave Systems. All are working on developing the leading computing technology.

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Source: Investors Alley 

Cryptocurrency

Revealed: The Only Crypto Investment Strategy That Makes Sense

As I write, it’s a red day. The second one in a row, actually.

Most cryptos are down… just like yesterday.

Obviously, the crypto world has been taking some hits recently.

Late last week, a Japanese cryptocurrency exchange reported more than $500 million worth of NEM (New Economy Movement) was stolen. And there’s more…

Earlier this month, French Minister for the Economy Bruno Le Maire restated his intention to include bitcoin as a major topic of debate at the upcoming G20 Summit in March.

Theresa May, England’s ineffectual leader, says her government is considering imposing regulations on crypto, preferably in coordination with the U.S.

And to top things off, China and Korea also made noises about more restrictions.

It sure seems like the noose is tightening around crypto…

On the other hand, any serious investor who has thought about the risks that crypto brings to the table probably had the same reaction I had…
Nothing really surprising or new here.

If any of these developments shocked or scared you, you clearly haven’t focused on the risk of owning crypto.

That’s okay… because we have.

And we’re willing to share with you some of our thinking on this important topic.

Our first piece of advice?

Don’t listen to the financial press.

The Mainstream Press Gets Crypto Risk Wrong

The mainstream press spends an inordinate amount of time reporting on government action (or inaction), hacks like the one that just happened with Japan’s Coincheck and price drops like the roughly 3% to 10% drops across the board we’ve seen yesterday and today.

Don’t get me wrong. It’s news. It should be covered. But the press offers little meaningful context or perspective.

Its reporting is shallow, misleading and often just plain wrong.

Let’s address the recent headlines one at a time…

Hacks. Yes, it’s lousy that these happen. And the pain is very real to those whose wallets are emptied. (By the way, Coincheck has pledged to pay back the losses to those affected by its recent hack.)

But it’s not a threat to the overall viability of the crypto space.

For one, unlike in the days of the Mt. Gox hack, there are a dozen major exchanges now. Though the amount stolen from Coincheck was more than what was purloined from Mt. Gox ($530 million versus $460 million), it was a much smaller amount when compared to the total value of crypto coins today.

The amount of NEM hacked? Less than one-tenth of 1% of crypto’s total market cap.

Let’s give the market some credit here. It reacted exactly as it should have. It’s not a big deal. The hack was reported on Friday. By Sunday, NEM was trading at a price exceeding the pre-hacked price.

There would have to be a series of large hacks squeezed into a short period of time to make a meaningful dent in the market.

That’s simply not in the cards.

Government actions and pronouncements. This has been a divisive issue from the get-go. Some crypto followers believe government regulation is sorely needed and would put crypto on firmer ground.

Others believe that governments will treat crypto as a major threat (which it is!) and overreact with excessively restrictive regulations that would suffocate this emerging and still somewhat fragile market.

First of all, governments – even one as powerful as the U.S. government – cannot destroy crypto. It’s global and decentralized. It largely operates outside of U.S. approval and jurisdiction.

But a government can control and restrict the use of crypto within its borders. It can close the bank accounts of crypto companies. And it can forbid the creation of any and all related businesses.

When China essentially did this, crypto investors simply moved their accounts to other countries.

But what if, say, the U.S., England, the EU and China acted in unison to ban crypto?

It could spell the end of crypto as we know it. At the very least, it would be a major setback.

But even then, it would be premature to write crypto’s obituary. Whether it would reach the level of a catastrophic event would depend on what’s happening in a half-dozen hubs, including Korea, Japan and Switzerland, as well as up-and-coming crypto centers like India, Canada, Australia, Brazil, and South Africa.

I suspect crypto would survive and re-emerge down the road.

By the way, this is NOT a likely scenario, at least not in the short term.

The U.S. does not have good relations with many of these governments, and the Trump White House doesn’t mind forging its own solitary path on global issues of the day.

And after Trump? By then, crypto could be too ubiquitous to oppose.

A bearish market. Let me set the stage for this…

The crypto market went up more than 35X last year. Most of the reasons were legit, based on crypto’s massive and very real upside potential.

But the market was also fed by FOMO (fear of missing out) and unexciting returns in the more traditional asset classes. So crypto leaned a little too far ahead of its skis.

It was due for a breather. So what’s the risk involved?

How hard the fall is. And how long it lasts.

As for how hard, we’ve seen the drop already. It was a big one. Bitcoin’s price was halved.

The key is how long the drop will last.

Last year, drops lasted from a few days to a couple of weeks.

On the other hand, in previous years, when bitcoin peaked to just under $1,000 in late 2013, it took three years for the coin to revisit and then exceed that price.

Could something like that happen again? And if so, what would cause it?

If draconian government measures or a spate of hacks fail to deflate the market, the one remaining X-factor would be a slower-than-expected evolution of blockchain technologies impacting the real world.

Sebastien Meunier calls this dynamic “market fatigue.” I call it the “instant gratification” trap – born of impatience sprinkled with overconfidence.

Disruptive technology of this scale and impact doesn’t happen simply overnight. (See my article here for more of my thoughts on this.)

The Curse Comes at Dawn

So, if these aren’t serious risks, what are?

It’s the curse of being at the dawn of a new technological age.

Everything is so new – the technology, protocols and products.

Think about what it was like at the dawn of the consumer electronics age. Remember Sony’s Walkman?

The first mini-cassette Walkman hit the market in 1979. By the early 1980s, they had become wildly popular. But this was mobile music 1.0. Its days of domination began to wane with the introduction of Apple’s iPod in 2001. By 2006, 60 million iPods had been sold.

In 2010, Sony stopped making Walkmans.

We’re in the cryptocurrency 1.0 era.

The technology is still largely unproven. Perhaps bitcoin’s established and growing brand will make it very hard or impossible to replace it with a better crypto.

Perhaps not.

Walkmans didn’t have the extra layer of protection provided by bitcoin’s “network effects.” Then again, bitcoin has a new crypto rival coming out literally three times a week (or more), all of them claiming to do bitcoin’s job better… or cheaper or safer or faster.

Walkmans never faced such intense competition.

I expect the blockchain technology to work and to scale, with cryptocurrencies part and parcel of the success story.

But it won’t necessarily be cryptocurrencies 1.0.

Heck, it may not even be version 2.0 or 3.0.

Let me repeat something I said last year: “We’re basically in the experimental, pre-commercial phase of blockchain technology… Mass consumption is still years away.”

Which is why Adam and I are covering our bases…

The Best of Each Generation

We can’t ignore bitcoin’s status as the gorilla of the crypto world.
Nor can we ignore the fact that many altcoins are developing intriguing technologies that could represent significant upgrades to what bitcoin and some of the older 1.0 cryptocurrencies do.

So, in addition to recommending bitcoin to our followers, we track and recommend the best altcoins we can find.

It’s a strategy that will give us a piece of the action in each generation from crypto 1.0 through succeeding generations.

As we move ahead, we’ll be keeping the best of the earlier generations as they prove their worth. And the ones that don’t? We’ll recommend our members sell them when it’s clear to us that they’ve been superceded by better blockchain technologies.

This is a long-term, multiyear crypto investing strategy – the opposite of a sexier but far riskier (and dangerous) instant gratification mode of investing.
Instead of impatience and overconfidence, our strategy is predicated on open-mindedness, humility, steadfastness and a long-term outlook.

We’re in it for the long haul. It’s not everyone’s cup of tea.

Five years from now, nobody will remember the dip crypto took in the last two days. And, with a portfolio hopefully sporting some big winners, nobody will care.

Good investing,

Andy Gordon
Co-Founder, Early Investing

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Source: Early Investing 

REITS

The Next Hot High-Yield Sector

Lodging is the commercial real estate sector that is most sensitive to the level of economic activity. Strong GDP growth usually leads to expanding profits for hotel owners. The lodging REITs have been in a slump since the sector’s recent bear market that lasted the full year of 2015.

In the spectrum of rent contract lengths, hotels have the shortest time. Room rates can change daily based on supply and demand conditions. When the economy starts to grow faster, there is greater demand for hotel rooms, which allows the lodging companies to fill more rooms at higher average prices.

The lodging real estate investment trusts (REITs) own portfolios of hotels. Most REITs focus on a specific sector of the hotel business. A REIT will own the properties and contract with third-party management companies. To keep it’s REIT status, the hotel owner cannot also be the operator. Lease contracts between the lodging REIT and the tenant/management company usually include a fixed lease payment and a percentage of revenues. The hotel REITs do experience greater revenue and free cash flow when hotel revenues are improving.

The metric to follow in this sector is RevPAR: revenue per available room. Quarter to quarter changes in RevPAR show you how well a specific REIT is doing. Flat or declining RevPAR means a flat dividend. If the metric starts to increase nicely, you can expect the REIT to start boosting the quarterly dividend. Most lodging REITs keep the dividend/FFO payout ratio low. This avoids the need to cut the dividend if there is slowing in the lodging space.

The hotel REITs had a tremendous run-up from the bear market bottom in 2009 until the sector peaked in January 2015. Investors saw rising dividends and share price gains of several hundred percent. When the RevPAR growth flattened, the hotel REITs went into a yearlong bear market covering 2015. For the last two years both RevPAR growth and hotel REIT share prices have been flat. Here is the five-year comparison chart of three hotel REITs that nicely illustrate the up, down and flat trends of the past half-decade.

With the U.S. economy hitting 3% GDP growth for several quarters in a row, investors are once again getting interested in the hotel REITs. Share values have risen nicely over the last five months, but be assured this is likely just the start of a run that could see share prices double or better. You should see RevPAR increasing and dividend increase announcements. Here are three lodging REITs that are well positioned to benefit from the stronger economic growth.

Host Hotels and Resorts Inc. (NYSE: HST) is the largest lodging REITs with a $15 billion market cap. The company owns a diversified portfolio of 89 premium hotels with over 50,000 rooms. These include upscale central business district locations, resort locations, and prime airport lodging facilities. Third party management contracts are with Marriott, Sheraton, Hyatt, Hilton and other premium hotel operators. For 2017, the company generated adjusted FFO of $1.65 per shares. Out of that dividends of $0.85 per share were paid. FFO per share was basically flat compared to 2016 and the dividend stayed level. Host Hotels did declare an additional $0.05 per share dividend in December.

Third quarter 2017 RevPAR was $176.87, down 1.5% from $179.63 for Q3 2016. These numbers are a good indication of how lodging revenues and profits have been very flat. A shift to increasing RevPAR will allow the company to grow the dividend and propel the share price higher. Full year 2017 results come out on February 22. HST currently yields 4.7%.

RLJ Lodging Trust (NYSE: RLJ) is a mid-cap, $4.1 billion market cap lodging REIT. The company is focused on acquiring premium-branded, focused-service and compact full-service hotels. RLJ Lodging Trust has a portfolio that consists of 157 properties with approximately 30,800 rooms. In September 2017, RLJ completed a merger with Felcor Lodging Trust, another mid-sized publicly traded REIT. For the 2017 third quarter, RevPAR declined 1.1% compared to a year earlier. This decline would have been 2.3% without the acquisition of the FelCor assets. FFO per share for the first nine months of 2017 was $1.84, handily covering the 40.99 per share of dividends paid. The merger will boost bottom line efficiency in 2018, setting the company up nicely for greater hotel demand this year and for the next few years. RLJ currently yields 5.6%.

LaSalle Hotel Properties (NYSE: LHO) is a $3.5 billion market cap REIT that owns hotels in 11 large urban markets and two resort hotels in Key West, FL. About 65% of the portfolio is managed by independent operators with the remaining third run by name brand hotel companies. The urban and resort focus allows LaSalle to generate high RevPAR rates, averaging $219 in the 2017 third quarter. RevPAR for that quarter was down 3.6% compared to a year earlier.

Last year was a tough year for competition in several of LaSalle’s target markets including Philadelphia and San Francisco. Those and the other urban hotel markets are the ones likely to benefit most from increased corporate travel spending associated with a growing economy and expanding corporate profits. LHO currently yields 5.9%.

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Source: Investors Alley 

Dividends

Buy This Dip for 8.7% Dividends and Massive Gains in 2018

There’s one income-producing sector you probably hold in your portfolio—and you may be wondering why it’s crashing out this year.

I’m talking about utilities, which are famous for their rock-steady dividends (and predictable dividend hikes). These companies literally power the economy. But if utilities are so important, why are they in the toilet while the rest of the market is on fire?

Investors Loathe Utilities

Before we go further, if you’ve noticed your portfolio’s utility sleeve taking a dive like the one above—or bigger—don’t worry. This dip is a buying opportunity! I’ll give you one option paying a fat 8.7% dividend below.

First, the big driver behind utilities’ plunge is the recovery in energy prices. Oil and natural gas are soaring after 2017’s bear market and the cold snap that kick-started this year’s commodity consumption. Higher energy costs hurt utilities’ profits, which, in turn, lowers their stock prices.

The Upside of Down

But if you’re an income seeker, this crash is an excellent opportunity to bulk up your income stream. Consider the Utilities Sector SPDR ETF (XLU), which is now yielding 3.5%, its highest level in over a year:

Utilities’ Income Rises

Let’s put some numbers behind this to understand what’s going on.

If you put $500,000 into XLU at the start of 2018, you would have gotten a $16,500 annual cash payout from the fund’s then-decent 3.3% dividend. But if you buy XLU today, you’ll get $17,350—a 5.2% raise! And that’s just because of a 0.2% increase in yield.

That is the power of dividends. And now I’m going to show you how we can kick that payout into overdrive.

Double Your Income in One Buy

There are a lot of funds out there paying a 6% dividend yield, or higher, while still investing in those same utilities XLU does. They’re called closed-end funds (if you’re not familiar with CEFs, click here for a quick and easy-to-follow primer), and they operate in an important way that supercharges their income stream.

The secret? Discounts.

When you buy $1 in XLU shares, you get $1 of XLU’s portfolio. That’s pretty straightforward. But CEFs are different: they often trade at a discount to their portfolio’s net asset value (NAV, or the market value of their holdings). And that makes their dividend yield even higher.

For instance, the Duff & Phelps Global Utility Trust (DPG) trades at an 11.5% discount to NAV—or its “true” value—which helps it cover a nice 8.7% dividend to shareholders.

Now let’s put some numbers behind this to see what we’re talking about. That $500,000 investment in XLU that paid $16,500 in annual cash dividends? Put it in DPG and suddenly you’re getting $43,450 a year. That’s a 163% raise!

Think there’s a catch? Let me put your mind at ease.

One of the first things investors do when they hear about a CEF is track its performance history. Do this with DPG, and things look bad. Let’s compare the price charts of DPG and XLU over the last year:

The Seeming Laggard

XLU is up nearly 4% while DPG is flat—a sucker’s bet, right?

Wrong.

The mistake most folks make is to look just at the price return of a fund and not the total return, including dividends. That’s because the media has trained us to obsess over the S&P 500, the Dow Jones Industrial Average and the Nasdaq 100—indexes that pay paltry dividends (you’ll get 2% on the S&P if you’re lucky). Paltry dividends don’t add much to total returns, which are the value of the dividend payouts and the price changes.

But CEFs typically yield 6% or more, so their dividends are a much more important component of their total returns. So now let’s look at a total return chart of DPG and XLU, including the dividends both funds paid out:

Laggard No More!

All of a sudden, DPG doesn’t look like a sucker’s bet anymore.

It’s a chronic problem with markets—a lot of investors do the most basic amount of research and give up. What exactly are they giving up? In this case, a 163% higher dividend, along with superior returns. If that isn’t a good enough reason to do deeper research, I don’t know what is.

So should you buy DPG now?

If you’re looking for a big income stream and you’re in it for the long haul, DPG is a good option. There are others, though. Some utility CEFs have bigger yields, and some have much better long-term returns than DPG. A basket of these funds, bought when their discounts are most attractive and their portfolios best positioned to guarantee their dividends, is ideal for most investors.

But, of course, as you’re shopping around for the right CEF, do make sure you look at total returns.

4 Better Buys Than DPG (Incredible Cash Payouts Up to 10.4%)

And I haven’t gotten to your best option yet: let me do the legwork for you.

In fact, I’ve already done it! And today I’m pounding the table on 4 bargain CEFs that hand you an average yield of 8.1% and even bigger upside (I’m talking gains of 20%+ here) than you’ll get from DPG in 2018.

One of these little-known picks hands you an astounding 10.0% payout and I expect it to be one of my biggest gainers in 2018, thanks to its massive discount to NAV. Just imagine banking an income stream like that while you watch your nest egg streak higher.

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

Source: Contrarian Outlook 

Technology

7 Stocks to Buy That Are Winning With Tech

Source: Shutterstock

Amazon.com, Inc. (NASDAQ:AMZN) made a major announcement Jan. 22. After more than a year getting the bugs out, the Seattle e-commerce company opened Amazon Go to the public.

Using artificial intelligence and cameras to keep tabs on the shoppers in the store — Amazon Go provides cashier-free grocery shopping — technology is changing the way consumers shop for groceries.

One of its customers is Amazon CEO, Jeff Bezos.

“Jeff [Bezos] has been aware. He loves the store — he definitely has shopped it,” VP of Amazon Go Gianna Puerini said. “He’s been super supportive and wonderful.”

So, depending on your point of view, Amazon is either a tech company using e-commerce as its end product or service or an e-commerce company using tech to sell its products and services.

While it’s using technology to grow its revenue, I’m going to pass on Amazon.

However, there’s no mistaking these seven stocks to buy that are all growing because of the intelligent use of new technology. 

Stocks to Buy Winning With Tech: Toyota (TM)

Stocks to Buy Winning With Tech: Toyota Motor (TM)

Source: Shutterstock

Toyota Motor Corp (ADR) (NYSE:TM) is one of the world’s largest automotive companies. To sell as many cars as it does, it needs supply chain management that’s second to none. Before its Jan. 23 announcement that it would start using Ottawa-based Kinaxis Inc’s cloud-based supply chain management solution, it was doing all of its planning by hand.

That’s no way for Toyota to be handling such a critical piece of its business planning.

“We are looking forward to working with Kinaxis to optimize inventory and enable more flexible responses to customer demand,” said Iwao Nakano, General Manager Corporate IT Division at Toyota. “RapidResponse will help us unify sales and production and will become the foundation upon which we can continue to realize improvement in demand and supply planning.”

Although Kinaxis isn’t well known outside Canada, many of its customers are; they’ve chosen the company’s RapidResponse solution because it dramatically improves supply chain management. Expect this to make Toyota even more efficient than it already is.

Stocks to Buy Winning With Tech: McDonald’s (MCD)

If I told you that technology could help McDonald’s Corporation (NYSE:MCD) improve its comparable store sales by 100 basis points in 2018 alone, would you buy the Golden Arches’ stock? I sure would.

“MCD is cultivating a digital platform through mobile ordering and Experience of the Future (EOTF), an in-store technological overhaul most conspicuous through kiosk ordering and table delivery,” Cowen & Company analyst Andrew Charles wrote in a note to clients last June. “Our analysis suggests efforts should bear fruit in 2018 with a combined 130 bps [basis points] contribution to U.S. comps [comparable sales].”

In Q3 2017, McDonald’s grew its global comps by 6%. Through the first nine months of fiscal 2017, those comps rose by 5.6%, which means a 130 basis point increase amounts to a 23% gain.

Combine these technology initiatives with the rollout of its $1 $2 $3 Dollar Menu and it’s no wonder MCD stock is hitting all-time highs.

Stocks to Buy Winning With Tech: Adidas (ADDYY)

Stocks to Buy Winning With Tech: Adidas (ADDYY)

Source: Shutterstock

The MIT Technology Review named Adidas AG (ADR) (OTCMKTS:ADDYY) one of its 50Smartest Companies 2017.

“The sneaker maker is changing the way it manufacturers shoes, launching a robot-intensive microfactory in Ansbach, Germany, where it will begin to produce locally and on demand later this year.,” stated the magazine. “A similar factory offering customization and faster reaction times to local fashion trends has been announced in the U.S.”

In addition to its move to robotics, it’s working with another company on MIT’s list — Carbon is ranked 18th — to deliver state-of-the-art athletic equipment including 4D shoes. According to the magazine, Adidas will print 100,000 pairs of shoes using Carbon’s technology by the end of 2018.

“Technology has also allowed Adidas to streamline some operations while also improving customer experience,” the Sourcing Journal’s Caletha Crawford wrote Jan. 18. “By teaming with FindMine, which uses visual algorithms to help merchandise products online, Adidas is able to better curate suggestions for shoppers.” 

Given how much growth Adidas experienced in 2017, it’s clear the investment in technology by the company is paying dividends.

Stocks to Buy Winning With Tech: Wal-Mart (WMT)

A definite upside to Amazon capturing such a big chunk of U.S. e-commerce sales — estimated at 44% in 2017 — is that Wal-Mart Stores Inc (NYSE:WMT) has been forced to get proactive about the use of technology, especially when it comes to online sales.

“Once viewed as a customer experience laggard, Walmart has turned to innovative tech to stay relevant, even leapfrogging some of the big e-tailers with a bold vision, …” stated Brennan Wilkie, an expert in customer experience intelligence, in an October 2017 article in Forbes. “At the end of the day, if what a brand promises does not line up with what customers want and expect, all the newfangled technology in the world won’t matter.”

InvestorPlace contributor Lawrence Meyers recently wrote that Walmart’s acquisition of Jet.com was a smart move to accelerate the company’s online ambitions. However, he’s not sure it will make a difference to the bottom line which has been slowly deteriorating in recent years.

I, on the other hand, consider Walmart’s willingness to embrace technology as a sign it’s willing to do whatever it takes to turnaround its business. Given WMT stock gained 46% in 2017, other investors feel the same.

Stocks to Buy Winning With Tech: Fiserv (FISV)

Stocks to Buy Winning With Tech: Fiserv (FISV)

Source: Shutterstock

Fiserv Inc (NASDAQ:FISV), one of the World Most Admired Companies according to Fortune, is using technology and automation to provide a better digital experience for financial services customers. For many banks, the transition between physical banking and digital banking is anything but seamless. It’s Fiserv’s job to make that more fluid.

By introducing new products such as voice banking through devices such as Alexa and other uses of artificial intelligence, the company hopes to bridge the gap.

“We need to begin to change the mindset,” Jamie Dominguez, director of product management for financial technology provider Fiserv told Bank Innovation. “Digital isn’t just about mobile and online, it’s really about a fluid experience.”

The use of technology to help financial institutions innovate has been profitable for FISV shareholders in recent years. Up almost 7% year to date through January 24, Fiserv hasn’t had a negative annual total return since 2008.

My instincts tell me Fiserv shareholders will continue to reward in the years ahead.

Stocks to Buy Winning With Tech: Nasdaq (NDAQ)

Stocks to Buy Winning With Tech: Nasdaq (NDAQ)

Source: Shutterstock

Nasdaq, Inc (NASDAQ:NDAQ) is the world’s largest operator of stock exchanges. It has embraced technology throughout its history, whether we’re talking about the introduction of electronic trading in 1971 or recently by using machine learning and data analytics to provide investors with the most comprehensive information and analysis possible.

Nasdaq had three priorities to execute this past year, one of which was to commercialize disruptive technologies such as blockchain, the cloud, and machine learning.

In November, Nasdaq filed a patent application with the U.S. Patent and Trademark Office that would create distributed ledgers using blockchain technology to store information regarding the ownership of assets.

“The application notes each block’s cryptographic hash value as an attractive feature, stating that the fact that a blockchain cannot be modified by malicious actors acts as an effective security function in protecting asset ownership data,” wrote Coindesk’s Nikhilesh De on Nov. 17, 2017.

Although Nasdaq admits that a lot more research is necessary before it would implement this technology, it’s easy to see why this is a significant development. For example, in places where the rule of law isn’t quite as robust, a secure and private network detailing the ownership of assets would provide greater protection for investors.

This type of innovation is what you want from a company like Nasdaq.

Stocks to Buy Winning With Tech: Stitch Fix (SFIX)

Stocks to Buy Winning With Tech: Stitch Fix (SFIX)

Source: Stitch Fix

Stitch Fix Inc (NASDAQ:SFIX) went public Nov. 16, 2017, at $15 a share. Since then, the online personal-styling service and clothing retailer’s stock is up 39.1% through Jan. 24.

Stitch Fix has taken mass customization to the limits using algorithms to figure out what customers want to wear.

“Like many personalized radio services (think Pandora), this service is designed to get better the more that you use it,” stated Stitch Fix founder Katrina Lake in a 2015 interview with Harvard Business Review. “Algorithms produce recommendations for stylists who use their personal experience and knowledge of the customer to curate those recommendations down to just five items per fix. As you purchase, answer questions and/or communicate with your stylist, each fix becomes increasingly accurate.”

People are starved for time. The number one rule for a creating a successful business, in my opinion, is to offer something to your customers that save people time or money. Stitch Fix does both.

As far as the seven stocks to buy winning with tech go, Stitch Fix is at the top of the list. Its service is tailored perfectly to the modern shopper.

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Source: Investor Place

Growth Stocks

The Tax Cut May Not Deliver All Its Promises

basic truth in life is that, if it sounds too good to be true, it usually isn’t all it’s cracked up to be. The same applies to investing. You have probably heard how great the tax cut will be for companies across the board. Well, ‘warts’ are already appearing on the tax cut front.

In an earlier article I on taxes I wrote: “Will the airlines just use the [tax] windfall to launch into another round of airfare wars? (See article here.) The industry has squandered windfalls in the past, such as from plunging oil prices.”

Based on the recent earnings call from United Continental Holdings (NYSE: UAL), it looks like another airfare price war is just around the corner.

The Airlines Never Learn

UAL’s management said it plans to increase available seat miles over the next three years by 4% to 6% per year. That compares to a 3.5% rise in 2017 and only a 1.4% rise in 2016. That sounds a lot like previous mistakes of expanding too much too quickly and then being forced to slash ticket prices.

Other airlines, of course, would respond in kind and another price war would be underway. Adding to the concerns about the industry, UAL’s management also seemed to signal a willingness to take on low-cost carriers on a price basis.

So forget about anything you may have heard about the benefits of the tax cuts for the airline industry.

Yes, the benefits are real. But it looks like, once again, that the industry will squander the benefits as it did when oil prices fell steeply. Until it becomes clear whether the airline industry will go down the path of another price war, I would avoid them and in particular, United Continental.

This should just bring home the point to you that you have should never base an investment decision solely on tax or other government policies.

While the airlines seem to be fumbling an opportunity to prosper, what really caught my eye regarding the new tax law is the potential perverse effect it will have on the prospects for technology companies repatriating their overseas assets (some cash, but mainly bonds).

Will Repatriation Happen?

Apple (Nasdaq: AAPL) garnered a lot of headlines recently when it said it would make a one-off $38 billion tax payment on the repatriation of some of its overseas profits. That led to speculation by the Trump Administration and others about how other technology companies would follow Apple’s lead.

But some tax experts say it may not happen. They point to parts of the legislation that could end up having the direct opposite effect, leading firms to shift more of their assets (and jobs) offshore.

A law professor at the University of Southern California, Ed Kleibard, told the Financial Times “The bill is biased in favor of offshore real investment.” In other words, companies may perversely be encouraged to build plants overseas, creating jobs there. Let me explain…

There is a new tax on any overseas profits above a fixed, tax-free return that companies will be allowed to earn on their tangible assets, such as plant and equipment. This is known as the GILTI (global intangible low-tax income) tax and it is aimed at taxing excess profits from intangibles, such as a technology company’s or pharmaceutical company’s patents and intellectual properties. Thanks to technology, the share of many companies’ assets that are intangible has grown a lot in recent years.

However, the GILTI tax rate is only half the new U.S. corporate tax rate. And companies can take a credit for any foreign taxes paid on this tax. This may encourage firms to keep as much of their profits in tax havens as they can, lowering their overall foreign taxes to a level where they can fully offset the minimal GILTI tax.

And here’s where it touches on the earlier point I made about real overseas investments. A law professor at the University of Pennsylvania, Chris Sanchirico explained to the Financial Times that all sorts of multinationals will have an incentive to add to their offshore facilities like factories (and the linked jobs), since such action will boost their tangible assets outside the United States, therefore sheltering even more of their profits from tax.

The likely result of all these new tax ‘games’ that will be played by the big multinationals? Likely hundreds of billions of dollars will remain ‘trapped’ outside the U.S.

What It Means to You

As far as investment implications goes, I think it means you should stick to investing in the large U.S. multinational companies. These same companies are already enjoying the benefits of a much weaker U.S. dollar that the Trump Administration is encouraging.

One prime example is Microsoft (Nasdaq: MSFT). In early December, its stock was down to $81 over worries about the tax bill. Now it is over $92 a share and still climbing. There are lots of reasons why, but I’m sure Wall Street has by now realized the new tax law won’t hurt Microsoft. Again, never make an investment decision solely on something like taxes.

In Microsoft’s case, I much prefer concentrating on its efforts in the cloud, artificial intelligence and quantum computing. For more on Microsoft and quantum computing, stay tuned for my next.

One other investment for you to consider is the WisdomTree U.S. Export and Multinational Fund (NYSE: WEXP). It is filled with blue-chip U.S. multinationals such as Microsoft, Boeing, Johnson & Johnson, Apple and Alphabet.

This ETF is up 21% over the past year and I would expect this type of performance to continue as long as the dollar tailwind and other macro factors (including taxes) continue to be favorable.

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Source: Investors Alley

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