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Zihan1004/FNSPID | 3 Items to Watch When WD-40 Reports First-Quarter Earnings
Industrial lubrication and chemicals manufacturer WD-40 (NASDAQ: WDFC) plans to release results from its fiscal first quarter of 2020 to investors on Jan. 8 after the markets wrap for trading. The small-cap multinational booked a disappointing 2019 from a share price perspective, as its 6% appreciation underperformed the Russell 2000 index (of which it is a component). The Russell 2000 chalked up appreciation of nearly 24% last year. Below, let's walk through three items investors should focus on in next week's filing to grasp WD-40's potential to catch up to peers in 2020.
1. Sales growth -- steady but anemic
WD-40 recorded top-line year-over-year expansion of just 4% in fiscal 2019. This growth exemplifies the predictability of the company's revenue due to the enduring popularity of its namesake WD-40 Multi-Use household lubricant. Steady sales of WD-40 Multi-Use seem to ensure a base of low-single-digit growth for the company year after year. But 4% expansion also underscores investors' desire for a bit faster pace of revenue improvement.
Image source: Getty Images.
For fiscal 2020, the company has outlined a revenue expectation of $436 million to $453 million, which translates into anticipated growth of 3% to 7% over fiscal 2019. In the first quarter, if the organization hits the top of (or exceeds) this range, the WDFC symbol will likely enjoy a positive reaction.
Such a revenue surprise, if any, will probably come from either of the company's two growth regions: EMEA (Europe, Middle East, and Africa) and Asia. These regions have recently outperformed WD-40's Americas segment (which includes North America as well as certain Latin American countries). The Americas segment, which accounts for 46% of total company sales, saw annual revenue growth of just 1% last year. Conversely, EMEA and Asia each chalked up revenue improvement of 6%.
WD-40 has achieved particular success in Asia over the last few quarters. By expanding Asian distributor markets, ramping up e-commerce sales, and building a greater presence in China, the organization is generating momentum -- revenue in this division jumped 22% year over year last quarter. WD-40 has used pricing and promotional tactics to introduce and scale its products in this promising market. Though it currently accounts for just 16% of the company's top line, Asia is rapidly increasing in prominence as a possible long-term growth catalyst.
2. Rebounding per-share earnings
In fiscal 2019, WD-40 netted diluted earnings per share (EPS) of $4.02, against EPS of $4.64 in fiscal 2018. This differential was primarily due to an $8.7 million reserve tax adjustment the company booked in the fourth quarter of 2019. For fiscal 2020, WD-40 anticipates diluted EPS of between $4.73 and $4.83, representing a return to -- and slight growth against -- fiscal 2018 earnings levels.
To achieve this goal, the company will need to meet its anticipated 2020 gross margin target of 54% to 55%. This is in line with its 54.8% gross margin in 2019, and it will produce the targeted EPS growth should the company scale its top line as anticipated.
As for per-share results for the first quarter, look for WD-40 to equal or exceed the diluted EPS of $0.95 it booked in the first quarter of fiscal 2019.
3. The state of product innovation
One of WD-40's top priorities over the last fiscal year has been the allocation of resources to speed up innovation while also investing in manufacturing capabilities to churn out new product variants. A prime example is the company's Smart Straw innovation, which is essentially an improvement on the ubiquitous red straw used on current WD-40 cans. The Smart Straw features an ergonomic design, the ability to flip between spray and stream settings, and a toolbox lock feature that prevents a can from discharging accidentally.
During the organization's fourth-quarter 2019 earnings conference call, CFO Jay Rembolt noted that the company plans to expend the majority of its $25 million capital budget in 2020 "to procure the proprietary machinery and equipment needed to manufacture [WD-40's] next-generation Smart Straw delivery system."
Once this additional capacity is brought online, the increased availability of Smart Straw-enhanced lubricant cans is likely to catalyze sales and assist the company in reaching the high end of its 3% to 7% revenue growth range for this year. Shareholders will look for details on Smart Straw manufacturing progress, along with other product innovation updates, during the company's upcoming call following the earnings release on the 8th.
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Zihan1004/FNSPID | Stock Market News: MercadoLibre Starts 2020 Strong; Signet Loses Its Luster
Wall Street was in a good mood to celebrate the start of what many hope to be able to call the Roaring '20s, as stock market indexes continued to move higher Thursday morning and added to their gains from 2019. But some of the market's momentum faded as the morning went on. As of 11 a.m. EST today, the Dow Jones Industrial Average (DJINDICES: ^DJI) was up 127 points to 28,665. The S&P 500 (SNPINDEX: ^GSPC) gained 7 points to 3,238, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) rose 48 points to 9,020.
Investors are busy trying to decide how to position their portfolios for 2020, and that had a lot of stock analysts offering their opinions. MercadoLibre (NASDAQ: MELI) got some favorable comments that spoke highly of the Latin American e-commerce specialist's payment platform, but Signet Jewelers (NYSE: SIG) had to deal with skepticism about the jewelry retailer's ability to weather tough conditions in its industry.
Feliz ano novo for MercadoLibre
Shares of MercadoLibre climbed 5% on Thursday morning, adding even more gains to a stock that had already climbed more than 90% in the past year. Analysts at Citi mentioned the Latin American e-commerce giant obliquely, but it looks as if more investors paid closer attention to MercadoLibre than to its partner.
Citi noted that the agreement MercadoLibre has with U.S. payment specialist PayPal Holdings (NASDAQ: PYPL) could be particularly auspicious for PayPal, which has worked hard to bolster its global presence. PayPal has also acquired majority control of a payment network in China, and it has collaborated with banks across the globe in order to offer nearly ubiquitous access to its digital wallet service.
Yet investors like MercadoLibre's prospects in part because the company is smaller than PayPal but has similar (or even superior) growth potential. The Mercado Pago payment service has taken off for MercadoLibre, and just as U.S. online marketplaces discovered, the value of the payment processing network might well end up exceeding what MercadoLibre gets from its core e-commerce retail business.
Image source: MercadoLibre.
MercadoLibre has already seen strong gains, but the potential for the Latin American economy to keep developing and growing is huge. Even after strong performance in 2019, MercadoLibre's stock could have further to run in 2020.
Signet sinks
Meanwhile, shares of Signet Jewelers were down 14% following negative comments from financial professionals. Stock analysts at Wells Fargo downgraded shares of Signet from equal weight to underweight, and investors didn't like the things they had to say about the jewelry retailer.
Signet faces a confluence of factors weighing on the stock, according to Wells. The core jewelry business isn't doing terribly well, since consumers are starting to find it more difficult to get financing for big-ticket purchases as financial institutions anticipate future deterioration in credit quality. At the same time, tariffs have hurt Signet, and although the tone between the U.S. and China seems to be improving, investors know how volatile that relationship has been lately.
The drop throws some cold water on what had been a rally for Signet, with many having hoped that CEO Gina Drosos had successfully executed the first part of a three-year turnaround plan to get the jeweler back in shape. Strong quarterly results in December supported that view, pushing shares higher.
However, fears about a possible recession in 2020 have made some question whether store closures and cost-cutting measures will be enough for the company to regain its past prominence. A lot will depend on its e-commerce initiatives, and so investors will look forward to getting Signet's read soon on how the holiday season went.
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Zihan1004/FNSPID | WB Crosses Above Key Moving Average Level
In trading on Thursday, shares of Weibo Corp (Symbol: WB) crossed above their 200 day moving average of $48.90, changing hands as high as $50.15 per share. Weibo Corp shares are currently trading up about 8.2% on the day. The chart below shows the one year performance of WB shares, versus its 200 day moving average:
Looking at the chart above, WB's low point in its 52 week range is $34.2638 per share, with $74.68 as the 52 week high point — that compares with a last trade of $50.32.
Click here to find out which 9 other stocks recently crossed above their 200 day moving average »
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Zihan1004/FNSPID | Is Cronos the Cheapest Pot Stock to Buy?
Valuations are a touchy subject in the cannabis industry. That's because many pot stocks are wildly overvalued, and investors are still struggling to determine what they're worth today. One stock that could enter the discussion as one of the cheaper options is Cronos Group (NASDAQ: CRON). A stock that's trading at less than seven times its earnings and 1.4 times its book value would seem to tick many of the boxes Warren Buffett-type investors look for. That's where Cronos finds itself today but is the stock really an excellent value?
Profitable for three straight quarters
While many cannabis companies have struggled to turn a profit even once, Cronos has done so in three successive quarters. Over the past nine months, the company's net income totaled a cumulative 1.5 billion Canadian dollars. It's an incredible streak, but it warrants an asterisk next to it.
During those three quarters combined, Cronos incurred an operating loss of CA$75 million on net revenue of just CA$29 million. The company was able to stay out of the red thanks to its other income and expenses. Specifically, Cronos benefited from gains on the revaluation of its derivative liabilities to the tune of more than CA$1.5 billion. That line item has grossly inflated the company's profitability and allowed it to showcase a very attractive price-to-earnings ratio in the process.
Image Source: Getty Images.
It's a prime example of how misleading financial statements can be. The derivative liabilities relate to cigarette maker Altria's investment in the company. Cronos has classified Altria's warrants and pre-emptive rights as derivative liabilities. And since Cronos' share price has been falling for much of 2019, the value of those liabilities has been dropping as well, resulting in fair value gains for the company.
Very expensive when looking at sales
Gains and other income can easily distort a company's earnings and its price-to-earnings ratio. However, it's a lot more difficult for the price-to-sales ratio to mislead, since it reflects the sales a company has earned during a period. Cronos' top line has unfortunately not been a strong point; revenue was above CA$10 million in only two of its past four quarters.
That's a trivial amount given the stock's market cap of $2.5 billion. By comparison, Aurora Cannabis (NYSE: ACB) has a lower market cap of $2.1 billion, and the lowest its sales have reached in any of the past four quarters was CA$54 million; over the trailing 12 months, Aurora's sales topped nearly CA$300 million. Its price-to-sales multiple of 9.5 pales in comparison to that of Cronos, which trades at nearly 90 times its revenue.
Cronos has fallen around 40% in 2019, right in line with how the Horizons Marijuana Life Sciences ETF performed during that time. Remarkably, even though it generated much more in revenue, Aurora's stock price declined by more than 63%.
If not Cronos, then what?
By now it's clear that Cronos isn't the great value buy that it appears to be at first glance. While the temptation may be to say that Aphria is a better value buy, as it has also been profitable for consecutive periods, nonoperating items have been inflating its bottom line as well. However, its price-to-sales multiple of 4.6 looks like a bargain compared to both Aurora and Cronos. It could be one of the better buys in the industry today, but even Aphria is still a bit of a risky investment, at least until it can prove that it can stay in the black without needing assistance from items below its operating income.
It's still a delicate time in the industry, and investors might be well advised to wait a while before investing in cannabis companies, at least until they prove that they're able to produce consistent and sustainable profits.
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Zihan1004/FNSPID | The Many Ways to Invest in Brookfield Asset Management
Brookfield Asset Management (NYSE: BAM) is "a leading global alternative asset manager." Over its 120 years, the company has developed a portfolio of real estate, infrastructure, renewable power, private equity, and credit assets. And it has done so in a way that allows investors to choose the areas to which they are exposed. Here is a quick guide that explains the options available to potential, Brookfield investors.
Image Source: Getty Images
Brookfield Asset Management (BAM)
BAM is the main business at the top of the organizational chart. BAM is an asset manager for many private funds and serves as the general partner for its several partnerships. BAM receives management and other fees from the accounts, funds, and partnerships that it manages. Also, the company invests its own capital into its partnerships and other investments. Owners of BAM receive exposure to and returns from everything done under the Brookfield umbrella.
As mentioned above, BAM has a diverse portfolio. As a result, the company has created several partnerships that allow investors to gain specific exposure to different areas of its portfolio. These partnerships are Brookfield Property Partners (NASDAQ: BPY), Brookfield Infrastructure Partners (NYSE: BIP), Brookfield Renewable Partners (NYSE: BEP), and Brookfield Business Partners (NYSE: BBU).
Brookfield Property Partners (BPY)
BPY is all about real estate. It "owns, operates and develops one of the largest portfolios of office, retail, multifamily, industrial, hospitality, triple net lease, self-storage, student housing, and manufactured housing assets." Investors of BPY receive exposure across the globe. While the majority of its assets are in the United States, the company also has assets in Canada, Brazil, Europe, Asia, and Australia. BPY itself is not a REIT; however, it does have a subsidiary that is.
Brookfield Infrastructure Partners (BIP)
BIP owns and operates various infrastructure assets in different parts of the world. These include:
Natural gas pipelines and storage in Australia and the Americas
Electricity transmission lines in North and South America
Rail, toll roads, and ports in multiple continents
Telecommunications towers in Europe
Data centers in several continents
A couple of BIP's specific holdings include a 50% stake in Natural Gas Pipeline Company of America (NGPL) and a "29% interest in AT&T's large-scale, multi-tenant data center portfolio."
Brookfield Renewable Partners (BEP)
BEP "operates one of the world's largest publicly traded renewable power platforms." The company has the capacity to generate 18,000 MW of power across multiple continents. To generate this power, it utilizes hydroelectric, wind, solar, and energy storage assets. As part of its portfolio, BEP owns a 51% stake in TerraForm Power (NASDAQ: TERP).
Brookfield Business Partners (BBU)
BBU is the private equity partnership. It was created to serve as BAM's "primary vehicle to own and operate business services and industrial operations." It is "focused on owning and operating high-quality businesses that are either low-cost producers and/or benefit from high barriers to entry." BBU has assets across the globe in various industries such as construction, energy, and mining among others. Among its holdings are Westinghouse Electric Company, Teekay Offshore, GrafTech International (NYSE: EAF), and Healthscope Limited.
Oaktree Capital Management
In addition to these partnerships, BAM acquired a majority stake in Oaktree Capital Management in 2019. To invest in BAM's Oaktree business, one can invest in one of Oaktree's two preferred stocks, or there are Oaktree's own brand of investment opportunities: Oaktree Specialty Lending Corporation (NASDAQ: OCSL) and Oaktree Strategic Income Corporation (NASDAQ: OCSI).
Brookfield has given investors many different ways to invest in its business. If they want to customize their basket of exposures, then investors can choose among the partnerships. If they want a little bit of everything, then BAM is available. Regardless of the mix, Brookfield has made it easy for investors to get just what they want.
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Zihan1004/FNSPID | 6 Retailers That Collapsed in the Last Decade
As 2009 came to a close, we were still surveying the wreckage of the financial markets' collapse and the worst economic recession the U.S. suffered since the Great Depression. While many industries were shaken, it was really only the beginning of the carnage that would spread across retail, a malaise that in many ways continues today.
Certainly the financial underpinnings of the market hurt the industry, but the rise of e-commerce to assume an essential role in how consumers shop would forever change the retail landscape. Below are six of the most notable retail failures that occurred over the last decade.
Image source: Getty Images.
1. Blockbuster (2010)
Because of the ubiquity of streaming video today, it seems hard to believe that 10 years ago, it was still possible to walk into a Blockbuster store and rent a movie on DVD. But the video rental chain was by that point creaking along to its demise as Netflix (NASDAQ: NFLX) flourished.
Blockbuster would be bought out of bankruptcy by DISH Network (NASDAQ: DISH), but two years later, it would close the remaining company-owned stores. The only Blockbuster that still exists is in Bend, Oregon.
2. Borders (2011)
Equally remarkable, there were still Borders bookstores operating a decade ago, though like Blockbuster, it was also crumbling fast. It had grown to become the second largest national bookstore chain behind Barnes & Noble, but the debut of the Amazon.com (NASDAQ: AMZN) Kindle e-reader in 2007 and the launch of Apple's iPad three years later were the beginning of the end.
Borders was slow to respond to the e-book phenomenon, and gave priority to brick-and-mortar stores instead of an effective e-commerce site. Barnes & Noble came out with the Nook in response to the Kindle, but it still struggled to fend off Amazon, and was taken private this past August.
3. RadioShack (2015)
The demise of the original electronics superstore was a painful, slow-motion decline. Its turnaround plans were thwarted by its own lenders, which feared they wouldn't be repaid if the retailer shrunk its store footprint as much as it needed to. Instead, they forced it into bankruptcy, although Sprint (NYSE: S) initially purchased about 1,700 stores before converting them into its own wireless stores.
4. Sports Authority (2016)
Once one of the largest sporting goods chains, Sports Authority was saddled with debt from its private-equity owners, which prevented it from responding appropriately to the changing retail landscape. The threat from Amazon in particular was too great a burden for a retailer too encumbered to make the necessary changes to its operations.
Its intellectual property was subsequently acquired by Dick's Sporting Goods (NYSE: DKS), which has gone on to its own reimagining by catering to team sports and by carrying private label brands.
5. Toys R Us (2017)
The bankruptcy of Toys R Us initially sent shock waves through the retail industry, since even at the end of its life it still accounted for nearly 14% of the entire toy market. Its filing sent toy makers like Hasbro and Mattel reeling from the loss of an outlet representing about 10% of sales.
Yet it also had the effect of leading other retailers to clear out shelf space to make room for more toys. Amazon even published a catalog to highlight where consumers could buy toys. It ended up not being the toy-pocalypse many had feared, and even now Toys R Us is trying to rebound with a new retail presence.
6. Sears (2018)
Sears (OTC: SHLDQ) is another bankrupt retailer, but it's not really gone from the marketplace (at least not yet). While many of its stores have been sold off, CEO Eddie Lampert continues to operate the retailer in a much smaller capacity.
Yet despite living on like some zombie retailer (much as it has from the beginning when Lampert first joined Sears with Kmart), the business has been on a long, slow decline into oblivion. The end remains on the horizon for the once venerable retailer, but it still survives at the moment.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, Hasbro, and Netflix. The Motley Fool is short shares of Hasbro. The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | Why Retirees Should Scoop Up This Dividend Stock Before the Next Recession
All bull markets come to an end, and this past decade has been a remarkable one for investors who've escaped largely unscathed from any corrections. While no one knows when the next recession will hit, there's good reason to believe we're closer to the next one than the last one.
Now would be a good time, then, to clad your portfolio in armor to protect it from the inevitable downturn. One of the best ways is through investing in quality, dividend-paying stocks, a key attribute for investors living off their stocks in retirement.
Here's why global energy giant ExxonMobil (NYSE: XOM) may be one of the best stocks for income-loving investors girding themselves for the fall.
Image source: Getty Images.
On top of a production boom
We don't hear much about oil's impact on the stock market these days. It wasn't that long ago that every tick higher in the price of a barrel caused ripples across most markets. That hasn't really happened much in recent years, and that's thanks to the U.S. becoming the world's largest energy producer over the past decade.
According to the Federal Reserve, the impact from higher oil prices on the U.S. economy "is likely a small fraction of what it was a decade ago and should get smaller still if U.S. oil production continues to grow as projected."
Primarily because of fracking, the U.S. has accounted for virtually all of the increase in oil production and for half of all natural gas, which saw the largest increase for any country in history. Sitting atop that boom is Exxon, which itself is the world's largest energy company, and it may be ready to bring even more to market.
Along with Hess and China's CNOOC, Exxon owns the largest portion of a new oil field off the coast of Guyana that just began producing its first oil and is expected to hit full production of 120,000 barrels per day within a few months. Recoverable resources for the area are estimated to exceed 6 billion barrels of oil equivalent.
A new discovery in the area was also just reported by Exxon, and as many as 750,000 barrels per day could be produced by 2025. It will begin production within five years of having made the discovery, some four years ahead of the industry average, and generate a 10% return even if oil falls to $40 per barrel. It has similar returns on its Carcara project off the coast of Brazil, too, that should begin producing its first barrels in 2023 to 2024.
Oil is north of $60 per barrel now, but having spent the past few years preparing its business to run on lower oil prices, Exxon is among just a handful of producers that can still profit if a new bear market swamps the industry.
Not just production, but refining, too
While Exxon's production capabilities are prodigious, it has also structured itself beyond its upstream capabilities to have leading downstream refining projects. Earlier this year, it announced it was investing $9 billion in six major projects, including hydrofiners, hydrocrackers, and cokers, giving it the ability to break down heavier crudes containing longer hydrocarbon chains into higher-value products like diesel and gasoline.
Exxon also plans to invest $2 billion in the Permian Basin to support its logistics projects in coastal refining, terminal capacity, and marine export. The combination of investments upstream, downstream, and in chemicals allowed it to outline a path forward that it says will let it double its earnings by 2025 to $31 billion.
A consistent track record in all kinds of markets
Exxon is one of the more innovative leaders in the energy industry, yet it has been served well by a conservative management team that has paid dividends to investors for over 100 years and has consistently raised the payout each year for the last 37 years.
Even during the Great Recession, which sent shock waves through the oil industry, Exxon was financially stable enough to continue paying out its dividend.
The yield is almost 5%
Despite the superlatives, ExxonMobil stock has underperformed the market over the past year as investors avoided the sector, rising just 1% compared with the S&P 500's 30% gain. That low price represents an opportunity for retirees.
The yield on Exxon's dividend is now 5% as a result of the depressed share price, but without adding too much risk, even though it has substantial negative free cash flow at the moment. Because it is investing large amounts in its capital expenditures, it has relied upon debt to pay for it, but has committed to doubling its cash flows as well over the next few years.
A focus on the future
Finding secure, dividend paying stocks now means an investor can concentrate on locating the best payouts without concern about the market's volatility over what may be a tumultuous time. Your income will continue regardless of how the market performs.
There are a number of stocks that could fit the bill for retirees, but ExxonMobil may be one of the best suited for the task.
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Zihan1004/FNSPID | These 3 Consumer Goods Stocks Gained More Than 1,000% in the 2010s
Past performance tells you nothing about the future gains or losses of any stock, but investors who bought into these three stocks 10 years ago have been smiling all the way to the bank.
The three consumer goods stocks below all returned more than 1,000% this decade. That's a tenfold boost, turning an original investment of $10,000 into $110,000 or more. How far ahead of the general market does that benchmark stand? You be the judge: The Dow Jones Industrial Average gained 170% over the same period while the S&P 500 index stopped at an increase of 186%.
COMPANY
MARKET CAP
10-YEAR SHARE PRICE GROWTH
Netflix (NASDAQ: NFLX)
$141 billion
3,940%
Domino's Pizza (NYSE: DPZ)
$12 billion
3,310%
MercadoLibre (NASDAQ: MELI)
$29 billion
1,010%
Data collected from YCharts.com on Dec. 31, 2019.
Have these three winners reached their respective peaks, or are they still good investments after the huge price increases listed above?
The streaming video market will grow much larger
Video-streaming veteran Netflix arguably created the industry in which it works. Ten years ago, the company was known as a DVD-by-mail rental service that just happened to offer a small selection of streaming titles as a free bonus. Now, Netflix runs a global streaming service with 158 million subscribers, powered by a multibillion-dollar annual investment in a wide variety of original content. The DVD service still has 2.3 million customers, but streaming sales accounted for 98.6% of total revenue in the third quarter of 2019.
There's plenty of fuel left for Netflix's growth engines. In the third quarter, earnings jumped 65% on 31% stronger revenue, measured against the year-ago period. The company saw a 6.4% increase in its domestic subscriber count while the number of paid international customers rose by 33%. Netflix's free cash flows are negative at the moment, but management expects to see a smaller cash burn in 2020 followed by positive cash flows in a few years.
The streaming video market is still small next to cable TV and over-the-air broadcasting, globally speaking. Digital streaming accounted for less than one-quarter of the worldwide market for pay-TV services in 2018, according to industry analyst Digital TV Research. Netflix leads the charge of a few global and many local streaming platforms, growing that market slice in a hurry.
Come back in five years and you'll see Netflix as a thriving media giant, whose value can be measured against its positive cash flows rather than top-line growth trends. This growth story is far from over.
Image source: Getty Images.
Can this pizza-flavored turnaround go any further?
In 2009, Domino's was tied with Chuck E. Cheese in a Brand Keys survey of America's favorite pizza parlors. Tied for last place, that is -- a result so adverse that Domino's revamped its pizza recipe to kick off a long-term turnaround story.
The company embraced social media marketing in a big way, placing CEO Patrick Doyle in omnichannel media streams next to both happy customers and obvious mistakes. That effort started to set Domino's apart from other pizza chains as an authentic company with a clear focus on good customer experiences.
And the relaunch of Domino's with better pizza recipes and a more approachable corporate brand paid dividends in the 2010s. The company's sales rose 150% over the last 10 years, and free cash flows more than quadrupled. Compare and contrast these gains over the same period to archrival Papa John's International (NASDAQ: PZZA), which won the 2009 taste survey mentioned above. That company's sales increased by a mere 40%, and its cash flows have turned negative. Papa John's stock gained a respectable 425% this decade, but that's nothing next to Domino's 34-bagger.
The company is still reporting sustainable growth, and management keeps a tight focus on long-term profitability. This pizza stock looks likely to stay hot and fresh for years to come.
More than just a Latin American e-commerce play
MercadoLibre has long been seen as the eBay of Latin America, but that's hardly the full story. This company is not only dominating the e-commerce sector in key markets such as Mexico and Brazil, but it also offers a plethora of ancillary services that effectively make allies out of potential rivals.
Besides the online marketplace, MercadoLibre also runs its own shipping and delivery network, an online payments platform akin to PayPal, and a plug-and-play merchant platform where small and medium businesses can set up shop online.
Revenue has grown tenfold over the last decade. Profits and cash flows come and go, as MercadoLibre is likely to reinvest any spare cash into heavier marketing and infrastructure ideas. This company is keeping the pedal to the metal, optimized for top-line growth for the foreseeable future. Profits will come later when MercadoLibre can take full advantage of a dramatically larger addressable market. The stock price should follow suit, making it one of the most exciting growth investments available today.
Find out why Netflix is one of the 10 best stocks to buy now
Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
Tom and David just revealed their ten top stock picks for investors to buy right now. Netflix is on the list -- but there are nine others you may be overlooking.
Click here to get access to the full list!
*Stock Advisor returns as of December 1, 2019
Anders Bylund owns shares of Netflix. The Motley Fool owns shares of and recommends MercadoLibre, Netflix, and PayPal Holdings. The Motley Fool recommends eBay and recommends the following options: long January 2021 $18 calls on eBay, short January 2020 $39 calls on eBay, and short January 2020 $97 calls on PayPal Holdings. The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | 3 Stocks to Buy and Hold for the Next 50 Years
At first glance, buying stocks and holding them for decades might seem like a silly move. After all, how can any investor know what's going to happen with a company's management team, its products and services, and macroeconomic events quarter to quarter, let alone over the span of decades?
But what some investors don't realize is that uncertainty is what makes a buy-and-hold investing strategy make sense. If you're able to keep a cool head when other investors are temporarily panicking, then you're a lot more likely to make money.
To start building a long-term portfolio that you can hang onto for decades, look no further than the companies below.
Image source: Getty Images.
1. Disney
If it's been a while since you've seriously considered Disney (NYSE: DIS) as an investment, now is the time to give this entertainment titan another look. Disney makes its billions from having its hands in everything from television networks, movies, and TV shows to theme parks, hotels, etc. But Disney has kicked its brand into hyperdrive over the past few years with acquisitions of the Star Wars franchise, Marvel Studios, and Twenty-First Century Fox.
Each of these purchases has given Disney access to characters, stories, movies, films, and shows that will help it generate revenue for years to come.
Disney has also used those acquisitions to help populate its new video streaming service, Disney+. The Marvel and Star Wars franchises, along with its own collection of classic movies and newly acquired Fox content, will help Disney set itself apart in the increasingly crowded video streaming market. Disney already has more than 10 million subscribers to its new service, and with its treasure trove of characters and stories, Disney has plenty of potential to benefit for decades.
2. Netflix
Netflix's (NASDAQ: NFLX) share price has skyrocketed an unfathomable 3,900% over the past decade, so it might seem like the company's best days are behind it. But consider that in the most recent quarter, Netflix's sales jumped by 31%, it added 6.7 million new subscribers, and the company's earnings popped 65% year over year. Additionally, investors should remember that the video streaming market is still in its early stages, and Netflix's current dominance -- it has more than 158 million global subscribers -- means that it's in the best position to benefit as streaming grows.
Netflix's early lead in the streaming space means that even though Apple, Disney, and others have recently launched their own streaming services, they'll have a difficult time matching Netflix's success any time soon.
And even as Netflix's competitors gain subscribers, it doesn't mean they'll be stealing them away from Netflix. Recent research shows that U.S. consumers are increasingly signing up for multiple video streaming services.
3. Amazon
Amazon (NASDAQ: AMZN) hardly needs an introduction, but there might be at least one aspect of the company's business that some people don't know much about: cloud computing. Amazon makes most of its profit from its Amazon Web Services (AWS) business, which allows everyone from large companies to individual developers to take advantage of web hosting, AI services, and a host of cloud computing tools.
Amazon controls about 32% of the cloud computing market right now, leading both Microsoft and Alphabet's Google, and there's plenty of room for growth. By 2022, the public cloud computing market will be worth $331 billion.
And, of course, Amazon will likely benefit from its dominance in the online retail space. Amazon accounts for about 38% of all online sales in the U.S., and online shopping is still in its infancy. In 2021, just 14% of retail sales will be online, which gives Amazon lots of room to grow its business in the coming years.
Just one more thing
Buying stocks of successful companies is the first step to having a long-term investing strategy, but the next step is to keep your cool and hold onto these companies when difficult times come -- because they will come. When the stock price dips or the company makes a wrong move, it's good to take the time to evaluate whether your original reason for buying the stock has changed. If it hasn't, then it's time to do the hard work and ignore the noise and hold onto your investment. If you can do that, you'll be well on your way to benefiting from all of the long-term potential these companies have.
Find out why Netflix is one of the 10 best stocks to buy now
Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
Tom and David just revealed their ten top stock picks for investors to buy right now. Netflix is on the list -- but there are nine others you may be overlooking.
Click here to get access to the full list!
*Stock Advisor returns as of December 1, 2019
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Netflix, and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney, long January 2021 $85 calls on Microsoft, short April 2020 $135 calls on Walt Disney, and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | Validea John Neff Strategy Daily Upgrade Report - 1/1/2020
The following are today's upgrades for Validea's Low PE Investor model based on the published strategy of John Neff. This strategy looks for firms with persistent earnings growth that trade at a discount relative to their earnings growth and dividend yield.
T. ROWE PRICE GROUP INC (TROW) is a large-cap growth stock in the Investment Services industry. The rating according to our strategy based on John Neff changed from 60% to 79% based on the firm’s underlying fundamentals and the stock’s valuation. A score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest.
Company Description: T. Rowe Price Group, Inc. is a financial services holding company. The Company provides global investment management services through its subsidiaries to investors across the world. The Company provides an array of Company sponsored the United States mutual funds, other sponsored pooled investment vehicles, sub advisory services, separate account management, recordkeeping, and related services to individuals, advisors, institutions, financial intermediaries and retirement plan sponsors. The Company distributes its products in countries located within three geographical regions: North America, Europe Middle East and Africa (EMEA), and Asia Pacific (APAC). It also offers specialized advisory services, including management of stable value investment contracts and a distribution management service for the disposition of equity securities its clients receive from third-party venture capital investment pools. As of December 31, 2016, it serviced clients in 45 countries across the world.
The following table summarizes whether the stock meets each of this strategy's tests. Not all criteria in the below table receive equal weighting or are independent, but the table provides a brief overview of the strong and weak points of the security in the context of the strategy's criteria.
P/E RATIO: FAIL
EPS GROWTH: PASS
FUTURE EPS GROWTH: PASS
SALES GROWTH: PASS
TOTAL RETURN/PE: PASS
FREE CASH FLOW: PASS
EPS PERSISTENCE: FAIL
For a full detailed analysis using NASDAQ's Guru Analysis tool, click here
FULTON FINANCIAL CORP (FULT) is a mid-cap value stock in the Regional Banks industry. The rating according to our strategy based on John Neff changed from 62% to 81% based on the firm’s underlying fundamentals and the stock’s valuation. A score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest.
Company Description: Fulton Financial Corporation is a financial holding company. The Company is the bank holding company of Fulton Bank N.A. (the Bank). As of December 31, 2016, the Company's six subsidiary banks were located primarily in suburban or semi-rural geographic markets throughout a five-state region (Pennsylvania, Delaware, Maryland, New Jersey and Virginia). Each of the Company's subsidiary banks offers a range of consumer and commercial banking products and services in its local market area. Personal banking services include various checking account and savings deposit products, certificates of deposit and individual retirement accounts. The subsidiary banks offer a range of consumer lending products to creditworthy customers in their market areas. Commercial banking services are provided to small and medium sized businesses. It also offers investment management, trust, brokerage, insurance and investment advisory services to consumer and commercial banking customers in its market areas.
The following table summarizes whether the stock meets each of this strategy's tests. Not all criteria in the below table receive equal weighting or are independent, but the table provides a brief overview of the strong and weak points of the security in the context of the strategy's criteria.
P/E RATIO: PASS
EPS GROWTH: PASS
FUTURE EPS GROWTH: PASS
SALES GROWTH: PASS
TOTAL RETURN/PE: FAIL
FREE CASH FLOW: PASS
EPS PERSISTENCE: PASS
For a full detailed analysis using NASDAQ's Guru Analysis tool, click here
INGLES MARKETS, INCORPORATED (IMKTA) is a small-cap value stock in the Retail (Grocery) industry. The rating according to our strategy based on John Neff changed from 62% to 81% based on the firm’s underlying fundamentals and the stock’s valuation. A score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest.
Company Description: Ingles Markets, Incorporated (Ingles) is a supermarket chain in the southeast United States. The Company's segments include retail grocery and other. Its other segment consists of fluid dairy operations and shopping center rentals. As of September 24, 2016, the Company operated 201 supermarkets in Georgia, North Carolina, South Carolina, Tennessee, Virginia and Alabama. The Company locates its supermarkets primarily in suburban areas, small towns and rural communities. Ingles supermarkets offer customers a range of food products, including grocery, meat and dairy products, produce, frozen foods and other perishables and non-food products. Its non-food products include fuel centers, pharmacies, health and beauty care products and general merchandise. The Company focuses on selling products to its customers through the development of organic products, bakery departments and prepared foods, including delicatessen sections.
The following table summarizes whether the stock meets each of this strategy's tests. Not all criteria in the below table receive equal weighting or are independent, but the table provides a brief overview of the strong and weak points of the security in the context of the strategy's criteria.
P/E RATIO: PASS
EPS GROWTH: PASS
FUTURE EPS GROWTH: PASS
SALES GROWTH: FAIL
TOTAL RETURN/PE: PASS
FREE CASH FLOW: PASS
EPS PERSISTENCE: PASS
For a full detailed analysis using NASDAQ's Guru Analysis tool, click here
Since its inception, Validea's strategy based on John Neff has returned 333.14% vs. 191.46% for the S&P 500. For more details on this strategy, click here
About John Neff: While known as the manager with whom many top managers entrusted their own money, Neff was far from the smooth-talking, high-profile Wall Streeter you might expect. He was mild-mannered and low-key, and the same might be said of the Windsor Fund that he managed for more than three decades. In fact, Neff himself described the fund as "relatively prosaic, dull, [and] conservative." There was nothing dull about his results, however. From 1964 to 1995, Neff guided Windsor to a 13.7 percent average annual return, easily outpacing the S&P 500's 10.6 percent return during that time. That 3.1 percentage point difference is huge over time -- a $10,000 investment in Windsor (with dividends reinvested) at the start of Neff's tenure would have ended up as more than $564,000 by the time he retired, more than twice what the same investment in the S&P would have yielded (about $233,000). Considering the length of his tenure, that track record may be the best ever for a manager of such a large fund.
About Validea: Validea is an investment research service that follows the published strategies of investment legends. Validea offers both stock analysis and model portfolios based on gurus who have outperformed the market over the long-term, including Warren Buffett, Benjamin Graham, Peter Lynch and Martin Zweig. For more information about Validea, click here
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Zihan1004/FNSPID | Is AbbVie's Stock a Buy?
It's been a tough year for AbbVie (NYSE: ABBV) as the stock is closing 2019 not far from where it finished the year before. Question marks about the future of its business have made investors wary of investing in the company. However, given its poor performance in a year that's seen the Health Care Select SPDR Fund rise by 21% and the S&P 500 index produce returns of around 29%, AbbVie could be an underrated buy for 2020, especially given some exciting opportunities ahead.
Diversification could be key to long-term growth
One of AbbVie's strengths over the years has been its ability to continue to drive revenue growth. From $22.9 billion in sales in 2015 to $32.8 billion in 2018, the company's top line has risen by more than 43% in a span of just three years.
Acquisitions have played a key part of AbbVie's growth. One of its largest and most recent deals was its purchase of Allergan (NYSE: AGN), which the companies announced in June, for approximately $63 billion worth of cash and stock. Although investors didn't initially respond favorably to the deal, over the long term, AbbVie could enjoy significant benefits, the biggest of which is diversification. Although no specific date has been given, the two companies expect the deal to close "early 2020" which is when AbbVie's financials will begin including Allergan's results.
AbbVie is largely dependent on Humira, perhaps so much that it makes the stock slightly risky. According to the company's most recent earnings report, released in November, Humira accounted for 58% of AbbVie's top line over the past nine months. And while that's an improvement from 61% the year prior, it's clear that the company needs to become more diversified, especially with sales from Humira dropping by 5% so far this year.
Image Source: Getty Images.
To make matters worse, the company's Rinvoq drug, which was highly touted by AbbVie executives, received a disappointing review from the Institute for Clinical and Economic Review, which said the drug had only "marginal clinical benefit" compared to Humira. The good news is that AbbVie doesn't have all its eggs in one basket, as it still has Skyrizi, which could be a substitute for Humira, and it's an attractive alternative, as it needs to be injected fewer times. Nonetheless, these are important reminders as to why diversification and the deal with Allergan are vital to ensuring that AbbVie continues to grow and expand its sales mix.
Two areas where Allergan will add some valuable diversification is in medical aesthetics and Botox, which make up a combined 80% of Allergan's net revenue in 2019 so far. Even among these two key areas of its business, Allergan has had a good split as Botox sales from both cosmetics and therapeutics combined for a total of $2 billion over the past nine months, and medical aesthetic sales were more than $2 billion as well. With a good mix of revenue, AbbVie's numbers will not only get stronger as a result of the acquisition, but its product sales will also be much more diverse.
Allergan acquisition may not be the ideal solution
Although the deal for Allergan may provide opportunities for AbbVie, it's also likely to present some challenges. Over the past nine months, Allergan's sales have struggled, generating almost no growth.To make matters worse, Allergan has struggled with profitability, as the company is coming off a Q3 performance in November in which it incurred an operating loss of $596.6 million. Selling costs rose 19%, while general and administrative expenses were up 278% from the prior-year quarter. Despite the added overhead, Allergan's top line grew by just 3.6%.
The danger for AbbVie is that while the acquisition will add more revenue, it could also saddle the company with greater expenses that eat into its bottom line, which has been strong, with AbbVie posting a profit of more than $5.1 billion in each of the past four years.
Is the stock too expensive to own today?
AbbVie is currently trading at more than 40 times its earnings, but its forward price-to-earnings multiple, which factors in the company's future growth, and is expected by analysts to fall to just nine. The company's results this year have been weighed down by other expense items, including goodwill impairment. But with a PEG ratio of 2.7, there may not be enough long-term growth to convince investors that there's enough substance to justify an investment in the company today.
There's a great deal of uncertainty surrounding AbbVie's future, both with the drugs it has in development and its deal with Allergan, and that makes the healthcare stock too risky of a buy today, especially at its current valuation. Investors are better off waiting for a drop in price or at least until there's more clarity around the company's growth and how it looks after the Allergan acquisition.
10 stocks we like better than AbbVie
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David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and AbbVie wasn't one of them! That's right -- they think these 10 stocks are even better buys.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | Perfect Dividends for the Roaring (or Recessionary?) 2020s
By Brett Owens
Are we kicking off another episode of the aEURoeRoaring 20saEUR today?
Who knows. Nobody really predicted the 2010s would be an end-to-end bull market. Yet the most hated rally of all-time resulted in stocks nearly quadrupling:
The Epic Rally Few Investors Believed In
A million bucks that sat in a boring S&P 500 fund a decade ago would have grown to $3.5 million. Unfortunately, many experienced investors did not participate in this full rally, still being shell-shocked after 2008.
(Which illustrates why it is important to always be fully invested. Investors who slept through the aEURtm08 carnage quickly made their money back in the years to follow. And smart dividend investors slept particularly well, and made their money back even faster. WeaEURtmll talk income stocks for the 2020s in a minute.)
Fast-forward to today, and common sense might now indicate that we are aEURoedueaEUR for a pullback, a recession, or at least a breather. Then again, the stock market is hitting all-time highs, and true bear markets do not typically follow on the heels of records this closely.
So, what are we careful contrarians to do? If we flip to cash now, we are likely to miss many months (and perhaps years) worth of income and compounding opportunities. These are not easily made up soonaEUR"if ever. And besides, weaEURtmve talked about broader market timing before. The problem most permabears have is that, even if they know when to flip to cash, practically no one successfully gets back into the market (and that includes aEURoeprofessionals!aEUR).
LetaEURtms revisit January 2010 again. The market has been in furious rally mode for 10 straight months, and nobody really thought it was the start of a new bull market. aEURoeHead fake,aEUR aEURoedead cat bounce,aEUR or aEURoesuckeraEURtms bet?aEUR Sure! But new bull run? Nah, anyone suggesting aEURoehigher stock pricesaEUR was laughed off. The scoffersaEURtm million bucks then is barely over $1 million now after a decade of aEURoewaiting for the next shoe to drop.aEUR
But I get the worries. We hear the phrase aEURoelate cycleaEUR over and over when it comes to our economy, and itaEURtms tough to get it out of our heads. So IaEURtmm going to propose a compromise.
LetaEURtms buy safe aEURoedecade-long worthyaEUR dividend stocks that rally whether the market goes up or down.
HereaEURtms a little back-of-the-envelope backtest. LetaEURtms rewind January 1, 2010 two more years from the start of 2008. If weaEURtmd bought an S&P 500 index fund heading into this bear route, weaEURtmd still be OK today. All stock market wounds heal, given enough time. But we donaEURtmt have aEURoeenough time.aEUR Our goal here is not to be merely aEURoeOKaEURaEUR"it is to grow wealthy and retire on dividends.
So, letaEURtms rewind and instead look at what would have happened if we had bought three of our favorite dividend-paying stocks. WeaEURtmve owned all three in our Contrarian Income Report portfolio at various times, enjoying yields up to 10% with total returns up to 105% along the way.
Now CIR was a mere apple of my eye in aEURtm08 (weaEURtmd launch your favorite income stock service seven years later), so letaEURtms add perennial favorites Omega Healthcare Investors (OHI), Medical Properties Trust (MPW) and W.P. Carey (WPC) to the aEURoemost poorly timed income portfolio everaEUR on January 1, 2008:
Total Returns Up to 6X, Including Fat Dividends
Rather than make this another lame (but essential!) lesson about long-term investing, I use this illustration to show the importance of picking the right stocks. OHI, MPW and WPC all shared three key qualities that made them slam dunk holdings over the last twelve years.
First, they paid big dividends throughout the last dozen years, including the aEURoecry for your mamaaEUR crash. On average, these stocks yielded no less than 5% and they paid 10% or more during brief bouts of aEURoebleak outlooks.aEUR But these pessimistic periods turned out to be screaming buying opportunitiesaEUR"even better than buying and holding since aEURtm08!
Second, they raised their dividends consistently. Over the last five years, OHI, MPW and WPC boosted their payouts by 26%, 18% and 9% respectively. Nothing spectacular, sure, but hikes donaEURtmt have to be when the yields are already so high. Show me a high-paying stock with a climbing dividend and IaEURtmll show you shares that only have one way to goaEUR"up!
Third, all three firms had (and still have) well-positioned business models. OHI owns skilled-nursing facilities, which have higher demand from the greying of America. MPW provides financing to hospitals, a recession-proof business if there ever was one. And WPC is a landlord to industrial complexes, including warehouses, which have boomed with the online shopping (and shipping) world.
I realize that Amazon.com (AMZN) is a great disruptor of business models, and many aEURoebrand nameaEUR firms of yesteryear are suffering today. But there are still plenty of profitable niches being fulfilled by publicly-traded dividend payers, and these are the stocks we want to own for the next decade.
IaEURtmll get to my favorite 10-year ideas in a moment. First, what donaEURtmt we want to buy and hold through the 2020s? Probably, plain old bonds (not the lesser-known and better way we like to own bonds). While there will continue to be money making opportunities in fixed income (there always are), itaEURtms unlikely that 10-year Treasury yields are another 2% lower ten years from now. In fact, thataEURtmd put them at zero!
aEURoeLong BondaEUR Rates Cut in Half Last Decade
A Is it possible that bonds are the surprise this decade that stocks were last decade? That rates do go to zero and there is still money to be made off of bonds? Sure, anything is possible. But itaEURtms important to consider that the upside you may see from an increase in bond prices is capped, because a further decrease in rates is running out of room.
To be a perfect income play for the 2020s, I like to see:
Dividends powered by timeless business models,
With the potential to raise payouts steadily, which will
aEURoeUncapaEUR the upside in the attached stock price.
Bull or bear, we donaEURtmt really care because our big dividend payers will support our stock prices either way.
This is what IaEURtmm talking about when I say aEURoeperfect income buys.aEUR And as we kick off the new year and decade, there are three specific investments we should be considering right now for:
Maximum current income,
Stable prices, and even
Upside potential above and beyond what the broader income market is likely to return.
Can I share more? Please click here and let me explain my 2020 Perfect Income Portfolio in detail.
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Zihan1004/FNSPID | How to Actually Save Money in 2020
Being better with money is always one of the most common New Year's resolutions -- money makes the world go round, and having more on hand is always helpful.
In this video from our YouTube channel, we break down how you can save your way to an extra $1,000 in 2020 and what you should do with the extra cash you'll have on hand.
10 stocks we like better than Walmart
When investing geniuses David and Tom Gardner have an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
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Dylan Lewis: Heading into the new year, it's impossible to avoid talk of goals and resolutions.
So what are some easy money resolutions you can knock out in the new year and set yourself up to be even better off in the future?
I'm Dylan Lewis from The Motley Fool and in this FAQ we're going to go through some of the easiest ways you can be better with money make future you very happy.
There are a ton of different surveys asking people what they are focusing on with their new year's resolution.
Next to dieting and exercising, being better with money is almost always one of the most common responses people offer.
We're going to split that out into two different categories:
Saving more
Putting your money to work
Let's start with the first one, keeping more money in your pocket.
The foundation of good personal finance practices is to build a budget and understand the money that is coming in and where it is going when it is heading out.
Budget-building sounds daunting, but it's actually pretty simple. Take your paycheck and subtract the major non-negotiable expenses you pay regularly like your rent or mortgage, utilities, groceries, your car bill, and healthcare costs.
Anything leftover is potential savings, and a negative number means there's more going out than coming in.
Now how do you save more? The personal finance space is full of articles telling you about the virtues of making your coffee instead of buying it from Starbucks, and it's true, that is a totally valid way to save. But the coffee purchase is a daily thing, which means to save several hundred dollars, you need to change a behavior every. single. day.
We're going to look at a couple one-time fixes that will immediately save you big.
Seemingly every company in the world has been transitioning to a subscription model over the past couple years -- cable, phone, granola bar companies.
Companies are pushing this model because it takes a purchase you actively have to make, and makes it automatic. Now maybe those purchases are truly things you need, but there are probably some you can either cut down or cut out altogether.
For example, in 2019 I looked into the wireless plan I was on. I had an unlimited data plan with one of the big 4 carriers, for all that I was paying $55 per month. That's not too bad, but there are far cheaper options out there.
After doing some research, I found an MVNO, or mobile virtual network operator -- basically a company that rents space on cell towers built by the big 4 companies.
This company offered a 12 GB monthly plan for $25 per month, so I tried it out.
I didn't notice a big drop-off in service, so I switched, and going from $55 per month for my phone plan to $25 means I'm saving over $350 per year. Like that, that's crazy.
The same is probably true for your cable bill. Most cable companies are happy to offer a nice low deal to get you in the door and then after that first year is up, all of a sudden your monthly bill starts creeping up. If you're in a market where you have options, look into the offers that other providers have, and if you don't actually watch that much TV, going down to an internet only plan can probably save you $40 per month -- or $480 per year.
Those are the common recurring payments, but there are plenty of others. If you're a house with multiple streaming accounts, consider having one at a time, watching the shows you care about, then closing the account and opening up another.
If you're looking for more ways to trim, take a close look at your credit card statements. Go through and circle all the recurring expenses. You might've totally forgotten that you signed up for cloud storage for $10/month, or that you're being charged monthly for access to a publication you never actually read.
And lastly, one of my favorite ways to save -- before you make any online purchase, go to Google Shopping and see if the product is available for less elsewhere, and once you've landed on where you'll buy it, search for promo codes for that website. I've easily saved $5 or $10 on purchases by taking the 30 seconds to do this.
Okay so if you're the average person, that's about $1000 in savings over the course of the year right there. And if you couple that with routine changes like cooking more and eating out less, you could save even more.
So with your pockets a little fuller, what should you do?
There's a bit of a hierarchy to how to approach having some extra change, here's a quick checklist:
Do you have some savings set aside in case something happens? We like to call this an "emergency fund" and the idea is to have enough money around to be able to cover a major expense if it pops up.
Ideally you build it up to 3-6 months of non-negotiable expenses, but $1000 is a great place to start.
With some money set aside, if you have a retirement account through work, focus on that. It's pretty common for employers to match contributions up to a specific amount. Make sure you're contributing at least enough to max out their match -- it's basically free money as long as you stay at the company long enough for it to vest.
Then, do you have high interest debt? We're talking credit card debt, or anything over 8-10%. If you do, use the extra money to pay that down as soon as possible.
After that, consider expanding that rainy day fund you've got from the $1,000 to 3 to 6 months of living expenses -- this is money you'll keep in your checking or savings account.
Next if you have other lower interest debt, you can consider paying it down or focusing on investing more of your money. If you go the investing route, you can either contribute more to your employer-sponsored retirement account, or open a Roth or standard IRA with a firm like Vanguard and buy index funds.
There's more you can do of course, but if you can make it to this step you're in pretty great shape and can start thinking about longer term goals, like whether buying a house might be in your future, or if you want to save up to send kids to college.
The path to being better with money will depend on your financial position. For some it will be saving up that $1,000, others will be focusing on destroying their high interest debt, and some folks will be ready to start investing. The big thing is to understand where you are and take action
This was kind of a dense video, so we actually have all of this and more in written form in our free starter kit -- it walks you through all things money and how you can save, invest, and be better off. Head over to Fool.com/Start and you can get the free kit there.
That'll do it for this FAQ video, if being better with money is one of your goals, go on and like the video with the thumbs up button, and if you have cool ways to save, drop them down in the comments section below!
And of course, subscribe to the channel to get more content like this from us, we're publishing new videos on how to be better with money each week.
Until our next video, thanks for tuning in and Fool on!
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Dylan Lewis owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | Warren Buffett Bought These 9 Stocks in 2019
There's probably not an investor on the planet who's more closely followed by Wall Street than Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) CEO Warren Buffett. That's because his long-term track record is unmatched.
Beginning with roughly $10,000 in seed capital in the mid-1950s, Buffett has bolstered his net worth to around $89 billion, which doesn't include the tens of billions of dollars he's donated to charity over the years. Berkshire Hathaway, which has acquired around five dozen companies and is currently invested in 48 securities, has also created more than $400 billion in shareholder value for investors over the years.
Suffice it to say that when Buffett buys a stock, Wall Street pays attention. According to Berkshire Hathaway's 13-F filings, Buffett bought the following nine stocks in 2019.
Berkshire Hathaway CEO Warren Buffett at his company's annual shareholder meeting. Image source: The Motley Fool.
1. Amazon
Easily the biggest eye-opener was Berkshire's purchase of Amazon (NASDAQ: AMZN) stock during the first and second quarters last year. Buffett has regretted overlooking Amazon's dominant business model, which may have been responsible for around 38% of all e-commerce sales in the U.S., per eMarketer.
Interestingly, though, Amazon's e-commerce and Prime membership may not be the leading driver for this company moving forward. Cloud-service provider Amazon Web Services (AWS) is growing at a much faster pace than e-commerce and is responsible for substantially higher margins than traditional retail sales. In other words, Amazon's future looks to be tied to AWS and not its online retail empire.
2. JPMorgan Chase
Considering that financials comprise close to half of Buffett's portfolio holdings in terms of invested assets, it really shouldn't be a surprise that the Oracle of Omaha chose to add to Berkshire's position in JPMorgan Chase (NYSE: JPM) during the first quarter. JPMorgan Chase has consistently been among the best money-center banks with regard to return on assets and return on equity, and Buffett tends to be a big fan of cyclical companies that are absolute cash machines. Buffett has even gone so far as to note that he keeps up on the happenings within the banking industry by reading JPMorgan CEO Jamie Dimon's annual letter to shareholders.
3. PNC Financial Services
Have I mentioned that Warren Buffett likes financials? Berkshire also added to its existing position in PNC Financial Services (NYSE: PNC) during the first quarter.
PNC Financial, which is a relatively recent addition to Berkshire's portfolio, generated $1.4 billion in net income on $4.5 billion in total revenue in the third quarter, all while returning $1.5 billion to shareholders through regular buybacks and a healthy dividend. Everything seemed to work as planned -- average deposits and average loans rose 2% and 1%, respectively, while nonperforming assets decreased slightly -- and now, Buffett can simply sit back and watch his investment dollars go to work.
Image source: Getty Images.
4. Delta Air Lines
Buffett piled into the airline industry during the second-half of 2016 and got even more aggressive with Delta Air Lines (NYSE: DAL) during the first quarter. Berkshire Hathaway added more than 5 million shares to its existing position.
Delta is lugging around far less net debt than key competitor American Airlines Group and has clearly benefited from West Texas Intermediate crude prices remaining in the $50s. A big stickler for value, Buffett is obviously still attracted to Delta's minuscule forward price-to-earnings ratio of just 8.
5. Red Hat
In both the first and second quarters, Berkshire Hathaway purchased stock in Red Hat, which was officially acquired by tech bellwether IBM (NYSE: IBM) on July 9 for $34 billion in an all-cash deal. IBM was late to the cloud-computing party and has seen sales from its legacy operations decline in nearly every quarter over the past six years. IBM's acquisition of Red Hat is designed to help narrow that gap. But having been burned by IBM before, Buffett was more than happy to take the cash and walk away.
6. Bank of America
File this under the "we're not surprised" tab, but Buffett purchased Bank of America (NYSE: BAC) stock on more than one occasion in 2019, adding to Berkshire's existing holdings. Bank of America is Berkshire's second-largest holding by market value and, like JPMorgan Chase, has been firing on all cylinders of late.
BofA has delivered substantive cost cuts by closing physical branches and focusing on digital banking. The company has also raised its quarterly payout back to $0.18 per quarter from the $0.01 per share it was paying out as recently as 2014. Bank of America has plans to return up to $37 billion to investors through dividends and buybacks over the course of the next year (as of late June 2019).
Image source: Getty Images.
7. US Bancorp
I know... shocker! Buffett bought more bank stocks. US Bancorp (NYSE: USB) has been a particularly sweet long-term holding for the Oracle of Omaha, given that it largely avoided the risky derivatives and toxic investments that sacked major money-center banks during the Great Recession. This is why US Bancorp's return on assets has consistently outpaced the industry over the past decade. This is a bank that's not doing anything fancy but still manages to grow average total loans and deposits by a low-to-mid single-digit percentage year after year.
8. RH
Another head-turner was the initiation of a position in RH (NYSE: RH), formerly Restoration Hardware, during the third quarter. What's unique about this purchase is that Buffett traditionally buys stakes in large, brand-name businesses with huge reach -- and RH doesn't fit the mold. This is a company selling higher-priced and oversized furniture and is primarily doing so by spurning online sales in favor of large paper catalogs.
Investors certainly can't argue with the results, as RH saw adjusted net sales grow 6% in the third quarter, with year-to-date free cash flow rocketing to $234 million from just $19 million last year. Still, with the U.S. economy likely in the later innings of its economic expansion, this purchase is a bit baffling.
9. Occidental Petroleum
Last but not least, Buffett opened a new position in Occidental Petroleum (NYSE: OXY) during the third quarter. Although Buffett doesn't devote a lot of his investments to the oil and gas sector, this move shouldn't be all that surprising. After all, Buffett committed to invest $10 billion in Occidental in late April to help with its acquisition of Anadarko. This investment was a bet on higher long-term oil prices, according to the Oracle of Omaha in an interview with CNBC's Becky Quick.
Now the question is: What will Buffett be buying in 2020?
10 stocks we like better than Bank of America
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David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Bank of America wasn't one of them! That's right -- they think these 10 stocks are even better buys.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams owns shares of Bank of America. The Motley Fool owns shares of and recommends Amazon, Berkshire Hathaway (B shares), and Delta Air Lines. The Motley Fool is short shares of IBM. The Motley Fool recommends RH and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short January 2020 $220 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | These 3 Tech Stocks Gained More Than 1,000% in the 2010s
Show me an investor who wouldn't love to see his stocks gaining 1,000% in 10 years, and I'll show you a liar. The tech sector happens to be full of extreme growth stocks that actually achieved that extreme 10-year return, and I'm here to show you how it was done.
How good are these gains? The Dow Jones Industrial Average rose 170% over the same period and the S&P 500 market barometer posted a 10-year increase of 186%. The three tech stocks below fared much, much better.
COMPANY
MARKET CAP
10-YEAR SHARE PRICE GROWTH
Tucows (NASDAQ: TCX)
$647 million
2,130%
Universal Display (NASDAQ: OLED)
$9.7 billion
1,560%
NVIDIA (NASDAQ: NVDA)
$143 billion
1,150%
Data source: YCharts.com, Dec. 31, 2019.
Are any of these proven winners staring down another stretch of extreme growth in the years ahead?
Ting, Ting, Ting!
Tucows, a Canada-based provider of online tools and a reseller of cell-phone services, was a mere penny stock 10 years ago. The company's surge started with the announcement of subsidiary Ting Mobile's low-priced data sharing plans in 2012, as smartphones were starting to reshape the way we used our mobile phones.
Three years later, Ting had grown into a profitable business that contributed 29% of Tucows' total revenue and 41% of the company's operating profit. The company has grown by leaps and bounds, thanks to a combination of organic revenue growth from Ting Mobile and several plug-in acquisitions adding heft to Tucows' domain name service operations.
The next big idea out of Tucows' Toronto headquarters is a big investment in Ting Internet. This sister service to Ting Mobile provides fiber-based broadband service to customers in a hand-picked selection of hyperlocal markets. This effort requires a large up-front investment to pull fiber lines into new neighborhoods and lighting up data centers to provide services to these markets, so Ting Internet is a drag on Tucows' earnings at the moment. But customers are quick to sign up when Ting Internet services become available: The service was available to 34,000 addresses in the recently reported third quarter, and 9,500 of these potential clients are already paying customers.
The Ting Internet project will continue to expand for years to come, giving Tucows a predictable stream of incoming high-quality customers for the long haul. The next decade probably won't match the once-in-a-lifetime run from penny stock to respectable multi-service growth investment, but Tucows still looks promising enough that I had to buy a few shares for myself this fall.
Image source: Getty Images.
The future's so bright, I gotta wear shades
Back in 2009, I saw Universal Display's organic light-emitting diode (OLED) technology finally hitting store shelves after many years of quiet research and development behind the scenes. The ultra-efficient technology seemed to be primed for world domination at the time, and I could hardly conceal my excitement. "Universal Display is small and obscure and can easily multiply your investment many times over when catalysts like the TV revolution kick in," I wrote.
The company's trailing revenue has exploded from $16 million to $374 million over this 10-year period. CEO Steven Abramson believes this is just the start of a much larger long-term growth story.
These days, OLED screens are a standard feature on most flagship smartphones, and the technology is making inroads in the big-screen TV market as well. After that, we Universal Display investors will enjoy watching the world embrace power-efficient OLED panels for everyday lighting, flexible and transparent screens, and much more.
Do the math
NVIDIA's path to a thousand-percent gain was rather bumpy. The stock traded almost exactly sideways between 2010 and 2015, gaining just 7% over that five-year span. The last five years were a different story, where NVIDIA's shares posted a gain of 1,070% on 114% higher revenue and 365% stronger free cash flow.
After several missteps and failed product launches, NVIDIA finally got its act together with a popular lineup of graphics cards in 2015. A brand new graphics architecture, known as Pascal, followed in 2016 to even greater acclaim. These cards stayed hot in 2017, allowing NVIDIA to take advantage of that fall's massive cryptocurrency mining trend -- as it turns out, high-powered graphics cards were very well suited to doing exactly the kind of math that crypto-mining required at the time.
The cryptocurrency surge faded in 2018, dragging NVIDIA's sales and share prices down with it. But the stock is coming on strong again thanks to solid sales into new target markets such as data analysis, self-driving cars, and artificial intelligence systems. NVIDIA's chips are great at these tasks, too.
The stalled gaming market is looking for its next big hit, some market watchers expect another big rush of cryptocurrency gains, and NVIDIA's more recent growth drivers should stay valid for many years. NVIDIA looks like a solid buy today.
10 stocks we like better than NVIDIA
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
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Anders Bylund owns shares of Tucows and Universal Display. The Motley Fool owns shares of and recommends NVIDIA, Tucows, and Universal Display. The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | Are Aurora Cannabis, HEXO, and Tilray Ready to Rebound in 2020?
Many investors in marijuana stocks are probably breathing a sigh of relief that 2019 is over. The year brought dismal performances for most pot stocks. To put things in perspective, the two leading cannabis-focused exchange-traded funds (ETFs) both plunged by at least 30%.
When ETFs fall that much, it means there are plenty of individual stocks that dropped even more. Three well-known pot stocks that performed especially badly in 2019 were Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Tilray (NASDAQ: TLRY). But are these beaten-down marijuana stocks ready to rebound in 2020?
Image source: Getty Images.
A common denominator
Aurora Cannabis, HEXO, and Tilray performed much worse than other big Canadian cannabis producers last year. Aurora's shares sank close to 60%. HEXO didn't fare much better, with the stock falling more than 50%. Tilray was the biggest loser of the three, with its shares tanking by over 75%.
There was one major common denominator behind all three stocks' horrible results in 2019: too few retail cannabis stores in Canada. This lack of an adequate retail infrastructure wasn't as problematic early in the year; pent-up demand for legal recreational marijuana initially led to big sales jumps for Aurora, HEXO, Tilray, and their peers. Later in the year, though, the retail bottleneck began to impact the volume of products that provinces were ordering for their adult-use recreational cannabis markets.
Ontario presented the biggest challenge of all. It's the most heavily populated province in Canada, home to nearly four out of 10 residents of the country. But by late November, only 24 retail cannabis stores were open in Ontario. That's one store for every 600,000 residents -- not nearly enough to serve the market.
It's not surprising that the management teams at Aurora and HEXO pointed the finger at Ontario when their quarterly updates later in 2019 disappointed investors. Tilray's executives didn't single out the province, although CEO Brendan Kennedy stated on the company's third-quarter conference call in November that "the challenges in the Canadian market are ongoing, with a limited number of retail locations and a supply-demand imbalance."
Company-specific problems
But Ontario wasn't the only reason that Aurora, HEXO, and Tilray stocks plunged in 2019. Each faced company-specific problems as well.
Aurora made the age-old mistake of overpromising and underdelivering with its fiscal 2019 fourth-quarter results. The company provided guidance for its Q4 revenue without having adequate visibility for its ancillary non-cannabis revenue. Its revenue miss ended up being an embarrassment. Aurora's fiscal 2020 Q1 results were even worse, and led to the company cutting its spending on capital projects. In addition, Aurora closed out the year by having its license to sell medical cannabis products in Germany temporarily suspended, causing the company to lose at least six weeks of sales in the key European market.
HEXO also overpromised and underdelivered. CEO Sebastien St-Louis predicted that net revenue would double in Q4 from Q3, but the company didn't come close to achieving that goal. HEXO's CFO departed unexpectedly in October. The company withdrew its fiscal 2020 outlook. And in late December, HEXO added more dilution to the list of reasons why investors soured on the stock.
While Aurora and HEXO at least enjoyed a few months of big gains earlier in the year, Tilray lost its steam quickly in 2019. The company routinely missed Wall Street estimates in its quarterly results. The acquisition of Manitoba Harvest, a maker of hemp-based foods, weighed on Tilray's margins. Probably the biggest issue for Tilray, though, was that it started out the year with a lofty valuation that simply wasn't sustainable.
Ready to rebound in 2020?
The good news for all three of these companies and their peers is that the retail environment in Canada should improve. Ontario is issuing around 20 licenses for new stores each month, beginning in March, following an initial wave of more than 40 new stores.
Another tailwind is that the Cannabis 2.0 derivatives market will ramp up in earnest in 2020. Aurora, HEXO, and Tilray are offering a range of products in this new market that should boost sales significantly in the new year.
My hunch is that these positive factors will spur many investors to jump back on the cannabis bandwagon, leading to solid rebounds for many Canadian marijuana stocks. I suspect that Aurora, HEXO, and Tilray will enjoy nice bounces.
However, the prospect of further dilution is likely to hover like a dark cloud over all three of these stocks in 2020. Unless the companies can demonstrate that they're clearly on a path to profitability, don't be surprised if the rebounds for their stocks fade.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | Here's Why 2020 Is the Big Test for Canadian Cannabis Companies
Canadian cannabis companies are still in the honeymoon phase of what's been rapid early growth for the new recreational marijuana market in Canada. However, in 2020 that's going to change in a hurry, and it could be a whole lot more difficult for cannabis companies to impress investors with their growth numbers. That could be bad news after what's already been a tough 2019 for the industry. Here's why things could get worse next year.
Prior-year results won't give companies an easy sales number to beat
One of the problems that Canopy Growth (NYSE: CGC) has been hit with this year has been a lack of profitability. It's been a sore spot for the company, and it's also dragged down the results of its key investor, Constellation Brands. The mounting losses have been a contributing reason, if not the main one, for the dismissal of Bruce Linton, who had long been the leader for Canopy Growth and a respected figure in the industry.
But many investors have ignored the lack of profitability in the industry because companies are still experiencing tremendous growth. For instance, in its Q2 results for fiscal 2020, released back in November, Canopy Growth's sales of 76.6 million Canadian dollars were up a whopping 229% from the CA$23.3 million it had generated in the prior-year quarter.
Image source: Getty Images.
However, it's not an apples-to-apples comparison because in the prior year the recreational market was not open in Canada, and so it was easy for the company to blow the comparative numbers out of the water. The recreational marijuana market opened for business in Canada on Oct. 17, 2018. And now that it's been more than a year since recreational pot has been legal, the upcoming quarterly results are going to have better prior-year numbers, and these significant growth rates will come down in a hurry.
In the company's Q3 results of fiscal 2019, which were released in February 2019, Canopy Growth's net revenue of CA$83 million was actually higher than net revenue earned this past quarter. The period didn't cover a full three months of the recreational market being open.
Whether it can beat these numbers when the company goes to report its earnings in February is going to be a big test for Canopy Growth. Other Canadian cannabis companies are going to be facing the same sorts of challenges.
Edibles should provide a boost
As for Canopy Growth, it should still come in ahead of prior-year results, as it will have the benefit of edibles and ingestible products, also known as the "Cannabis 2.0" market in Canada. The new cannabis products arrived on store shelves in December and will provide a new source of revenue for cannabis producers like Canopy Growth.
According to estimates Deloitte made in June, this new segment of the market could be worth CA$2.7 billion annually. That's nearly half of the near-CA$6 billion market size that Deloitte expects the recreational and medical market to be worth, which excludes the new products.
Canopy Growth's new products should help ensure that sales continue to grow. However, growth rates are unlikely to be as high as they've been in 2019, and that could put pressure on the stock.
What marijuana investors should watch out for
Canadian cannabis companies should continue to benefit in 2020 from a new segment of the market being open for business. But if there are any hiccups for edible or ingestible products, producing strong year-over-year sales growth numbers could be a big challenge.
And the problem for cannabis stocks is that with profitability being nowhere in sight for many companies, growth is all that investors will have to hang their hats on. If cannabis companies report sales numbers with only modest improvements from last year, that could lead to even more selling for pot stocks in 2020.
This past year has already been a tough one for marijuana stocks as the Horizons Marijuana Life Sciences ETF fell 40% in 2019 while Canopy Growth declined by 34%. As bad as the sell-off has been in the industry, it could get even worse in 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | 뉴스 | 1,115 |
Zihan1004/FNSPID | Warren Buffett Bought These 9 Stocks in 2019
There's probably not an investor on the planet who's more closely followed by Wall Street than Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) CEO Warren Buffett. That's because his long-term track record is unmatched.
Beginning with roughly $10,000 in seed capital in the mid-1950s, Buffett has bolstered his net worth to around $89 billion, which doesn't include the tens of billions of dollars he's donated to charity over the years. Berkshire Hathaway, which has acquired around five dozen companies and is currently invested in 48 securities, has also created more than $400 billion in shareholder value for investors over the years.
Suffice it to say that when Buffett buys a stock, Wall Street pays attention. According to Berkshire Hathaway's 13-F filings, Buffett bought the following nine stocks in 2019.
Berkshire Hathaway CEO Warren Buffett at his company's annual shareholder meeting. Image source: The Motley Fool.
1. Amazon
Easily the biggest eye-opener was Berkshire's purchase of Amazon (NASDAQ: AMZN) stock during the first and second quarters last year. Buffett has regretted overlooking Amazon's dominant business model, which may have been responsible for around 38% of all e-commerce sales in the U.S., per eMarketer.
Interestingly, though, Amazon's e-commerce and Prime membership may not be the leading driver for this company moving forward. Cloud-service provider Amazon Web Services (AWS) is growing at a much faster pace than e-commerce and is responsible for substantially higher margins than traditional retail sales. In other words, Amazon's future looks to be tied to AWS and not its online retail empire.
2. JPMorgan Chase
Considering that financials comprise close to half of Buffett's portfolio holdings in terms of invested assets, it really shouldn't be a surprise that the Oracle of Omaha chose to add to Berkshire's position in JPMorgan Chase (NYSE: JPM) during the first quarter. JPMorgan Chase has consistently been among the best money-center banks with regard to return on assets and return on equity, and Buffett tends to be a big fan of cyclical companies that are absolute cash machines. Buffett has even gone so far as to note that he keeps up on the happenings within the banking industry by reading JPMorgan CEO Jamie Dimon's annual letter to shareholders.
3. PNC Financial Services
Have I mentioned that Warren Buffett likes financials? Berkshire also added to its existing position in PNC Financial Services (NYSE: PNC) during the first quarter.
PNC Financial, which is a relatively recent addition to Berkshire's portfolio, generated $1.4 billion in net income on $4.5 billion in total revenue in the third quarter, all while returning $1.5 billion to shareholders through regular buybacks and a healthy dividend. Everything seemed to work as planned -- average deposits and average loans rose 2% and 1%, respectively, while nonperforming assets decreased slightly -- and now, Buffett can simply sit back and watch his investment dollars go to work.
Image source: Getty Images.
4. Delta Air Lines
Buffett piled into the airline industry during the second-half of 2016 and got even more aggressive with Delta Air Lines (NYSE: DAL) during the first quarter. Berkshire Hathaway added more than 5 million shares to its existing position.
Delta is lugging around far less net debt than key competitor American Airlines Group and has clearly benefited from West Texas Intermediate crude prices remaining in the $50s. A big stickler for value, Buffett is obviously still attracted to Delta's minuscule forward price-to-earnings ratio of just 8.
5. Red Hat
In both the first and second quarters, Berkshire Hathaway purchased stock in Red Hat, which was officially acquired by tech bellwether IBM (NYSE: IBM) on July 9 for $34 billion in an all-cash deal. IBM was late to the cloud-computing party and has seen sales from its legacy operations decline in nearly every quarter over the past six years. IBM's acquisition of Red Hat is designed to help narrow that gap. But having been burned by IBM before, Buffett was more than happy to take the cash and walk away.
6. Bank of America
File this under the "we're not surprised" tab, but Buffett purchased Bank of America (NYSE: BAC) stock on more than one occasion in 2019, adding to Berkshire's existing holdings. Bank of America is Berkshire's second-largest holding by market value and, like JPMorgan Chase, has been firing on all cylinders of late.
BofA has delivered substantive cost cuts by closing physical branches and focusing on digital banking. The company has also raised its quarterly payout back to $0.18 per quarter from the $0.01 per share it was paying out as recently as 2014. Bank of America has plans to return up to $37 billion to investors through dividends and buybacks over the course of the next year (as of late June 2019).
Image source: Getty Images.
7. US Bancorp
I know... shocker! Buffett bought more bank stocks. US Bancorp (NYSE: USB) has been a particularly sweet long-term holding for the Oracle of Omaha, given that it largely avoided the risky derivatives and toxic investments that sacked major money-center banks during the Great Recession. This is why US Bancorp's return on assets has consistently outpaced the industry over the past decade. This is a bank that's not doing anything fancy but still manages to grow average total loans and deposits by a low-to-mid single-digit percentage year after year.
8. RH
Another head-turner was the initiation of a position in RH (NYSE: RH), formerly Restoration Hardware, during the third quarter. What's unique about this purchase is that Buffett traditionally buys stakes in large, brand-name businesses with huge reach -- and RH doesn't fit the mold. This is a company selling higher-priced and oversized furniture and is primarily doing so by spurning online sales in favor of large paper catalogs.
Investors certainly can't argue with the results, as RH saw adjusted net sales grow 6% in the third quarter, with year-to-date free cash flow rocketing to $234 million from just $19 million last year. Still, with the U.S. economy likely in the later innings of its economic expansion, this purchase is a bit baffling.
9. Occidental Petroleum
Last but not least, Buffett opened a new position in Occidental Petroleum (NYSE: OXY) during the third quarter. Although Buffett doesn't devote a lot of his investments to the oil and gas sector, this move shouldn't be all that surprising. After all, Buffett committed to invest $10 billion in Occidental in late April to help with its acquisition of Anadarko. This investment was a bet on higher long-term oil prices, according to the Oracle of Omaha in an interview with CNBC's Becky Quick.
Now the question is: What will Buffett be buying in 2020?
10 stocks we like better than Bank of America
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Bank of America wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams owns shares of Bank of America. The Motley Fool owns shares of and recommends Amazon, Berkshire Hathaway (B shares), and Delta Air Lines. The Motley Fool is short shares of IBM. The Motley Fool recommends RH and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short January 2020 $220 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | 뉴스 | 1,793 |
Zihan1004/FNSPID | Validea Motley Fool Strategy Daily Upgrade Report - 1/1/2020
The following are today's upgrades for Validea's Small-Cap Growth Investor model based on the published strategy of Motley Fool. This strategy looks for small cap growth stocks with solid fundamentals and strong price performance.
TIMBERLAND BANCORP, INC. (TSBK) is a small-cap value stock in the Regional Banks industry. The rating according to our strategy based on Motley Fool changed from 59% to 85% based on the firm’s underlying fundamentals and the stock’s valuation. A score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest.
Company Description: Timberland Bancorp, Inc. is the holding company for Timberland Savings Bank, SSB (the Bank). The Bank is a community-oriented bank, which offers a range of savings products to its retail customers while concentrating its lending activities on real estate mortgage loans and commercial business loans. The Bank offers personal banking solutions, business solutions, lending solutions and additional services. The Bank's principal lending activity consists of the origination of loans secured by first mortgages on owner-occupied, one- to four-family residences, or by commercial real estate and loans for the construction of one- to four-family residences. The Bank offers consumer loans and commercial business loans. The Bank originates both fixed-rate loans and adjustable-rate loans. The Bank also offers adjustable-rate mortgage loans. It originates three types of residential construction loans: custom construction loans, owner/builder construction loans and speculative construction loans.
The following table summarizes whether the stock meets each of this strategy's tests. Not all criteria in the below table receive equal weighting or are independent, but the table provides a brief overview of the strong and weak points of the security in the context of the strategy's criteria.
PROFIT MARGIN: PASS
RELATIVE STRENGTH: FAIL
COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: PASS
INSIDER HOLDINGS: PASS
CASH FLOW FROM OPERATIONS: PASS
PROFIT MARGIN CONSISTENCY: PASS
R&D AS A PERCENTAGE OF SALES: NEUTRAL
CASH AND CASH EQUIVALENTS: PASS
"THE FOOL RATIO" (P/E TO GROWTH): PASS
AVERAGE SHARES OUTSTANDING: PASS
SALES: PASS
DAILY DOLLAR VOLUME: FAIL
PRICE: PASS
INCOME TAX PERCENTAGE: FAIL
For a full detailed analysis using NASDAQ's Guru Analysis tool, click here
Since its inception, Validea's strategy based on Motley Fool has returned 570.24% vs. 225.00% for the S&P 500. For more details on this strategy, click here
About Motley Fool: Brothers David and Tom Gardner often wear funny hats in public appearances, but they're hardly fools -- at least not the kind whose advice you should readily dismiss. The Gardners are the founders of the popular Motley Fool web site, which offers frank and often irreverent commentary on investing, the stock market, and personal finance. The Gardners' "Fool" really is a multi-media endeavor, offering not only its web content but also several books written by the brothers, a weekly syndicated newspaper column, and subscription newsletter services.
About Validea: Validea is aninvestment researchservice that follows the published strategies of investment legends. Validea offers both stock analysis and model portfolios based on gurus who have outperformed the market over the long-term, including Warren Buffett, Benjamin Graham, Peter Lynch and Martin Zweig. For more information about Validea, click here
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | 뉴스 | 805 |
Zihan1004/FNSPID | 3 Best U.S. Marijuana Stocks of 2019: Are They Buys Now?
Don't think for a second that just because many marijuana stocks performed miserably in 2019 that there weren't any big winners. One key to finding those winners is to focus on U.S.-based stocks rather than on the stocks of Canadian cannabis producers.
The three best U.S. marijuana stocks of 2019 delivered gains of 45% or more. Here's which stocks ranked at the top -- and whether they're smart picks to buy now.
Image source: Getty Images.
1. Scotts Miracle-Gro
Scotts Miracle-Gro (NYSE: SMG) went from falling nearly 43% in 2018 to becoming the best-performing U.S. marijuana stock of 2019 with an impressive gain of over 70%. The company achieved this remarkable turnaround the old-fashioned way by posting strong revenue and earnings growth.
Credit the booming U.S. cannabis industry for much of Scotts' tremendous performance this year. The company's Hawthorne Gardening subsidiary drove much of Scotts' revenue growth, with California's legal recreational marijuana market improving significantly and emerging cannabis markets in Florida, Ohio, Michigan, and Massachusetts picking up momentum.
However, Scotts Miracle-Gro's core U.S. consumer lawn and garden products business was also solid in 2019. In his comments about the company's overwhelmingly positive fiscal second-quarter results in May, CEO Scott Hagedorn said that "consumers came flying out of the gate compared with last year to get a head start on the lawn and garden season." They kept coming through that gate throughout the year, generating what Hagedorn referred to in November as "the strongest growth we've seen this decade."
2. Innovative Industrial Properties
Innovative Industrial Properties (NYSE: IIPR) was a big winner in 2018 with a gain of 40% and delivered an even better performance in 2019, with its shares soaring close to 70%. The cannabis-focused real estate investment trust (REIT) achieved this huge gain by sticking with its strategy of reinvesting capital into additional medical cannabis properties to lease to customers.
The company started out 2019 with only 11 properties in nine states. By the end of the year, that number was up to 46 properties in 14 states. All of the properties are leased for a weighted average of more than 15 years.
Investors were no doubt attracted to IIP's tremendous growth, with trailing 12-month revenue and earnings more than doubling in 2019. They were also almost certainly drawn to the stock's dividend, which currently yields nearly 5.5%.
3. Trulieve Cannabis
While Scotts Miracle-Gro and Innovative Industrial Properties are ancillary providers to the cannabis industry, one pure-play stock also ranked among the top three U.S. marijuana stocks of 2019 -- Trulieve Cannabis (OTC: TCNNF). Trulieve's shares jumped more than 45% higher, fueled by rapid growth in Florida's medical cannabis market.
Trulieve operated 23 medical cannabis dispensaries in Florida at the beginning of 2019. The company announced the opening of its 42nd dispensary in the state in December, only a few days after becoming the first medical cannabis license holder to top 40 retail locations. This retail expansion drove Trulieve's revenue and earnings significantly higher throughout last year.
There's no question that Trulieve reigns as the leader in Florida. The company claims a market share of close to 50% of medical cannabis flower sales. Trulieve is also expanding beyond Florida, with additional operations in California, Connecticut, and Massachusetts.
Are they buys now?
I think that the short answer to this question is "yes." All three of these top-performing U.S. marijuana stocks of 2019 can still deliver market-beating returns in the future, in my opinion.
Scotts Miracle-Gro should continue to reap the rewards from its string of acquisitions that have made Hawthorne the top gardening products supplier to the U.S. cannabis industry as the cannabis markets in multiple states mature. I also look for the company's consumer lawn and garden products business to continue growing in 2020 with the launches of new products on the way.
Expect Trulieve's growth trajectory to slow with fewer new stores opening in Florida. However, the stock could nonetheless perform well in 2020 as the overall market in Florida grows and as Trulieve builds its operations in other states.
My favorite of these three U.S. stocks, though, is Innovative Industrial Properties. I think that IIP will be able to repeat its successes achieved in 2019 by investing in more medical cannabis properties. And with its fantastic dividend, my view is that IIP ranks as one of the top marijuana stocks to buy for 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | 뉴스 | 1,256 |
Zihan1004/FNSPID | Breakingviews - A health craze for 2020: Chinese medicine
Reuters
Reuters
HONG KONG (Reuters Breakingviews) - Move over, connected exercise bikes. There’s a new, more serious healthcare fad for investors: Chinese drugs. U.S. regulators in November approved the first-ever cancer therapy from the People's Republic. For global pharmaceutical companies, a made-in-China blockbuster drug may be within reach.
The world's most populous country is aging quickly. Despite overwhelming demand for treatments against cancer, diabetes, and cardiovascular disease, Chinese drugmakers have produced few innovative medicines so far. But there’s a new breed of biotechnology upstarts inspired by friendly policies, government research incentives, and the prospect of grabbing a slice of the world’s second-largest drugs market, at $137 billion in 2018 according to healthcare analytics group IQVIA.
Leading the charge is BeiGene. The Beijing-based company, valued at $12 billion as of early December, focuses on oncology treatments. China now accounts for more than a fifth of new cancer cases, according to the International Agency for Research on Cancer. And BeiGene's co-founders, John Oyler and Xiaodong Wang, have global ambitions. In November its lymphoma treatment won an accelerated approval from the U.S. Food and Drug Administration – a first for a Chinese company.
More such breakthroughs are probably on the way. One reason is the country's 2017 entry into the International Council for Harmonisation, which sets standards for developing new drugs. For China, a key benefit of adopting ICH guidelines is that other members of the coalition, including American and European regulators, will more readily accept local clinical trial results. BeiGene's landmark U.S. approval was also the first to be based partly on data from Chinese patients.
Big Pharma is noticing. Just weeks before the United States approved BeiGene's cancer drug, biotechnology giant Amgen splashed out $2.7 billion for a 20.5% stake in the company. The same month, AstraZeneca unveiled plans to partner with investment bank China International Capital Corp to launch a $1 billion healthcare fund in the country. These big-name endorsements will attract other potential investors.
Unfortunately, as with many health crazes, this one comes with small-print warnings. Most Chinese biotech firms don't have a long record, so it’s difficult to tell good from bad. BeiGene itself was subject to a short-seller attack earlier in 2019. Moreover, clinical trials in developing countries have often been plagued with fraud and other issues. Some unexpected side-effects are inevitable.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | 뉴스 | 568 |
Zihan1004/FNSPID | The Best Marijuana Stocks to Buy in 2020
Last year was supposed to be when marijuana stocks proved their worth, transcending from speculative investments to worthwhile long-term holds. However, this didn't even come close to happening.
Following a first quarter that saw more than a dozen pot stocks gallop higher by at least 70%, the industry entered a precipitous decline for the remaining nine months of the year. When the curtain closed, the vast majority of cannabis stocks ended the year lower by a double-digit percentage.
Image source: Getty Images.
In a year when a lot could have gone right, the reality is that very little did. Canada continues to struggle mightily with supply issues caused by an inadequate number of open marijuana dispensaries in Ontario. Additionally, regulatory agency Health Canada's inability to review and process licensing applications in a timely manner has led to significant delays in bringing product to market. Meanwhile, select U.S. states with recreationally legal pot have been taxing the daylights out of cannabis consumers. The collective end result being that black market marijuana thrived in North America, while most marijuana investments seemed to go up in smoke.
While many of these issues won't be resolved overnight, the expectation is that a more cost-focused cannabis industry will take the necessary steps forward in 2020, leading to a much better year.
But there are a handful of marijuana stocks that I don't believe will simply tread water or be part of the status quo in 2020. Rather, I see the following companies as the best pot stocks investors can buy in 2020. They're far from being brand-name companies, but they have the differentiating factors needed to stand out in what should still be a high-growth industry over the long run.
Image source: Getty Images.
OrganiGram Holdings
Canadian growers were certainly given the opportunity to be industry leaders, but a combination of regulatory issues and overzealous spending has made that nothing more than a pipe dream...except when discussing OrganiGram Holdings (NASDAQ: OGI).
OrganiGram is unique in a number of ways relative to its peers. For one, it's the only major grower (i.e., a cultivator that has peak production potential of at least 100,000 kilos per year) located in an Atlantic province. Being based in New Brunswick, OrganiGram has the natural ability to gobble up market share in Canada's eastern provinces. While less populated, these regions are known for cannabis-use rates that are higher than the national average. It's also worth mentioning that OrganiGram is one of five growers that have forged supply deals with every Canadian province, so it's certainly not stuck just servicing these less-populated markets.
Another factor that really stands out with OrganiGram is the company's production efficiency. According to its management team, it is capable of 113,000 kilos of peak yearly output, yet is working with less than 500,000 square feet of cultivating space. The secret is that it uses a three-tiered growing system in its licensed rooms, thereby pushing its projected yield per square foot to around 230 grams. Comparatively, this yield is about double that of its peers, and it should mean substantially higher margins.
But perhaps the most important thing to remember about OrganiGram is that it's the only Canadian grower to have produced a no-nonsense profit. In the fiscal third quarter, net sales of cannabis outpaced costs of goods and operating expenses by 1.17 million Canadian dollars ($895,000). Sure, it wasn't a huge operating profit, but it's the first real operating profit we've seen in the industry, without the aid of fair-value adjustments or other one-time benefits. This is a well-run company with the tools to outperform in 2020 as derivative sales pick up.
Image source: Getty Images.
Innovative Industrial Properties
It may not be a household name, but cannabis real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR) was one of the few bright spots for the marijuana investment world in 2019. That's a trend I'd expect to continue in 2020.
The basis for IIP's business model is pretty simple. The company acquires assets for growing and processing medical marijuana, then leases these properties out for an extended period of time (often 10 to 20 years), thereby reaping the rewards of rental income. Furthermore, it passes along annual rental increases to its tenants, allowing it to stay ahead of the inflationary curve, and charges a 1.5% property management fee that's based on the current rental rate. In other words, although IIP primarily grows by making acquisitions (the hallmark of most REITs), it does have a modest organic growth factor built in.
In 2019, Innovative Industrial Properties wound up nearly quadrupling its portfolio from 11 assets owned to 42 properties in 13 states. More important, IIP provides updates to its metrics following every acquisition. As of now, the company's weighted-average remaining lease is 15.5 years, and its average return on invested capital is a healthy 13.6%. Put in another context, Innovative Industrial Properties should see a complete payback on its $431.2 million in invested capital in just over five years, which means plenty of cash flow and cost predictability in an environment where little predictability now exists.
Also, this is the only pure-play cannabis stock that pays investors a dividend -- and a fat one at that! Having recently announced a fourth-quarter payout of $1 per share, IIP is now yielding 5.6%. What's more, the $1 payout is 567% higher than what the company was dishing out to shareholders just nine quarters ago. This fast-growing company is perfect for growth and income seekers alike.
Image source: Getty Images.
MediPharm Labs
Ancillary companies will continue to play a key role in the long-term development of the pot industry, but many are contending with the same supply or tax issues hurting direct players. That, however, is unlikely to be the case for extraction-service provider MediPharm Labs (OTC: MEDIF).
Extraction companies find themselves at the center of the hottest trend in the industry: the manufacture of derivative products. Derivatives (like edibles, vapes, concentrates, infused beverages, tinctures, and topicals) were launched in Canada about two weeks ago. They're a considerably higher-margin product than traditional dried cannabis, meaning it's not a matter of whether growers devote time and effort to creating derivatives, but a question of how much capacity and capital is allotted to make these high-margin products.
This is where MediPharm Labs comes into play. It takes hemp and cannabis biomass and processes it for the resins, distillates, concentrates, and targeted cannabinoids that growers use to make derivatives. MediPharm's fee-based contracts to perform these services are often 18 months or longer, meaning that, like IIP above, the company can deliver relatively predictable cash flow every single quarter. And with the company working on expanding its processing capacity to 500,000 kilos per year, the ceiling for sales and profitability continues to be raised.
Speaking of profits, MediPharm has delivered two consecutive quarters of no-nonsense operating profits despite the fact that it only began operations in November 2018. Mind you, these profits were achieved before derivatives even hit Canadian shelves. Now that we're actually seeing these products make their way to market, MediPharm's business, and its ability to secure processing contracts, should really heat up. This should make it one of the best marijuana stocks to buy in 2020.
The Planet 13 SuperStore in Las Vegas. Image source: Planet 13.
Planet 13 Holdings
Last, but not least, I'm a big fan of vertically integrated multistate operator (MSO) Planet 13 Holdings (OTC: PLNHF) in 2020 and feel you should be, too. While there are plenty of other, larger MSOs to choose from, none offers the differentiation of Planet 13.
The company's flagship store is just west of the Las Vegas Strip. When complete, the SuperStore will span 112,000 square feet (that's bigger than the average Walmart by 7,000 square feet) and will house a pizzeria, coffee shop, events stage, consumer-facing processing center, and the broadest selection of cannabis products a consumer could find. In essence, Planet 13 not only wants repeat cannabis users, but it's also quickly becoming a go-to destination for anyone fascinated by cannabis culture.
Having visited the SuperStore, I can say that Planet 13 has done a lot right. It has heavily incorporated technology into the buying experience, with self-pay kiosks interspersed throughout the store, and has the perfect, engaging layout. This is to say that the company's highest-margin product is nearest the registers and entrance, while the dozens upon dozens of various dried cannabis strains are toward the back of the store. A centrally located immersion station, as well as personal budtenders, also help make the experience unique.
Best of all, you get plenty of transparency with Planet 13. Every month since opening in November 2018, the company has provided customer traffic data, including numbers for visitors, paying customers, average ticket size, and the percentage of sales the SuperStore is doing in relation to all of Nevada. With expansionary spending on the SuperStore nearing an end, and the company focused on opening a second location in Santa Ana, California, in 2020, my expectation is that Planet 13 will push into profitability before year's end. That makes it one heck of a value in the marijuana space.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Innovative Industrial Properties and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | 뉴스 | 2,287 |
Zihan1004/FNSPID | Validea James P. O'Shaughnessy Strategy Daily Upgrade Report - 1/1/2020
The following are today's upgrades for Validea's Growth/Value Investor model based on the published strategy of James P. O'Shaughnessy. This two strategy approach offers a large-cap value model and a growth approach that looks for persistent earnings growth and strong relative strength.
UNILEVER PLC (ADR) (UL) is a large-cap value stock in the Personal & Household Prods. industry. The rating according to our strategy based on James P. O'Shaughnessy changed from 80% to 100% based on the firm’s underlying fundamentals and the stock’s valuation. A score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest.
Company Description: Unilever PLC is a fast-moving consumer goods (FMCG) company. The Company's segments include Personal Care, which primarily includes sales of skin care and hair care products, deodorants and oral care products; Foods, which primarily includes sales of soups, bouillons, sauces, snacks, mayonnaise, salad dressings and margarines; Home Care, which primarily includes sales of home care products, such as powders, liquids and capsules, soap bars and a range of cleaning products, and Refreshment, which primarily includes sales of ice cream and tea-based beverages. The Company's geographical segments include Asia/AMET/RUB, The Americas and Europe. Its brands include Axe, Dirt is Good (Omo), Dove, Hellmann's, Knorr, Lipton, Lux, Magnum, Rexona, Sunsilk and Surf. The Company operates in more than 100 countries, selling its products in more than 190 countries. The Company operates approximately 310 factories in over 70 countries.
The following table summarizes whether the stock meets each of this strategy's tests. Not all criteria in the below table receive equal weighting or are independent, but the table provides a brief overview of the strong and weak points of the security in the context of the strategy's criteria.
MARKET CAP: PASS
CASH FLOW PER SHARE: PASS
SHARES OUTSTANDING: PASS
TRAILING 12 MONTH SALES: PASS
DIVIDEND: PASS
For a full detailed analysis using NASDAQ's Guru Analysis tool, click here
Since its inception, Validea's strategy based on James P. O'Shaughnessy has returned 310.72% vs. 225.00% for the S&P 500. For more details on this strategy, click here
About James P. O'Shaughnessy: Research guru and money manager James O'Shaughnessy forced many professional and amateur investors alike to rethink their investment beliefs when he published his 1996 bestseller, What Works on Wall Street. O'Shaughnessy back-tested 44 years ofstock market datafrom the comprehensive Standard & Poor's Compustat database to find out which quantitative strategies have worked over the years and which haven't. To the surprise of many, he concluded that price/earnings ratios aren't the best indicator of a stock's value, and that small-company stocks, contrary to popular wisdom, don't as a group have an edge on large-company stocks. Today O'Shaughnessy is the Chief Investment Officer of O'Shaughnessy Asset Management.
About Validea: Validea is aninvestment researchservice that follows the published strategies of investment legends. Validea offers both stock analysis and model portfolios based on gurus who have outperformed the market over the long-term, including Warren Buffett, Benjamin Graham, Peter Lynch and Martin Zweig. For more information about Validea, click here
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | 뉴스 | 832 |
Zihan1004/FNSPID | 3 Ways to Prepare Your Stock Portfolio for a Recession
Since the Great Recession enveloped the global economy back in 2008-09 related to a crisis with sub-prime mortgages, there has not been any real indication of a similar crippling economic downturn returning for over a decade now. But that doesn't mean a recession couldn't return.
And while no one should expect to invest with the looming fear of an impending recession, it's always good to position your portfolio to be ready for one. The key is not to over-prepare, but instead to ensure the portfolio is continually reviewed and positioned in case of unforeseen circumstances. Investors can view these practices as a form of insurance for their portfolios.
Here are three effective ways to prepare your investment portfolio for a recession.
Image Source: Getty Images
1. Buy growing companies with a strong competitive moat
Investors need to remember that investing is a marathon and not a sprint. Great companies need years or even decades to build their business, and the investor who remains vested with such companies will benefit from the "magic" of compounding interest. Companies with a track record of growth and strong competitive moats offer peace of mind to the investor, as recessions and downturns have only a limited effect on their long-term growth.
By buying companies that are the leaders in their fields, such as Starbucks (NASDAQ: SBUX), Apple (NASDAQ: AAPL), and Nike (NYSE: NKE), investors can enjoy a double benefit. Being the leaders in their respective industries, these companies have plans in place to continue to grow and innovate. They also have the resources and balance sheet strength to cope with any protracted downturn.
Apple, for example, has total cash and marketable securities of close to $245 billion, giving the company ample firepower to weather any downturn and also funds available to swoop in to purchase a distressed company it thinks could help it. Apple also has recurring revenue through its various services that is somewhat recession-resistant. Starbucks has a whopping 31,256 stores located around the world and it provides a product (caffeine) and services that many would continue to seek out, even in recessionary times. Nike has nearly $3.6 billion in cash on hand and continues to command a leading market share in the sports footwear and apparel industry. Its recent direct-to-consumer initiatives should help it weather any potential downturns in purchases that might occur at retail partners during a recession.
2. Ensure you have ample cash on hand
The second way to stay prepared as an investor is to always have available cash for deployment into the stock market. As investors will not know when a crash or recession will be coming, it's always useful to keep some cash set aside, rather than putting it all into the stock market. Should stock prices for companies you want to invest in suddenly become much more affordable (for whatever reason), investors will want to ensure they are able to take advantage. This can help average down the cost of their existing positions in a stock or initiate new positions at bargain prices for a stock on a wish list.
There is no universal agreement on the amount of cash to set aside for such potential portfolio injections, but a general rule of thumb is to have around 10% to 20% cash (as a proportion of your total portfolio value) on standby. Investors should also take note: do not eagerly pump all your cash in at the first signs of a potential recession. The average length of a U.S. recession historically has been around 22 months. Take your time to slowly allocate capital as share prices decline, all the while ensuring that the cash does not run out and that you don't need some of that cash for other non-investing reasons.
3. Rely on cash flow from dividends
Some portion of your portfolio should be invested in dividend-yielding stocks. Receiving regular dividends will help ensure you have a constant stream of passive income that adds to your cash stash. Dividend stocks provide a steady stream of (mostly) reliable cash flow for investors on a regular basis.
Though companies may reduce their dividend payments during tough times, very few companies will completely eliminate their dividends unless the business is facing major headwinds. This goes back to the first point about purchasing companies with a growing footprint and a strong moat. These are attributes that enable a company to withstand a downturn and maintain a dividend payout.
Investors may also consider real estate investment trusts (REIT) such as American Tower (NYSE: AMT) or Digital Realty Trust (NYSE: DLR), as these businesses own large portfolios of real estate that generate steady, dependable rental income that the companies are required by law to (mostly) pass through to their investors. Because American Tower locks in property leases for long periods, this provides cash flow stability in good times and bad and that helps the company weather downturns and continue to pay out a dividend. These entities offer an even stronger assurance that dividends will continue to be paid because they work with clients they feel have the financial strength to continue paying for the duration of the lease even in a downturn.
Another category of steady dividend payers is the business development company (BDC). BDCs focus on lending to middle-market companies in defensive industries (i.e., industries that are far less likely to be adversely affected by a recession) and receive steady cash flow from interest charges to such businesses. The BDC then returns that income to investors through an often high-yielding dividend. An example of a BDC is New Mountain Finance Corp. (NYSE: NMFC).
The current dividend yield of New Mountain Finance Corp is close to 10%, and the dividend is paid quarterly. The company has been paying out this level of dividends since at least 2014, while sometimes also throwing in a special dividend of $0.12 per share to boot. Management is adept at selecting less-risky middle-market companies to lend money to, as default risk is the biggest blow to cash flows for BDC. The fact that is can continue to maintain dividends at such consistent levels for so many years speaks volumes about the company's risk management policies.
Do not fear a recession
Recessions are a normal feature of a properly functioning economy, and though they may sound fearful and terrible, investors who have positioned their portfolios well and in accordance with the three points above should not be unduly worried. In fact, recessions may throw up juicy, once-in-a-lifetime opportunities to own great companies at marked-down valuations.
Find out why Apple is one of the 10 best stocks to buy now
Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
Tom and David just revealed their ten top stock picks for investors to buy right now. Apple is on the list -- but there are nine others you may be overlooking.
Click here to get access to the full list!
*Stock Advisor returns as of December 1, 2019
Royston Yang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends American Tower, Apple, Nike, and Starbucks. The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | Validea John Neff Strategy Daily Upgrade Report - 1/1/2020
The following are today's upgrades for Validea's Low PE Investor model based on the published strategy of John Neff. This strategy looks for firms with persistent earnings growth that trade at a discount relative to their earnings growth and dividend yield.
T. ROWE PRICE GROUP INC (TROW) is a large-cap growth stock in the Investment Services industry. The rating according to our strategy based on John Neff changed from 60% to 79% based on the firm’s underlying fundamentals and the stock’s valuation. A score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest.
Company Description: T. Rowe Price Group, Inc. is a financial services holding company. The Company provides global investment management services through its subsidiaries to investors across the world. The Company provides an array of Company sponsored the United States mutual funds, other sponsored pooled investment vehicles, sub advisory services, separate account management, recordkeeping, and related services to individuals, advisors, institutions, financial intermediaries and retirement plan sponsors. The Company distributes its products in countries located within three geographical regions: North America, Europe Middle East and Africa (EMEA), and Asia Pacific (APAC). It also offers specialized advisory services, including management of stable value investment contracts and a distribution management service for the disposition of equity securities its clients receive from third-party venture capital investment pools. As of December 31, 2016, it serviced clients in 45 countries across the world.
The following table summarizes whether the stock meets each of this strategy's tests. Not all criteria in the below table receive equal weighting or are independent, but the table provides a brief overview of the strong and weak points of the security in the context of the strategy's criteria.
P/E RATIO: FAIL
EPS GROWTH: PASS
FUTURE EPS GROWTH: PASS
SALES GROWTH: PASS
TOTAL RETURN/PE: PASS
FREE CASH FLOW: PASS
EPS PERSISTENCE: FAIL
For a full detailed analysis using NASDAQ's Guru Analysis tool, click here
FULTON FINANCIAL CORP (FULT) is a mid-cap value stock in the Regional Banks industry. The rating according to our strategy based on John Neff changed from 62% to 81% based on the firm’s underlying fundamentals and the stock’s valuation. A score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest.
Company Description: Fulton Financial Corporation is a financial holding company. The Company is the bank holding company of Fulton Bank N.A. (the Bank). As of December 31, 2016, the Company's six subsidiary banks were located primarily in suburban or semi-rural geographic markets throughout a five-state region (Pennsylvania, Delaware, Maryland, New Jersey and Virginia). Each of the Company's subsidiary banks offers a range of consumer and commercial banking products and services in its local market area. Personal banking services include various checking account and savings deposit products, certificates of deposit and individual retirement accounts. The subsidiary banks offer a range of consumer lending products to creditworthy customers in their market areas. Commercial banking services are provided to small and medium sized businesses. It also offers investment management, trust, brokerage, insurance and investment advisory services to consumer and commercial banking customers in its market areas.
The following table summarizes whether the stock meets each of this strategy's tests. Not all criteria in the below table receive equal weighting or are independent, but the table provides a brief overview of the strong and weak points of the security in the context of the strategy's criteria.
P/E RATIO: PASS
EPS GROWTH: PASS
FUTURE EPS GROWTH: PASS
SALES GROWTH: PASS
TOTAL RETURN/PE: FAIL
FREE CASH FLOW: PASS
EPS PERSISTENCE: PASS
For a full detailed analysis using NASDAQ's Guru Analysis tool, click here
INGLES MARKETS, INCORPORATED (IMKTA) is a small-cap value stock in the Retail (Grocery) industry. The rating according to our strategy based on John Neff changed from 62% to 81% based on the firm’s underlying fundamentals and the stock’s valuation. A score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest.
Company Description: Ingles Markets, Incorporated (Ingles) is a supermarket chain in the southeast United States. The Company's segments include retail grocery and other. Its other segment consists of fluid dairy operations and shopping center rentals. As of September 24, 2016, the Company operated 201 supermarkets in Georgia, North Carolina, South Carolina, Tennessee, Virginia and Alabama. The Company locates its supermarkets primarily in suburban areas, small towns and rural communities. Ingles supermarkets offer customers a range of food products, including grocery, meat and dairy products, produce, frozen foods and other perishables and non-food products. Its non-food products include fuel centers, pharmacies, health and beauty care products and general merchandise. The Company focuses on selling products to its customers through the development of organic products, bakery departments and prepared foods, including delicatessen sections.
The following table summarizes whether the stock meets each of this strategy's tests. Not all criteria in the below table receive equal weighting or are independent, but the table provides a brief overview of the strong and weak points of the security in the context of the strategy's criteria.
P/E RATIO: PASS
EPS GROWTH: PASS
FUTURE EPS GROWTH: PASS
SALES GROWTH: FAIL
TOTAL RETURN/PE: PASS
FREE CASH FLOW: PASS
EPS PERSISTENCE: PASS
For a full detailed analysis using NASDAQ's Guru Analysis tool, click here
Since its inception, Validea's strategy based on John Neff has returned 333.14% vs. 191.46% for the S&P 500. For more details on this strategy, click here
About John Neff: While known as the manager with whom many top managers entrusted their own money, Neff was far from the smooth-talking, high-profile Wall Streeter you might expect. He was mild-mannered and low-key, and the same might be said of the Windsor Fund that he managed for more than three decades. In fact, Neff himself described the fund as "relatively prosaic, dull, [and] conservative." There was nothing dull about his results, however. From 1964 to 1995, Neff guided Windsor to a 13.7 percent average annual return, easily outpacing the S&P 500's 10.6 percent return during that time. That 3.1 percentage point difference is huge over time -- a $10,000 investment in Windsor (with dividends reinvested) at the start of Neff's tenure would have ended up as more than $564,000 by the time he retired, more than twice what the same investment in the S&P would have yielded (about $233,000). Considering the length of his tenure, that track record may be the best ever for a manager of such a large fund.
About Validea: Validea is aninvestment researchservice that follows the published strategies of investment legends. Validea offers both stock analysis and model portfolios based on gurus who have outperformed the market over the long-term, including Warren Buffett, Benjamin Graham, Peter Lynch and Martin Zweig. For more information about Validea, click here
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Zihan1004/FNSPID | Better Buy: Trulieve vs. Curaleaf
Curaleaf Holdings (OTC: CURLF) and Trulieve Cannabis (OTC: TCNNF) have been taking two very different approaches to expanding their cannabis businesses. Curaleaf's been focusing on expanding rapidly, while Trulieve has chosen a steadier approach. Their share prices are also going in opposite directions of late:
CURLF data by YCharts
By comparison, the Horizons Marijuana Life Sciences ETF has fallen 35% over the same period.
Both Curaleaf and Trulieve are among the most successful multistate operators in the country, but knowing which one to invest in today involves a closer look at their strategies. Let's separate these two cannabis stocks and assess which one is the better buy heading into 2020.
Curaleaf's pending acquisitions could propel it atop the industry
Curaleaf has been aggressive when it comes to acquisitions. It's taken a page out of Canopy Growth's book in not shying away from making big moves. In May, Curaleaf announced it was acquiring cannabis oil producer Cura Partners, which owns the popular Select brand, in an all-stock deal worth $948.8 million at the time of the announcement. However, as a result of worsening market conditions in the cannabis industry, the deal has since been adjusted, and it's now worth around $309 million, with the possibility of that rising if certain targets are met.
Image Source: Getty Images.
The acquisition will give Curaleaf a significant presence on the West Coast; at the time of the announcement, Select's products were sold in more than 900 retailers across the West Coast, including in California. Currently, Curaleaf has operations in 12 states with 50 dispensaries and 14 cultivation sites.
However, the company didn't stop there. Curaleaf made another big splash in July by announcing it would acquire Grassroots in a cash-and-stock deal worth $875 million. It's a strategic move for Curaleaf as the deal gives it access to new markets including Illinois and Oklahoma. It would give Curaleaf a presence in 19 states across the country. Curaleaf says the deal would make it "the world's largest cannabis company by revenue."
And that could indeed be true. In November, Curaleaf released its third-quarter 2019 earnings, which identified pro forma revenue totaling $129 million. Pro forma is essentially a what-if scenario, as it includes revenue from closed and pending acquisitions. For comparison's sake, Canopy Growth's sales totaled just $77 million Canadian dollars in its most recent quarter.
Has Trulieve focused too much on Florida?
On Dec. 18, Trulieve opened its 42nd dispensary in Florida as it continues expanding its operations in the state. However, there are more than 30 other states that have legalized medical marijuana; it's hard not to wonder if Trulieve has been too passive in its strategy.
The company did announce multiple acquisitions in the past year to expand into new markets, including Connecticut, California, and Massachusetts. But a presence in just four states still puts Trulieve well behind Curaleaf and other multistate operators in the country.
However, it's hard to argue with good results, which is what Trulieve's produced in recent quarters. In November, the company released its Q3 earnings; Trulieve posted a profit of $60 million. The cannabis producer has recorded a profit in each of its past four quarters. Even the company's operating income is consistently in the black.
And with revenue totaling $209 million over the trailing 12 months, the company has been doing just fine in Florida. With a strong business model that's focused on selling to one of the hottest markets in the country and then slowly expanding outward, an argument could be made that it doesn't need to rapidly expand the way Curaleaf has. Many cannabis companies are bleeding cash and recording mounting losses, and Trulieve is growing at a much more sustainable rate, one that won't incur as many expenses compared to if its expansion were rapid. That's allowed Trulieve to better control its costs, enabling it to record strong margins and profits, which is a rarity in the industry and that's why the stock stands out from its peers.
Why Trulieve is the better stock to buy today
An overly aggressive growth strategy can be a quick way for a company to spread itself thin, accumulate costs, and burn through cash. That's why, for all the potential and market-share opportunities that exist for Curaleaf, there are also some very big risks. It may have operations in more states than Trulieve, but with marijuana still illegal at the federal level, Curaleaf is not able to benefit from synergies across those locations and even transport marijuana products across state lines.
And that's why a rapid growth strategy may not be worth all the expenses and cash burn that will come with it. The simpler the business model, the easier it is to control. Trulieve is profitable, it's growing, and there's nothing wrong with the business to suggest that it needs to expand. Marijuana legalization may not happen in the U.S. for years, and expanding too early may do more harm than good.
There's still plenty of time for Trulieve to expand into more markets. It's a great marijuana stock to buy for both the short and long term.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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Zihan1004/FNSPID | Manufacturing Sector PMIs Put the EUR, GBP and Dollar in Focus
FXEmpire.com -
Earlier in the Day:
It was a relatively quiet day on the Asian economic calendar in the earlier hours of this morning.
China’s Caixin manufacturing sector PMI figures were in focus in the early part of the day.
Outside of the numbers, market risk sentiment towards the U.S – China phase 1 trade agreement also provided direction.
Out of China
The Manufacturing PMI fell from 51.8 to 51.5 in December. Economists had forecast a manufacturing PMI of 51.8.
According to the Markit Survey,
While output continued to rise at the end of the year, new order growth fell to a 3-month low. Export sales saw marginal growth.
Confidence in the 12-month business outlook also remained relatively weak.
While hiring stagnated in December, firms expanded purchasing activity and increased inventories.
In December, selling prices increased for the first time in 6-months.
The Aussie Dollar moved from $0.70163 to $0.70157 upon release of the figures. At the time of writing, the Aussie Dollar was flat at $0.7017.
Elsewhere
At the time of writing, the Japanese Yen was up by 0.07% to ¥108.68 against the greenback, with the Kiwi Dollar up by 0.10% to $0.6731.
Volumes remained on the lighter side through the morning, with Japan and New Zealand’s markets closed.
The Day Ahead:
For the EUR
It’s a busy day ahead on the economic calendar. Key stats include Italy and Spain’s December manufacturing PMI numbers. Finalized manufacturing PMIs from France, Germany, and the Eurozone will also need to be watched.
Barring any revision to prelim figures, however, the focus will likely remain on Italy and the Eurozone’s PMIs.
Outside of the numbers, expect any Brexit chatter to also influence. EU member states have just 1-month to deliver their list of demands to the British PM…
At the time of writing, the EUR was up by 0.07% to $1.1220.
For the Pound
It’s a relatively quiet day ahead on the economic calendar, with finalized manufacturing PMI numbers for December in focus. Barring a downward revision, there’s unlikely to be too much influence on the Pound.
While the UK markets reopen, the UK Parliament remains in recess until 5th January. Any chatter on Brexit will influence, however. Britain now has just one month remaining before entering the transition period, which may well end in December.
At the time of writing, the Pound was down by 0.01% to $1.3253.
Across the Pond
It’s also a relatively busy day on the data front. Key stats include December finalized manufacturing PMI numbers.
Barring a deviation from prelim, however, the numbers are unlikely to have a material impact on the Dollar. The focus will be on the ISM numbers due out on Friday.
Outside of the numbers, any chatter on the phase 1 trade agreement and military strikes in the Middle East will also influence.
Over the holidays, Trump set the date for the signing of the phase 1 agreement. The agreement is scheduled to be signed on 15th January in Washington.
The attack on the U.S embassy in Iraq could see tensions between the U.S and Iran rise further, which would also be a test for the global financial markets.
At the time of writing, the Dollar Spot Index was up by 0.02% to 96.461.
For the Loonie
It’s a quiet day on the economic calendar, with no material stats due out of Canada to provide direction.
The lack of stats will leave the Loonie in the hands of sentiment towards trade. While the U.S and China move closer to signing phase 1, the real question is when phase 2 talks will begin. Tariffs remain and could test risk appetite and recent gains in crude oil prices. For now, getting the phase 1 agreement across the line remains key.
Rising tensions in the Middle East, as the U.S deploys more troops, would support the Loonie, however.
The Loonie was up by 0.11% to C$1.2973 against the U.S Dollar, at the time of writing.
This article was originally posted on FX Empire
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Zihan1004/FNSPID | My Top Stock Pick and Biggest Holding for 2020 and Beyond
As a new decade begins, it's a great time for investors to review the stocks in their portfolio. This is especially the case after a year of strong returns for the market. The S&P 500 climbed nearly 30% in 2019, which has left some stocks less attractive -- and others overvalued.
One stock that could help balance out a portfolio after such a bullish run is Telaria (NYSE: TLRA) -- a high-quality company that has largely flown under the radar and is trading at a bargain valuation. The sub-$400 million digital advertising specialist has strong fundamentals and a massive addressable market.
Not only is Telaria my top stock pick for 2020, but I'm also putting my money where my mouth is: The stock is my largest holding by a wide margin.
Image source: Getty Images.
Telaria's business
Following a multiyear transformation process that included hiring a new CEO, the sale of its buy-side ad technology platform so it could focus solely on the supply side, and a move to double down on connected TV (CTV), Telaria has morphed into a leader in one of the fastest-growing areas of advertising: CTV programmatic advertising.
Telaria's trailing-nine-month results reflect its impressive momentum. Revenue over this time frame is up 36% year over year; gross profits climbed 24%; and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) narrowed from a loss of $4.4 million to a loss of $1.7 million. Yet even these figures don't fully appreciate how much Telaria's business has improved since they don't include the important holiday quarter -- a period when TV advertising spend ramps up significantly. Management expects full-year adjusted EBITDA to be between $2 million and $4 million, up from a loss of $400,000 in 2018.
A few other metrics highlight Telaria's sound financials, including its 82% trailing-12-month gross profit margin and its $15 million in free cash flow over that time frame. In addition, it has no debt on its balance sheet and boasts $66 million in cash and cash equivalents.
A powerful catalyst
But even Telaria's rapid revenue growth and improving profitability understate the tech company's momentum. To more clearly understand why its prospects are so strong, investors should take a closer look at its CTV revenue.
CTV revenue soared 115% year over year in Q3, and now represents 44% of the top line. It accounted for 25% of revenue in Q3 2018 and 6% of revenue in Q3 2017. Just over three years ago, the company didn't have any CTV revenue. This growth reflects the leadership position the company has carved out for itself when it comes to helping premium video distributors like Sling, Hulu, Fox News, MLB.tv, and ABC News optimize yield on their programmatic digital video ad inventory.
Despite the rapid growth Telaria has seen already in its CTV business, there's far more upside ahead. Of the more than $70 billion expected to be spent on TV ads in 2019, only around $7 billion is forecast to be spent on CTV -- and likely less than half of this CTV ad spend will be transacted programmatically -- Telaria's bread and butter.
We can expect that linear TV advertising spend will continue to shift to CTV, reflecting content companies' growing investments in streaming services they attempt to compensate for the cord-cutting trend. Total ad spend in CTV is forecast to exceed $10 billion by 2021.
More importantly for Telaria, the portion of CTV ad spend that is programmatic will likely rise much more rapidly than the total. Ad buyers and sellers will increasingly look for the same measurability and optimization they have become familiar with on desktop and mobile platforms. Unsurprisingly, it's already clear that a major shift toward programmatic is happening in CTV advertising. As Telaria VP of Product Marketing Steve Kondonijakos said in a recent blog post on the company's website, "growth of programmatic CTV has already outpaced the growth of programmatic spend on desktop and mobile."
A compelling valuation
Strong fundamentals, a powerful catalyst, and an attractive addressable market are great. But investors can't make an informed decision about an investment without also considering valuation. Fortunately, this may be where Telaria shines the most, particularly when compared to The Trade Desk (NASDAQ: TTD) and Roku (NASDAQ: ROKU) -- two other companies benefiting from the tailwinds of soaring ad spend in connected TV.
Telaria trades at just 6 times sales while The Trade Desk and Roku have price-to-sales ratios of 19 and 16, respectively. Similarly, Telaria's price-to-gross profit ratio of 7 is far lower than The Trade Desk's 25 and Roku's 35.
A game-changing merger
Anyone considering investing in Telaria should also be aware that on Dec. 19, it announced a deal to merge with sell-side ad tech company Rubicon Project (NYSE: RUBI). The result will be the world's largest independent sell-side advertising platform.
The deal, which is subject to shareholder votes, regulatory approval, and other customary closing conditions, is expected to close during the first half of 2020. The agreement stipulates that each Telaria share will be exchanged for 1.082 Rubicon Project shares, giving former Telaria shareholders approximately 47.1% of the combined company.
For the trailing-12-month period ending Sept. 30, the combined company would have reported $217 million in revenue -- a figure that was up 32% year over year. Further, it would have had $150 million in cash and no debt.
By combining, the two companies believe they can accelerate Telaria's CTV business, benefit from $15 to $20 million in annual cost savings, and better serve customers with a single supply-side platform and improved tools for publishers. The merger would also make Rubicon an indispensable partner to buyers, giving platforms like The Trade Desk access to quality, scaled inventory across all channels.
As one analyst recently put it, the combined company can become "the Trade Desk of the buy side."
Risks
Of course, there's always a chance that things may not play out as expected. Further, shares could trade erratically in the short term, even if Telaria's revenue and profitability improve significantly in the coming years. As famed investor Benjamin Graham has said, "In the short run, the market is a voting machine but in the long run, it is a weighing machine."
But there are several business-specific risks Telaria investors should keep an eye on as well.
The first is the company's ability to manage its non-CTV revenue. Though it seems to be doing everything right when it comes to CTV, revenue from desktop and mobile video still represent over half of the top line. Because of headwinds in desktop, Telaria's non-CTV revenue fell from about $10 million in Q3 2018 to $9.3 million in Q3 2019. If the deterioration of this non-CTV business worsens, this could weigh meaningfully on the company's consolidated results.
Fortunately, Telaria's merger with Rubicon could address this problem, as Rubicon is thriving in the channels where Telaria isn't. But this brings us to a second risk: While unlikely, it's always possible that Telaria's merger with Rubicon won't go through. If it fails, Rubicon may begin investing heavily in CTV -- an area where it only has a nascent offering. If Rubicon succeeds in growing its CTV business, the company could take share from Telaria.
Notably, Telaria currently has a major competitive advantage when it comes to competition. Its two biggest sell-side CTV competitors are FreeWheel and SpotX, both of which have compromised value propositions to content publishers since they are owned by cable companies (a content publisher generally doesn't want to partner with a platform that is funding a competing content publisher). But investors will still want to keep an eye on the competitive environment; mergers, spin-offs, and acquisitions could change things quickly.
A bet on programmatic adverting and connected TV
Long story short, I believe Telaria is the market's best avenue for investing in the confluence of two undeniable trends we will see in the new decade: the rise of programmatic advertising and the growth of connected TV.
Investors have aggressively bought up The Trade Desk shares in recent years because they've recognized the compelling economics in buy-side ad tech. But the market hasn't quite figured out who will come out on top on the sell side. Therefore, there's still time to profit from buying Telaria stock before the masses realize the scale of this opportunity.
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Daniel Sparks owns shares of Telaria, Inc. The Motley Fool owns shares of and recommends Netflix, Roku, Telaria, Inc., and The Trade Desk. The Motley Fool has a disclosure policy.
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