This year is on track to be the fourth warmest on record, and the effects are being felt across the globe from Northern Europe to the Pacific Northwest. People are dying of heat exhaustion in Japan, and nuclear reactors are being shut down in France, Germany and Switzerland due to the extreme temperatures.
But where there is excessive heat, there is demand for air conditioning.
For our purposes today, let’s focus on the U.S. In July alone, according to Brandon Miller, meteorologist for CNN International, we broke 41 heat records across the United States and are well on our way to breaking more. California is suffering from the largest wildfire in state history, and we’re seeing record-breaking highs in places like Oregon that aren’t prepared for consecutive weeks of 90-plus-degree weather.
With that in mind, air conditioning supplier Lennox International (NYSE: LII) is having a fantastic year. In the most recent quarter, Lennox posted earnings of $3.67, well beyond the $3.56 that analysts predicted.
Chairman and CEO Tobb Bluedorn announced the following as well:
Revenue and profit hit new highs on strength in both replacement and new construction business. Residential revenue was up 9% at constant currency, and profit rose 9% as segment margin remained at the record 21.5% level.
Lennox is seeing strong numbers out of the commercial sector as well, hitting a new record of $292 million in revenue for the second quarter. Everything is pointing toward record business and growth.
If the average temperature around the world continues to rise the way it has for the last 10 or so years, so will the value of air conditioner suppliers. And Lennox stands to make their shareholders very happy for the foreseeable future.
Benjamin …read more
The correlation between the S&P and industry is traditionally a tight one. Historically, as industrials perform well, the market follows suit.
However, over the past year or so, the S&P has outperformed industrials, due in no small part to the overperformance of tech stocks. This is worrying analysts who fear a market correction will be necessary to return the correlation to traditional levels.
Before we jump to any conclusions, let’s consider Caterpillar (NYSE: CAT), which is one of the major holdings of the Industrial Select Sector SPDR Fund (NYSE: XLI), an $11 billion industrial-themed ETF. In the past, Caterpillar has been a bellwether for future performance of the sector and the market overall.
Based in Deerfield, Illinois, Caterpillar is the world’s largest maker of heavy equipment for mining, construction and energy companies. Last month it beat analysts’ expectations, reporting a second quarter profit that was more than double that of the same quarter last year. And equipment sales were up 25% due to rising demand natural gas, oil and mining companies, as well as Chinese construction companies.
Since 2011, Caterpillar and the global economy as a whole have enjoyed a long run of escalating activity. This most recent earnings announcement brings renewed hope that robust global economic activity will continue through 2019.
It’s also good news for Caterpillar’s business model. Selling to more than 190 countries, the overseas markets account for half of its sales. Despite the looming tariffs that threaten to destabilize material costs, Caterpillar continues to book more orders and deliver higher profits.
The short-term future is bright for Caterpillar. Although the stock is still roughly 30 points below its 52-week high, it’s sitting on a backlog of $17.7 billion in orders, up $200 million from the first quarter. And company executives expect product prices to more than offset looming cost increases.
Hopefully, Caterpillar’s performance is an indicator that industrials are catching back up to meet the market and return it to its traditional correlation with the sector. It’s a better scenario than the market dramatically dropping to do the same.
Benjamin …read more
Earlier this month, Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) stirred up the market with a big announcement – it’s changing its share repurchase policy to be more “flexible.”
The framework previously allowed for the buyback of shares at prices “no higher than a 20% premium to book value.”
This is not the first time Berkshire has updated this policy. When it announced its first repurchase plan with Buffett at the helm in 2011, the program limited the premium to just 10% over book value. With the current price hovering around a 40% premium to book value, a buyback now would be double the previous policy’s limit.
Investors saw shares rise more than 8% with that announcement seven years ago, and it seems like they’re setting up for a repeat in 2018. Since this most recent policy change, Berkshire’s stock is up 5% on the news.
What does this mean for Berkshire?
Announcing a willingness to buy back company stock at more than a 20% premium to book value is a stimulus for investors to get in beforehand… and see the value per share go up when the buyback takes place.
We saw this in 2011 when Berkshire announced its first repurchase program change:
In the opinion of our board and management, the underlying businesses of Berkshire are worth considerably more than this amount, though any such estimate is necessarily imprecise. If we are correct in our opinion, repurchases will enhance the per-share intrinsic value of Berkshire shares, benefiting shareholders who retain their interest.
This time, it’s not all good news, though. Berkshire built its empire through acquisitions. But now, that model is slowing down. It’s currently sitting on more than $100 billion dollars in cash. Buffett and his group have been looking to pick up something new but have not found anything large enough to spend money on.
When the main business strategy is to buy companies and improve their value, not executing on that strategy slows growth and chills investor sentiment. This new buyback plan may just be a short-term fix for a longer-term problem with Berkshire.
In the meantime, you may want take advantage of the unique opportunity to buy Berkshire before the buyback boosts its stock performance.
Benjamin …read more
In June, we asked readers to tell us what’s keeping them from investing more… or investing at all.
As illustrated in this week’s chart, almost 28% feel like they’re investing what they can. But a whopping 43% either don’t know where to start investing… or won’t invest for fear of losing money.
The remaining 30% or so had other reasons, including not having enough money, being in debt and not understanding the markets.
A 2015 Bankrate Money Pulse survey found that 73% of the more than 1,000 Americans polled didn’t own stocks at all, primarily because they didn’t know enough about the markets… or didn’t have enough money to invest.
So you’re in good company.
Meeting the needs of those who a) don’t know enough about the markets, b) fear getting involved in them or c) know some but want to learn more is exactly why our free daily e-letter Liberty Through Wealth exists.
You may think you’re not qualified to manage your own money, but we disagree. Our goal is to empower you to confidently take charge of building and maintaining enough wealth to sustain your desired lifestyle.
As for not having enough money… we know it’s not meant as an excuse. Between wage stagnation, rising costs and the Great Recession, discretionary income just hasn’t been as plentiful for much of this millennium.
But wages have started to turn around as the economy has taken off. And what may seem like barely enough to buy a cup of coffee – when invested wisely – can put you on the path to total financial independence.
Led by Chief Investment Strategist Alexander Green for close to 20 years, Liberty Through Wealth will teach you how to successfully manage your money yourself, using simple yet sophisticated strategies to increase your returns, reduce your risk, avoid Wall Street’s mountain of fees and keep the taxman at bay.
Not already a free subscriber? Click here now…
Starbucks will just have to wait. Your future depends on it.
Donna …read more
This March, The Oxford Club hosted its 20th Annual Investment U Conference at the Four Seasons in Las Vegas, Nevada.
If you’re not familiar with it, it’s an exclusive meeting where the Club’s investment experts share their biggest moneymaking strategies and recommendations with attendees.
This year’s conference theme was “The Art of Intelligent Speculation.” (To steal a line from Chief Investment Strategist Alexander Green, “What better place to hold this event than in the land of unintelligent speculation?”)
For many, the term “speculation” may immediately conjure thoughts of the California gold rush, mortgage-backed derivatives or even cryptocurrency investing.
In other words… high-risk, high-reward gambles.
But speculation – as defined by the Club’s investment experts – means calculated decision making that maximizes profits and minimizes risk.
And calculating is what they’re good at…
So good, that of the 63 recommendations they made at the 2017 conference, attendees saw a whopping 94% success rate. That’s right, 59 of the 63 stock picks were winners!
And as you can see from today’s chart, the Investment U Conference picks from 2016 outperformed the broader market by nearly 90% over the following 12-month period.
In fact, of the 52 recommendations made that year, 40 double- and triple- digit winning plays were revealed – all of which shot up an average of 53.4% in just a few short months…
During those same months, the S&P 500 was up only a mere 4.5%.
In his keynote address this year, Alex suggested we’re facing a “Goldilocks economy” – one that’s not too hot and not too cold.
The bull market has aged, company valuations are high, the Fed is raising interest rates and good news is mostly already baked into share prices.
So how do you intelligently speculate in today’s market?
Alex says invest in ten-baggers. The term – originally coined by legendary Magellan Fund manager Peter Lynch – describes companies poised to rise tenfold or more based on a number of determining factors. In Vegas, Alex shared the stocks he believes are destined for a breakout year.
ETF Strategist Nicholas Vardy insists that with ETFs, the structure and performance of your portfolio is limited only by your imagination. Because ETFs can be structured around any asset class, theme or investment strategy, Nicholas challenged conference attendees to think beyond basic index-tracking funds and build portfolios with greater creativity.
Emerging Trends Strategist Matthew Carr and Early Investing Co-Founder Adam Sharp look to the hottest sectors posing once-in-a-generation opportunities for real wealth building. Right now, those sectors are cannabis and, yes, crypto. And during the conference, attendees just couldn’t get enough (information, that is).
All told, the ideas discussed at the 2018 Investment U Conference could add an extra $1 million to your wealth in just this year alone.
Wish you had been there? We do too!
That’s why we created The 2018 Millionaire Blueprint…
To share the strategies that could create a lifetime of wealth for you.
It’ll be just like you were there… but from the comfort of your own living room.
Click here to gain access to the insights and recommendations from one …read more
Macau – an autonomous region on the south coast of China – is nicknamed the “Las Vegas of Asia.”
Its giant casinos and malls on the Cotai Strip make it a huge tourist attraction for Asian gambling.
And for investors, Macau’s gambling revenue is one to watch. It can signal emerging market moves.
Emerging markets have struggled this year due to global macro forces like trade wars and a stronger dollar, as well as local issues.
And today’s chart signals the pain could continue.
What’s great about the Macau indicator – the year-over-year growth of gambling revenue – is that it’s a consumer sentiment barometer.
Forget investor and consumer sentiment surveys and the latest data from central banks. If people are spending their hard-earned cash at the casino, they probably think their next paychecks are safe.
The data measures optimism, risk appetite and – for Macau in particular – China’s willingness to let capital leak out of its borders.
As you can see, over the last decade, the Emerging Markets Index has moved practically in lockstep with the Macau indicator. Back in January, when global optimism peaked, Macau’s gambling revenue was up 36% year over year.
But since then, it’s pulled back significantly to 12% year-over-year growth, coming in below expectations. Simultaneously, emerging markets also sold off.
And China – which makes up 31.7% of the MSCI Emerging Markets Index – has really taken it on the chin.
Earlier this week, my colleague and The Oxford Club’s ETF Strategist Nicholas Vardy covered China’s tumble of 20% from its peak.
The Shanghai Composite – China’s main stock market index – has officially entered bear market territory.
While U.S. interest rates, tighter domestic policy on the mainland and a trade war spitting contest have contributed to the drawdown, Nicholas declares that China has been dead money for the past decade.
He notes that while GDP growth in China has outpaced U.S. growth, it hasn’t translated into gains in Chinese stocks.
For example, money invested in the iShares China Large-Cap ETF (NYSE: FXI) would have handed you a negative 5.9% return over the last decade.
You can’t argue with the data – it’s been a bad bet.
And with the Macau indicator down a third from its January high, I wouldn’t bet on the Red Dragon turning around anytime soon.
Ryan …read more
Would you rather retire to a beautiful beach house in sunny South Florida… or stay in the house you’ve lived in for years?
The choice may sound obvious (75-degree winters and sunrises over the water are pretty tempting)… but apparently it’s not.
According to a recent survey, more than half of Wealthy Retirement readers plan to remain in their current homes in retirement.
It goes along with the recent trend of what’s called “aging in place,” which is exactly what it sounds like: growing old right where you are.
Why would you choose aging in place over an exotic location or even a downsized condo or apartment? There are a lot of reasons – from staying near family to cherishing the memories you’ve made in your house to just not wanting to go through the hassle of moving. But one of the primary factors is, of course, cost.
Many people believe that staying put is the cheapest alternative.
But the cost of living at home in retirement is steeper than you might think…
You have to consider things like basic maintenance and upkeep as well as emergency home repairs and modifications that might be necessary as you age (like adding ramps or remodeling a bathroom to be more “senior friendly”). Some of those renovations can cost up to $100,000!
Not to mention, if you still have a mortgage on your house – which 30% of Americans ages 65 and older do – it will eat up more and more of your retirement income and savings.
And there’s no easy solution. Senior living communities are notoriously pricey (the median rate for a one-bedroom apartment is $3,500), and even the cost of downsizing has gone up thanks to higher housing prices.
Bottom line: Retirement is expensive, no matter which way you go. The trick is to pick what works for you then figure out how to budget and save for it.
There are plenty of options too. For example, some of the “Other” responses included turning a vacation home into a full-time residence, moving to a state with cheaper taxes and even traveling the country.
Amanda …read more
You’ve heard us say it before: Asset allocation is responsible for up to 90% of your long-term investment returns.
To get the most out of your portfolio, you need to sensibly divide it between U.S. stocks, foreign stocks, bonds, precious metals and other asset classes.
And as you can see from this week’s chart, classic cars are an unexpectedly good way to diversify your investments. In fact, they’ve beaten the S&P 500’s returns over the last decade.
How Classic Car Investing Works
A classic car is an example of a rare tangible asset – that’s a physical investment with aesthetic or collectible value.
Many cars have seen their resale values increase fivefold in the last decade. The internet has caused an explosion of activity in this obscure market. Once-isolated car nuts are able to join together to swap information… and rides.
Granted, not every old car is worth a lot of money. The investment car market tends to favor European coupes and sedans from the ‘50s and ‘60s. And collectors typically have strong preferences about condition and mileage.
Why Buy the Whole Thing?
As with any asset class, investing in classic cars has its downsides – especially if you’re buying and maintaining whole cars by yourself.
For obvious reasons, the classic car market generally has a very high cost of entry. Buying into the market will probably cost you at least $20,000. And that doesn’t include any maintenance or security costs you may incur over the course of your investment.
Plus, just like in the stock market, there are good purchases and bad purchases. Unless you’re rich enough to diversify your car portfolio across several classic models, this can be a risky market.
But a software company called Rally Rd. has developed an interesting solution to these problems. Its app (available only on iPhone at the moment) allows you to buy shares of these sweet old rides for as little as $40. Click here to learn more.
Samuel …read more
An important part of the startup investment process is finding quality crowdfunding platforms. SeedInvest is one of our favorites here at Early Investing. Why?
Because a successful startup requires more than just a good idea. It needs a team of savvy founders and advisors to turn an idea into an actual product and company. It’s difficult. Even experienced executives struggle to launch startups.
As this chart shows, a basic vetting process eliminates most startups from investment consideration.
Since its inception in 2013, SeedInvest has conducted raises for more than 150 companies, raising more than $100 million. In that time, SeedInvest has had more than 25,000 startups apply to raise capital on its platform. Only about 1% have made the grade.
SeedInvest’s approach to vetting companies isn’t radically different from how most experts evaluate new companies:
How is the company organized?
What is the corporate structure and ownership of the company?
Who are the people behind the company?
What is the company’s financial situation (business origins and operations, legality, etc.)?
What are the terms of the company’s offering?
Of course, the Early Investing team takes dozens of other factors into account to identify the cream of the crop. But the due diligence SeedInvest and other portals do is critical.
They provide a kind of guiding light. Rather than taking a shot in the dark, you’re reaching into a basket of startups with the best potential for success.
Of course, as an investor, you must do your own due diligence when vetting investments. But humans are emotional beings. It can be easy, especially in startup land, for investors to fall in love with a particular company and fail to account for all its risks. If you stop paying attention to the metrics – projected expenditures, raise amounts, use of funds, etc. – you can end up on a sinking ship.
Portals like SeedInvest can help make the journey a little bit easier.
Assistant Managing Editor, Early Investing …read more
Winnebago (NYSE: WGO) is a small cap company that operates within the automobile industry. Its market cap is $2 billion today and the total one-year return is 40.31% for shareholders.
Winnebago stock is beating the market, and it reports earnings soon. But does that make it a good buy today? To answer this question we’ve turned to the Investment U Stock Grader. Our research team built this system to diagnose the financial health of a company.
Our system looks at six key metrics…
✓ Earnings-per-Share (EPS) Growth: Winnebago reported a recent EPS growth rate of 45.83%. That’s above the automobile industry average of 44.89%. That’s a great sign. Winnebago’s earnings growth is outpacing competitors.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the automobile industry is 69.64. And Winnebago’s ratio comes in at 15.57. It’s trading at a better value than many of its competitors.
✓ Debt-to-Equity: The debt-to-equity ratio for Winnebago stock is 56.74%. That’s below the automobile industry average of 131.12%. That’s a good sign. Winnebago’s debt levels are not out of control.
✗ Free Cash Flow per Share Growth: Winnebago has decreased its FCF per share over the last year relative to its competitors. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth.
✓ Profit Margins: The profit margin of Winnebago comes in at 4.72% today. And generally, the higher, the better. We also like to see this ratio above competitors. Winnebago’s profit margin is above the automobile average of -15.24%. So that’s a positive indicator for investors.
✓ Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Winnebago is 19.16% and that’s above its industry average ROE of 8.79%.
Winnebago stock passes five of our six key metrics today. That’s why our Investment U Stock Grader gives it a Strong Buy.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
If you’re interested in finding Strong Buy stocks yourself, check out 3 Powerful Technical Indicators for Smarter Investing. We’ll show you how to eliminate emotional bias from your trading process with three powerful technical tools you can start using to boost your trading profits immediately. Click here to learn more. …read more
I can think of a lot of things I’d do with $1 trillion…
Go on a European holiday.
Build my dream house somewhere on the beach.
Donate a chunk to the Wounded Warrior Project.
The list goes on and on…
Unfortunately, the chances of me – or you – receiving that much money are pretty slim.
But that’s the amount that American companies will be handed as a result of President Trump’s tax cuts.
So the big question they all face is “What now?”
Since the No. 1 priority of any company should be to make the shareholders (aka people like you and me) happy, we asked what you thought they should do with all that money.
Not surprisingly, the majority of you would like to see dividend increases. After all, those would put more cash in your own wallet. Employee raises and benefits took second place, which, again, is an immediate benefit for the average person in corporate America.
Fortunately, it seems like companies are listening to what we want. Or at least, they are in agreement when it comes to where that money is going.
According to a Morgan Stanley survey, 43% of the tax savings are being spent on dividend hikes and stock buybacks, which are both wins for shareholders. And while only 13% is going toward employee welfare through bonuses, healthcare and paid leave time, that’s still something to celebrate for the 3.5 million American workers who will benefit.
Even if you don’t feel a direct impact from the tax cuts, take a step back and look at the bigger picture: A lower corporate tax rate is better for businesses.
That’s something I think we can all support – especially since those of you who marked “other” want increased investment in infrastructure, more hiring and a focus on training workers here in the States instead of outsourcing overseas.
Hopefully the corporate tax cuts will be more than just quick cash for companies. We’d like to see it be a solid start to encouraging more jobs and economic growth right here in the United States and, well, making America great again.
Amanda …read more
Editor’s Note: This is it, folks – three days left!
Here’s what to expect…
Tomorrow, you’ll receive a special Saturday email from Investment U with the subject line “An Important Notice About Your Subscription”.
Please read it carefully because we’ll finally reveal the name of Alex and Nicholas’ new daily e-letter. (They’ll be coming to your inbox “from” that name starting Monday.)
Investment U was originally designed to be the educational arm of The Oxford Club. They’re merely taking its mission to the next level by empowering you to confidently take charge of your journey from financial literacy… to financial liberty.
While the e-letter will still contain the content you’ve come to anticipate on a daily basis, the new brand better reflects how they hope to meet your needs in the years to come.
That is, by covering how to grow and protect what you have, manage risk, stay ahead of inflation and keep your newfound wealth out of the prying hands of the taxman.
How will they do that? Through unique insights, timely analysis, proven strategies, actionable opportunities… and much more.
So remember… Monday, June 11… Alex will again be coming to you, but from a new email address.
We look forward to connecting with you there!
– Donna DiVenuto-Ball, Managing Editor
Some people in this country are rich. Most folks aren’t.
It’s important to stop every once in a while and recognize why this is.
Poverty needs no explanation, really. History shows that it was the default existence for most of the men and women who ever lived.
(And remains the unfortunate fate of billions in the Third World today.)
Today we live in an affluent era in the world’s most prosperous country. So it’s reasonable to ask why some have so much and others have so little.
Let’s think about it…
Some are rich because they won the genetic lottery.
I’m not talking about inheriting Gal Gadot’s looks or LeBron James’ physique.
If you were born 50 years ago or more, at a time of institutionalized discrimination, it was a tremendous advantage to be born male… or white.
Being white and male – as I am – made it easier still.
If you were born with an average IQ or higher, you had another advantage. People with low IQs don’t typically go to college.
And people without college degrees end up with much lower lifetime earnings. They don’t go on to become doctors, lawyers, pilots and engineers.
Some folks are born into loving, supportive families. Others are not.
That has huge ramifications.
Poor kids, for example, often grow up in a culture of silence. They show up for kindergarten not knowing that peas are small, round and green.
They often lack good role models. In fact, outside their door, there may be plenty of young people who are just the opposite.
In our competitive society, being born into this environment is like starting a foot race in a 10-foot hole.
Then there is a matter of circumstances.
You might meet the right people at the right time. (Or, like singer-songwriter Dr. John intimates in one lyric, you may be in the right place… but at the …read more