Read the transcript below.by
Alright! I believe I got all the right keywords in the title. I have a new stock pick for you.
Billionaire Sebastián Piñera will be the next president of Chile. “The conservative Piñera ran a campaign that promised incentives to re-energize the economy, which is growing at a sluggish 1.4% rate this year” – LA Times
Sebastian is viewed as pro business and whether he can turn the economy into growth or not remains to be seen, but markets trade on expectations so we are likely in for a ride.
Chile is arguably the most stable country in South America. It is ranked number one for it’s region in the international property rights index by the Property Rights Alliance. And Chili has been number one for the region since the Index tracked the country back in 2007.
The recommendation today is to buy the Aberdeen Chile Fund. $CH.
The fund is up about 60% from it’s bottom in 2016, but don’t let that scare you as the fund is still down 60% from it’s 2011 high and it has a lot of room to run.
The last monthly December candle is showing strong support on rising volume after a bit of a correction.
And here is one of the best parts, since the fund is a closed ended fund it can end up trading at a discount to it’s net asset value and indeed that is exactly what is happening.
As I am typing this, the fund stock price $8.98 while the NAV (Net Asset Value) is 10.06. A discount of 11%! Would you trade .89 cents for a $1? I’d take that deal every time.
The fund is also diversified into many industries (you can see here). Chile’s main export is copper and copper prices looked to have bottomed out in 2016. China will likely remain highly dependent on Chile’s copper in the future as well.
If you are feeling the U.S. stock market is a bit expensive then the Aberdeen Fund may just be a great buy for you.
Here are the key points:
- Pro business president just elected
- The fund is in a uptrend but still down 60% from it’s 2011 highs
- The most stable country in South America coming in consistently as #1 for the region in the property rights index.
- The close ended fund is trading at a 11% discount to it’s NAV
- The fund is diversified into different industries in Chile
- Copper prices looked to have made a bottom in 2016 (you can see the fund rising during the same time frame)
- Enables you to diversify out of U.S. stocks
- Oh I almost forgot. Four Aberdeen directors purchased shares just in November. So we have insiders buying. A great sign.
OK, the only thing left is to book a trip to Chile. Sounds fun.
Recommendation: Buy Aberdeen Chile Fund (NYSE American: CH)
Since the market is now closed, I will be adding this to our Tao Stock Tracker tomorrow (12/21). We have a trailing stop loss put in place for 18%.
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I haven’t made a recommendation in a while. This recommendation is just too easy for me not to make.
Warren Buffet was quoted once as saying something along the lines of “if you think the company is going around in 20 years, then it’s probably a good buy now”.
This time I’m recommending the J.M. Smucker Company $SJM.
It’s a really simple pick for the long haul. You get to collect a 3% dividend on some awesome brands.
- Knott’s Berry Farm
And many more! Check out all the brands here: http://www.jmsmucker.com/smuckers-corporate/jm-smucker-brands
The stocked popped today as it likely as people started noticing the 3% yield.
We have a lot of support around the $100 level and a small hammer formation on the monthly candlestick.
The debt to asset ratio is around 30% which is in my comfort zone. The dividend payout ratio is at 63% which is a good level for continued dividend growth.
The last time the stock was this cheap it was paying $2.56 a share back in 2015. That dividend payment has grown 17% to $3.12 today.
I think it’s safe to say this company is going to be around in 20 years with a much higher dividend payment to boot.
Lets pick up some shares today 10/31/2017 and add them to our Tao Stock Tracker.by
In April I had recommended buying the 3D printing company Stratasys $SSYS. We entered the stock into our Tao Tracker to protect us from a down trend using a 25% trailing stop. We hit our stop today at a profit for about 6% depending on the sell price you get today.
While I’m disappointed we got stopped out we are going to do the right thing and obey the stop an sell. I We may revisit this company at later time.
We will no longer be tracking the stock in our Stock Tracker and it will now show in our closed positions.by
His mother was upset he went into law, so he dropped the occupation and went to work at a counting house (bank), however he proved to have no business skills and that job was soon over. His father lent him money to start a business to which all of the loaned money was lost. He finally ended up working at at his fathers brewery but he was more interested in politics and the injustice of taxation at the time.
Samuel Adams would of course go onto be a revolutionary and one of America’s founding fathers.
Flash forward to 1985 and James Koch and Rhonda Kallman offered Samuel Adams Boston Lager as a tribute to the revolutionary hero. The Boston native started brewing in his kitchen with a recipe that went back for generations in his family.
You know of the signature beer of the Boston Beer Company ($SAM), however you may not know they also own brands such as Twisted Tea, Angry Orchard, and Truly Spiked & Sparkling.
I haven’t given a stock recommendation on Tao Economics in a while, partially due to being very busy these days (who isn’t) and also I am a fan of saving some dollars at the moment due to an overall expensive market and cracks showing in the credit markets.
In short, I’m being patient and looking for companies that have a strong balance sheet, that are not going anywhere, and have broken out to the upside.
We have found the perfect candidate with the Boston Beer Company. Lets start with the balance sheet.
I like to turn to the google finance for a quick visualization of a balance sheet. As you can see above the debt to asset ratio is nothing. They released earning for Q2 on 07/27 and the market was happy as margins increased along with a slight increase in revenue.
This company doesn’t need to worry about the credit markets rolling over and they have over $71 million in cash as they had $61 million in cash from operations this quarter. In short they have no issues covering their liabilities.
The company does not pay a dividend, however they did retire $88 million worth of shares and they have a history of buying back and retiring shares, which effectively increase the shares value.
The full 2nd quarter report can be found here.
So is the stock cheap? It’s current P/E (price to earnings) ratio is at 22 for the year. That may sound expensive for value seekers, but consider the S&P is currently at 24 and over the last 10 years the companies PE ratio has been as high as 63 and as low as 16.7. We are leaning on the cheap side for this stock. Other ratio’s also indicate the stock being cheap compared to it’s history.
If you don’t own any sin stocks, now is a good time to add this one to your portfolio as people drink no matter how the economy is doing. So what’s the downside? There has been heavy competition in the beer and cider industry. We could see revenue’s decline again, but this is why we use a trailing stop. If things turn really bad for $SAM down the road we know it will likely take some time to play out and our trailing stop will get out of the position before too much damage has been inflicted.
The stock broke out of it’s 50 day moving average as it had a long decline from it’s 2015 high’s
We got stopped out of $AG – First Majestic Silver Corp. I originally recommended a 25% trailing stop. By the stop loss program we used opted for 18% based off of the stocks beta.
We are going to use the stop loss program I wrote in google sheets to and close out of the position today for a 17.8% loss.
The markets have turned against both precious metals and the miners. The signals I use for both pm’s and miners flipped to red.
I strongly believe that we will see another massive bull market in miners and in the metals however that might not form until later this year or even possible later in 2018.
The purpose of the stop loss is to take the human emotion out of the sell so we do not occur massive losses, and on the flip side it will allow our winners to run.
If you are following our tracking please sell today. We will likely re-visit First Majestic Silver Corp at another time.
You can see our booking here: http://taoeconomics.com/tao-stock-tracker/
We will no longer be tracking the stock in our open positions.by
U.S stocks are expensive. The Shiller P/E ratio of the S&P is in extremely high territory.
Many analysts are predicting the market is going to drop or crash this year, and it very well may happen.
The only thing that has kept me from believing of a imminent drop is that we have one the most ignored stock bull market in our history. I don’t have people giving me stock tips, the average retail investor has been largely out of this market (until this year that is).
If you notice in the above chart, the S&P volume has finally shot up at the start of 2017. Otherwise known as the Trump trade. I think there is a chance that we may be at the start of a mania phase for stocks. Stocks trade on expectations, and the current expectation is that we will see some massive tax cuts.
If we are at the beginning of a mania phase, then yes we are going to likely see an ugly crash/correction at some point. Here is how to proceed in the market:
- Be aware. Make sure you are paying attention. Not just to lines on a chart, but to what with bills getting past, the EU elections, strangers giving “hot” stock tips, and so forth.
- Hold/Save more cash.
- Obey you stop losses. If you don’t have a sell/exit strategy then do not buy.
- Expect volatility.
So on to the stock pick. This pick will likely make people’s stomach turn. Retail in the U.S has been hit hard. I’m sure you have come across many articles regarding store closures and declining revenue.
Target’s ($TGT) stock is down a lot. The stock had a high of over $80 a share just last year and now trades for $55.75, a sell off of over 30%.
I’m going to tackle some of the risks I see first and get them out of the way.
- Revenues were down in the 4th quarter of last year, and they may continue to go down.
- If we see imports get taxed more heavily or a trade war breaks out, that could really effect Target and other retailers.
- I’m not a fan of the shopping online to pick up in a store model which they are continuing to pursue. Isn’t that just shopping twice?
- The company is putting back $7 billion into it’s stores over the next 3 years. I don’t view this as a bad thing, as it is likely necessary for future growth. But I figure I would note it hear is it will likely cause their margins to drop during this time.
Now for the positive:
- By most metrics the stock is cheap. Forward P/E, Current P/E, Price to Sales ratio is only .45. Price to free cashflow.
- The dividend payout ratio is at 48%. I believe the current dividend is safe at this level.
- Target is still a great store where people love to shop.
- Online segment is growing as well.
Action: Buy Target up to $59
Use a 18% trailing stop or if the stock closes below $52.by
3D printer companies are getting some attention again. Earlier this month the Motley Fool had an article on 3D printing one how more and more companies are turning to the technology while we can likely forget about using them in our homes (at least for now). From the article:
There’s some significant progress on that front, with Stratasys signing deals with both Airbus and Ford. 3D Systems has been used by Mitsubishi and Daimler as well, so these companies are slowly being built into the design process. And these partnerships just scratch the surface of companies expanding 3D printing capabilities.
They go on to explain how 3D printing with metals will be the next phase for growth. And recently they covered again on the shoe industry and it’s use 3D printing.
On the 3D printing end, this partnership propels Carbon way ahead of current leader 3D Systems (NYSE:DDD) in the 3D-printed shoe space. Moreover, Carbon is on track to become the tech supplier behind a momentous 3D printing industry record: Once production hits full scale, the Futurecraft 4D will be the highest-quantity mass-produced 3D-printed product ever!
Today shares of Stratasys shot up over 10% on a upgrade noting a positive outlook for the rest of the year. Stratasys has little debt, and arguably the most experience on commercial 3D printing.
If we compare the disruptive technology cycle chart below with the price action of 3D printing companies we may now just be past the disillusionment trough.
Stratasys ($SSYS) Monthly
The stock is down about 80% from it’s 2014 level and now starting to trend up. Insider buying has also been trending up since December. If we consider Trump’s America first mantra and the push for manufacturing back home, it stands to reason that 3D printing could end up benefiting. In the future the profits from commercial 3D printing may fuel 3D printing for home personal consumption.
Action to take: Buy Stratasys up to $26 a share. Use a 25% trailing stop or sell if it closes below $16.00by
As Trump launched Tomahawk missiles into Syria to the neocon’s delight, gold and silver are continuing to creep up.
First Majestic Silver Corp. ($AG) is trending up past it’s 50 moving average after making a double bottom.
As you can see $AG is down over 50% from it’s 2016 Aug high.
The company also has been managing it’s business much better than it’s peers. Noted from the 3rd quarter of 2016 they exceed at keeping their costs down:
All-in sustaining costs: down 27%
As if the dual fuels of rising production and prices were not enough, First Majestic also pushed its all-in sustaining costs down by 27% year over year to just $10.52 per silver ounce. Three factors contributed to this decline: the company’s recently renegotiated smelting and refining agreements, the continued weakness in the Mexican peso, and its record silver production. Those new arrangements alone resulted in a 34% decrease in smelting and refining costs, helping the company to more than offset a 10% increase in electric costs from the national power grid.
Recommendation: BUY (First Majestic Silver Corp. ($AG). Sell if you reach a 25% trailing stop or if the stock closes below it’s March low of $7.23.
This is a good time to play off of uncertainty, while the rest of the market appears expensive.by