Since it is the end of the year, I thought I might submit to this board what I think are important trends. Trends keep me excited about the underlying business and help me to stay engaged during down times in the market. I hope these might spur some ideas of other trends or other stocks we could look at. I know some of these stocks have been listed as Saul stocks. If you do own these, it is always nice to know if the trend is truly your friend. If you don’t, it’s food for thought.
Best Regards,
bulwnkl
- Natural gas trumps coal (and will continue to trump coal) as the top source of electric power in US.
http://www.cnbc.com/2015/07/14/natural-gas-tops-coal-as-top-…
For the first time ever, natural gas trumped coal as the top source of electric power generation in the U.S. In April, roughly 31 percent of electric power generation came from natural gas, whereas coal accounted for 30 percent, according to a recent SNL Energy report.
It’s a dramatic difference from April 2010, when coal accounted for 44 percent of the mix and natural gas just 22 percent.
As most people are aware, we have become the “Saudi Arabia of natural gas”. Because natural gas is so abundant, exploration and production are not necessarily the place to be right now. However, mid-stream (processing, storing, transporting, and marketing) of natural gas and natural gas liquids looks to me to be VERY promising. These stocks have been beaten to pieces in 2013. Unlike typical Saul stocks, this is valued based. Normally, this should be an income stock with a return somewhat close to National Grid (NGG, yielding 4.7%).
Candidate Stock: Oneok Inc. (OKE)
•Recent dividend = 10.2%
•Stock price down~58% over the past year
•Company is increasing it’s pipeline services to 75% fee based rather than % of NG value.
•Debt/EBITDA = 4.2 (Moody’s reduced Kinder-Morgan’s outlook to negative when it looked as if it would exceed Debt/EBITDA = 5.8 for reference)
•Company just reaffirmed dividend for the complete year
2.Internet commerce has a long runway, but it is hybridizing to bricks + mortar + cyberspace. Internet commerce is expected to yield a 37% increase in total revenue share by 2018.
https://hbr.org/2014/08/e-commerce-is-not-eating-retail/
Brick and mortar retailers still control between 94% and 97% of total retail sales. Several large store-based retailers (including Apple and Macy’s are growing their e-commerce sales even faster than Amazon).
It’s more and more difficult to distinguish e-commerce sales from others. Imagine that a customer goes to a Macy’s store, learns that the product is out of stock, and uses her smartphone to order the product from another Macy’s outlet, which ships it to her home the same day. Is that an e-commerce sale or a physical one?
Stores don’t necessarily need as much foot traffic as they have had in the past to succeed. If 20% of their sales are shipments from online orders to nearby customers, they are still valuable. That’s why so many companies that began as pure e-commerce plays have added physical stores, including Warby Parker, Athleta, BaubleBar, and Bonobos.
http://arstechnica.com/business/2015/11/amazons-first-brick-…
On Tuesday, after years of rumors and speculation, Amazon launched a brick-and-mortar store—the kind of place that it has frequently been accused of putting out of business for over 20 years.
http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will…
Approximately 63% of the US population will make a digital purchase this year, yet only 6.5% of US retail sales are expected to come from internet transactions, projected to be 8.9% by 2018.
Candidate Stock: Amazon (AMZN)
•Stock price up 117% over the past year
•Cash from operations up 75% over last 5 years.
•Net sales increased 23% YOY
•Amazon Web Service grew income 432% over most recent quarter
3.Internet data usage is growing exponentially.
http://www.ntt.com/resource-center/article/data/global-watch…
Worldwide, total IP traffic is expected to grow an average of 32% annually, between 2010 and 2015, reaching approximately 80 exabytes (80 million terabytes) per month by 2015*.
Candidate Stock: Infinera
• Stock price up 14.8% over the past year
• TTM Earnings Growth 196%.
• Revenue Growth 21.6%
- People are struggling to make ends meet.
http://www.bls.gov/news.release/pdf/empsit.pdf
1.7 million persons were marginally attached to the labor force
There were 594,000 discouraged workers in November
Unemployed persons, at 7.9 million
Long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.1 million in November
https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?pan…
Wage growth has been between 1.5 and 3.0% for the last 5 years.
Although things are looking up for people, money is still tight with people. People need value for the basic necessities. I think Skechers are reasonably good quality copies of many name brand shoes for a fraction of the price. I also think this is a play on the aging population. After people have been married for 25 years, they may not be out to impress people with their expensive shoes.
Although some might think it is wicked to profit from someone’s misery, I think it is good capitalism to support a solution to people’s problems.
Candidate Stock: Skechers Shoes
•Stock price up 67% over the past year
•TTM Earnings Growth 87.5%.
•Revenue Growth 33%
5.People are addicted to automation (eg IOT, Smart Phones)
http://www.shape.com/lifestyle/mind-and-body/cell-phone-addi…
The reason that smartphones are so addicting is because they trigger the release of serotonin and dopamine—the “feel good chemicals” in our brains—providing instant gratification just like addictive substances do, says therapist and addiction expert Paul Hokemeyer, Ph.D.
http://www.wired.com/2015/12/this-year-was-almost-the-year-o…
Juniper research predicted that by 2020, there will be 38.5 billion connected devices. IDC says it’ll be 20.9 billion.
Candidate Stock: Skyworks Solutions
•Stock price up 8% over the past year
•TTM Earnings Growth 63%.
•Revenue Growth 26%