What I Got Right (and Wrong) in 2017
I write today with one very important question on my mind…
…did I help you make money in 2017?
I’m asking because I’m a firm believer in taking my own advice.
I counsel you to take a good hard look at the strategies you use, at your investments, and at your analysis so it only makes sense that I do the same.
Frankly, I wish more investment experts would own up – warts and all – because that’d go a long way to cleaning up Wall Street. Sadly, there’s a snowball’s chance in you know what because they’re too busy trying to steer you in a direction that boosts their profits at your expense.
The way I see it, integrity is everything in this business. I don’t deserve the trust you place in me if I’m not helping you chart a path to profits.
Let’s start with one of the boldest and most audacious predictions I’ve ever made.
Did I Get It Right On How President Trump Would Impact Markets?
I stopped Fox Business Network host, Stuart Varney, cold, five days before President Trump’s victory on November 8, 2016, by saying on air that his victory would result in a “rip your face off rally.”
Mind you, that was at a time when everyone I knew, or knew of, was calling for massive declines, including – to name a few – Nobel Prize winning economist and New York Times columnist Dr. Paul Krugman, American billionaire entrepreneur Mark Cuban, and the head of global economics at Bank of America Merrill Lynch, Ethan Harris.
Since then, the Dow has hit 70 record closes, which tops the previous record set in 1995 of 69. It’s also easily toppled four 1,000 point milestones while also putting in the second fastest 1,000 point run ever recorded… in just 24 trading sessions.
Meanwhile, the S&P 500 put in a record 388 day stretch without a 3% or more pullback even as the VIX, which tracks S&P 500 contract volatility, sank to record lows. That’s created a staggering $1.6 trillion in market capitalization.
And, not to be left out, the tech-heavy Nasdaq is cresting at 7,000 points for the first time. Big tech continues to plow ahead and remains more than capable of growing into PE ratios others perceive as expensive, but aren’t – a distinction that most investors fail to grasp.
Investors who got “in to win” as you and I discussed many times have done exceptionally well, while those who failed to get on board because they couldn’t overcome their fears or doubts got left behind… yet again.
Was I Correct That Apple had Value yet to be Recognized?
This time last year many investors worried that Apple Inc. (NasdaqGS:AAPL) had reached the end of its run. Yet, I argued that the company had value yet to be recognized, and that Team Cook had another great run in front of it.
Apple’s year to date return is a staggering 52.82% and it’s well on its way to becoming a $1 trillion company. Many investors don’t believe that’s possible… but I beg to differ.
I believe Apple will make a fundamental pivot to medical devices and, in doing so, potentially double revenues once doctors, insurance companies, and health care practitioners begin prescribing everything from the Apple Watch to iPhones, iPads, and more. Dropping $1,000 on the latest cell phone will be your insurance company’s problem, not yours. Prices will rise and margins along with them.
It’s disruptive progress of the highest order and fully capable of making my $200 per share price target appear cheap in the rear-view mirror, a few years from now.
Did the “Most Dangerous” IPO I’ve Ever Seen Stay Dangerous?
Snap’s now trading at $15.59, after falling 63.85% from its post-IPO high to a low of $11.28.
I seriously thought about recommending shorting the stock, but reasoned that doing so wasn’t worth the risk given SNAP’s status as a media darling. Instead, I encouraged you to invest in alternatives like Facebook Inc. (NasdaqGS:FB), Alphabet Inc. (NasdaqGS:GOOGL) and even Microsoft Corp. (NasdaqGS:MSFT), which have tacked on 51%, 33%, and 35%, respectively, within the past year.
SNAP remains a failed company based on a business model that never should have been brought public in the first place. Investors who fell for the “innovation” it supposedly brought forward have collectively lost more than $15.67 billion, according to Yahoo!Finance.
Grade: A- for avoidance
Is My View on Why Pessimists Never Make Money Accurate?
Last January, just after the Dow hit 20,000, I shared my thinking with you about why pessimists never make money.
It was a theme we’d return to many times for the simple reason that I believed, and still do, that the markets had plenty of room to run. There was no reason to stay on the sidelines given the staggering amount of money chasing relatively few quality stocks.
Every new milestone forced me to revise my numbers, though… 21,000 became 22,000 and even 23,000, which I viewed as a foregone conclusion as of October. I noted on CNBCAsia that the S&P 500 may even touch 3,000 in a “surprisingly strong move to the upside” that would catch many investors by surprise.
The Dow is within spitting distance of 25,000 as I type, but the S&P 500 remains at around 2,700, which means I got three things correct: direction, timing, and the sector analysis.
So I’m going to ding myself a bit because my calculations were off, despite the fact that this is advice which stands the test of time.
Ekso Bionics – Hero or Zero?
Ekso Bionics Holdings Inc. (NasdaqCM:EKSO) is easily one of the most exciting and yet frustrating companies I’ve ever encountered. Every time I’m ready to write it off, the company does something brilliant.
On the plus side, management knows exactly what they’re doing, has a very extensive and very valuable patent portfolio, is working with truly groundbreaking technology, and is plowing into retail markets that augment the very lucrative but slow-to-adopt-new technology health model.
Huge breakthroughs like the EksoVest being tested by Ford Motor Co. (NYSE:F) are great and very noteworthy, but can take time to convert to revenue… time Ekso may not have.
On the down side, Ekso just can’t seem to catch a break. That means there’s a constant battle between the need to raise more cash and the need to burn it in pursuit of bigger sales, research, and eventually profits.
Still, all is not lost. I recommend using the market’s wiggles to convert as many shares as you can to “Free Trade” status, every chance you get… there’s enough volatility given the company’s trading range.
The key here is using a Total Wealth Tactic – the “Free Trade” – to make risk somebody else’s problem, even as you stay in the game. Exit the trade if it no longer fits neither your risk tolerance, nor your objectives.
I fully expected Ekso to be trading above $10 a share right now and I’ve let you down, doggonit.
Did My Dividend Picks Deliver?
I authored a column titled, “Never Fear a Bear Market Again” to show just how powerful dividends can be to your total returns at a time when many people were worried that there were bear tracks around and the markets felt tenuous.
Lockheed Martin Corp. (NYSE:LMT) announced a 10% dividend hike in late September, following Raytheon Co.’s (NYSE:RTN) announcement of a 9% dividend hike this past year – marking 13 consecutive years of dividend increases. Altria Group Inc. (NYSE:MO) raised its dividend hike by just over 8%, marking the 51st time the company has increased its dividend over 48 years – now sitting at a stellar 3.64% yield. Not for nothing, all three also enjoyed 23.5%, 25.7%, and 7.5% appreciation, respectively, over the past year.
All three are still great buys today, especially for income-starved investors who still want or need growth.
Did My Thoughts on the Retail “Ice Age” Deliver?
I wrote to you in June with my thoughts on how to play the retail “ice age” – a term I coined to reflect the extinction-level event I saw happening in shopping malls around the world. And, in a statistic that caught many investors by surprise, I observed that 50% of the total value of all U.S. shopping malls was concentrated in just 100 retail properties, according to Professor Scott Rothbort of Seton Hall University’s Stillman School of Business.
Any investor going along for the ride would get crushed, I cautioned.
I called out Nordstrom Inc. (NYSE:JWN) and Sears Holdings Corp. (NasdaqGS:SHLD) as being particularly at risk. The former has fallen by 9.52% but the latter is off 62.26% as of press time and a staggering 94% from 2013 when I initially called out the once iconic retailer as a “death-watch” stock.
Amazon.com Inc. (NasdaqGS:AMZN), of course, has a good deal to do with this. The Seattle-based behemoth has singlehandedly changed the entire retail landscape and, in the process, everything from inventory management, to order flow, to customer loyalty. It remains the far stronger play.
Interestingly, Wall Street takes a different stance. They want you to believe that there are Amazon-proof companies out there that are worth your money.
Don’t “buy” it at any cost!
More than 30 U.S. retailers filed bankruptcy during the first 11 months of 2017 and there are another 26 with credit ratings of CAA or lower. That’s 18.6% of the Moody’s rating universe, versus only 16% at risk during the height of the Great Recession 10 years ago.
I view Vitamin Store’s GNC Holdings Inc. (NYSE:GNC) as being next in line to fail. It’s rumored to have hired “special financial advisors” to help the chain deal with staggering amounts of debt, a key indicator that a wipeout looms. Short or avoid – but at $3.75 a share, there’s not much juice.
Did Health Care Stocks Lose 50% When President Trump Killed Obamacare?
I called this out in December 2016 as part of my five most outrageous profit plays for 2017, then returned to the theme several times as the year went on.
I identified Jazz Pharmaceuticals Co. (NasdaqGS:JAZZ) and Horizon Pharma Public Ltd. Co. (NasdaqGS:HZNP) as being particularly at risk because of price jacking, a practice the President wants very badly to eliminate. The former has risen 15% year to date while the latter has fallen 15% over the same time frame – a mixed result.
But health care operators like Tenet Healthcare Corp. (NYSE:THC), which I turned to as opportunistic targets during Q1, fell as much as 46% by August. It’s since recovered a bit and remains down 35.62% YTD.
Two of the three made you gobs of money if you played along by shorting them, while saving you a bundle if you avoided ’em.
Was the Yahoo Hack Really a Warm-Up?
We’ve tracked cybersecurity as a national defense priority for a few years now, not the computer-related investment Wall Street prefers to use as a categorization instead.
Recommendations like Lockheed Martin Corp. (NYSE:LMT) and Raytheon Co. (NYSE:RTN), which are both very active in self-adaptive machine learning, have paid off in spades. Not only have both companies appreciated by 23.5% and 25.7%, respectively, in 2017 – they show no signs of slowing down in an increasingly complicated world, which is why they remain favored recommendations heading into 2018.
However, I was caught flatfooted by the Equifax Inc. (NYSE:EFX) breach, which compromised 146 million Americans – including yours truly.
Usually I’m pretty good at sniffing out this kind of stuff based on options activity, institutional cash flows, or insider buying – especially when it involves arrogant executives who demonstrate callous disregard for their consumers. That was not the case here.
Worse, the stock tanked 34% following news of the data theft and I failed to recommend you get on board for the snap back that now tallies 28% as of press time. I viewed what was happening to the company as being very different to what happened during the ‘Brexit’ and during the Flash Crash of 2010, when the entire markets suffered a short-term dislocation.
My thinking at the time was that the company posed too much of a risk to your money on the grounds that the data breech was a potentially extinction level event… or at least a solid comeuppance… because of the potential legal costs associated with what happened.
The markets had other ideas, though. Equifax Inc. (NYSE:EFX), in fact, wound up being a great contrarian play, albeit one that took some real hutzpah to make. I’m inclined to penalize myself pretty harshly for not having gotten you into that trade even though the alternative investments we’re following, as part of the bigger theme, are off to the races.
Why Uber’s Self-Destruction Could Be an Opportunity
Uber is one of those companies I positively love to hate. Plagued by lawsuits, political strife, incompetent and seemingly maniacal executives – it’s a never-ending disaster and Silicon Valley’s worst nightmare.
What most investors don’t realize is that a situation like Uber, where the top-player gets knocked down a few notches, inevitably creates an opening for second tier entrants to rewire the landscape.
Really, though, the real value in Uber’s ongoing disaster isn’t financial at all.
Rather, it’s a wake-up call for investors.
I believe 2018 will be the year of some terrific IPOs based on real cash flow, real business, and real results – all of which will actually be good for your money, not just Silicon Valley insiders.
I’ve got my eye on a couple great candidates with windfall potential.
Grade: test in progress.
Did I Make Good On My Forecast for Rising Rates?
I’ve maintained that the Fed would take a measured approach to raising rates because it didn’t understand the linkage between real money, inflation, and job creation.
That’s now increasingly a market meme and, it would appear, spot on given bond market activity.
I expect global bond traders to keep the pressure on, which will further confound the Fed in 2018, at a time when it has become largely irrelevant.
In closing, I hope you’ve enjoyed reading today’s column as much as I’ve enjoyed writing it.
Looking back is always an important part of profiting forward, especially when it comes to the three-part approach that makes Total Wealth so very powerful.
- Line up your money with Unstoppable Trends backed by trillions of dollars.
- Buy the best companies, making must have products and services the world can’t live without.
- Manage risk intently and constantly to maximize profits.
Here’s to a fabulous 2018 and another prosperous year together.
Thank you for being part of the Total Wealth Family – I am thrilled you’re here.
Best regards for a Happy New Year,
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