Stocks

Stocks for the Long RunThis is a list of stocks that Fundamental Trends subscribers generally hold for extended periods. On rare occasion we might trade short-term on news or large price swings, however, we are generally on a 3 to 5 year time horizon. People who are looking to trade frequently are genearlly making a mistake. Not only are trying to trade against super computers, hedge funds and investment bankers, they are destined to miss the biggest moves by being "out" when something happens and they wake up to see the news and stock price move too late.

Our core criteria for buying any stock is that we believe it can double in price within five years as a worst case scenario. We believe in building in a "margin of safety" on each purchase.

Most stocks will be released to the public once we are done accumulating a position, generally four to twelve months after initial purchases are made. Often we will use selling cash-secured puts to build a position. Those trades are noted in the Options section. 

Many people will build a 20-30 stock portfolio over a few years and then slowly replace expensive stocks with cheaper stocks. It is a process designed for the patient, thoughtful, forward looking and emotionally controlled. Asset allocation is a seperate issue. Some subscribers buy nothing but stocks, but most blend with an ETF allocation. I recommend blending an ETF portfolio with a stock portfolio. Read the guide you get when you subscribe to learn how to build an asset allocation that is right for you.

Your strongest edge as an investor is the ability to evaluate a company and let the calendar work for you. Not only can you beat the market that way, but you can do other things with your time.

This week, Nutrien (NTRraised its dividend, announced a buyback and positively revised their outlook. Several keys to fertilizer prices exist, including slowly rising demand, flattish supply and the impact of climate change. A key thesis that many in the market overlook is that drought makes the value of fertilizer higher over time. We know that drought is increasing across the planet. 

According to the USGS: "No substitutes exist for potassium as an essential plant nutrient and as an essential nutritional requirement for animals and humans. Manure and glauconite (greensand) are low-potassium-content sources that can be profitably transported only short distances to crop fields."

Enter the potash mining companies.

SunPower (SPWRbeat estimates, but guided lower and got thumped after being up on the day to start. Said CEO Tom Werner:

"In relation to the 201 solar tariff decision, the product exclusion process was published today.  We will continue to work through this process with the Administration to convey that only SunPower can make a copper-plated, interdigitated back contact solar cells and that with an exclusion, SunPower can further invest in research and development to improve on its market-leading efficiency and performance while demonstrating America's continuing leadership in solar energy innovation. Unfortunately, we are already seeing a negative near-term impact from the ruling as the increased costs due to import tariffs have delayed certain 2018 projects and made other projects uneconomical. We have also put our planned $20 million U.S. employment expansion on hold and are considering other significant cost saving initiatives to lower our overall expense structure and improve our financial performance. Given the early stages of this review, we are not prepared to discuss specific actions at this time but expect to communicate our plans on or before our next earnings call. Our focus has been, and will continue to be, on driving cash flow, strengthening our balance sheet and positioning the company for sustained profitability."

The energy sector has taken it on the chin the past 3 years and again recently. If I am right and oil heads to $80 per barrel in the next 6 to 18 months, then there will be some big winners in the oil patch.

Here are some very quick thoughts on the oil and gas stocks that are in our universe, as well as, some major companies that are well known by investors.

In real estate it is "location, location, location." In stocks it's quality, quality, quality. The problem is that in the stock market, basically everybody knows who the quality stocks are. There are certain companies that only go on sale once or twice a decade, usually during correlated market corrections when "everything" falls in price. 

So, now that we are hitting 10% on this correction in the stock markets, let's focus on a dozen or so quality stocks to add or round up positions for our portfolios. These are stocks we rarely can get with a discount. 

I'll start with a half-dozen dividend growth stocks that actually have growth. One day folks who don't understand that just because a dividend grows doesn't make a company strong, i.e. they borrow to pay the dividend, or look good going forward, i.e. if there's no growth how do they keep growing, or maybe even paying, the dividend. 

I'll then move to growth companies, virtually all in tech, that are part of the massive changes that are occuring in the world. There will be a common theme to all of them - they are all profitable or on the verge of being profitable. No speculations. We don't need to. 

I will follow up tomorrow morning with some options trades for this group, but to be sure, selling cash-secured puts on any of them, a month or two out just a shade below the money is a great trade. Premiums being paid are very high right now, so there is added built in margin of safety. 

Several of our VSL stocks have fallen to the lower-end or even below their assigned "buy ranges." I've discussed this long ago, but buy ranges are not absolute areas to be a buyer. Those are areas to do a last deep dive into the research in order to make a decision. Due diligence is an ongoing process. 

Right now, for all the reasons I've discussed over and over, the stock market is overvalued. While we are on ice now, there is no telling how long that ice stays firm. From government to rising interest rates to trade wars to potential real wars, all on top of stretched valuations and what appears to be peak earnings, there is a lot of reason for caution. 

I know that the feeling of "missing out" can be powerful. I get it all the time when I don't play a hand at the poker table or don't introduce myself to a nice woman. But the reality is that most success is found in saying "no."