Wednesday, July 19, 2017

Wall Street Breakfast: More Record Highs For Equities?

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Despite some of the slowest trading of the year over the past few sessions, U.S. stock indexes continue to notch record highs, with the summer sun heating up markets. Futures now look poised to continue their bullish run amid a quiet day of economic releases, while investors turn their attention to another slew of corporate earnings. Banking heavyweight Morgan Stanley (NYSE:MS) is among the companies slated to post results before the open.
The risk of deflation has been removed from the eurozone, according to ECB Governing Council member Francois Villeroy de Galhau. "We have made progress, but we have not yet reached the [two percent] target and so there is still a need for our accommodative monetary policy," he declared. "We are adapting its intensity depending on the economic situation."
Top Chinese and U.S. business leaders are urging their governments to quickly solve bilateral trade issues. The appeal came during the U.S.-China business leaders summit, co-hosted by Alibaba's (NYSE:BABA) Jack Ma and Blackstone's (NYSE:BX) Stephen Schwarzman. U.S. Commerce Secretary Wilbur Ross responded by saying that the private sector is well placed to resolve "serious trade imbalances."
The Trump administration is considering a ban on oil imports from Venezuela, sources told Bloomberg, as part of a spate of sanctions to punish President Maduro. Potential disruptions? Venezuela is the third-biggest supplier of oil imports to the U.S., and Gulf refiners like Valero (NYSE:VLO), Chevron (NYSE:CVX) and Phillips 66 (NYSE:PSX) have spent millions tailoring their plants to use its unique brand of heavy, tar-like crude.

Toshiba has resumed blocking access by Western Digital (NYSE:WDC) to data at their memory chip joint venture, amid a feud over the Japanese company's planned auction of the business. Toshiba (OTCPK:TOSYY) previously allowed partial access after a U.S. court ordered a temporary restraining order, but it won an appeal in California on Tuesday.
Apple just announced a new major executive post: Engineering leader Isabel Ge Mahe will be taking on a role as managing director of Greater China, reporting to CEO Tim Cook and COO Jeff Williams. Apple's (NASDAQ:AAPL) China business has boomed over the past half decade, peaking at $61B in 2015, but it has recently stumbled, declining to $46B in 2016 and shrinking for the past five quarters.
Qualcomm is facing a fresh set of antitrust allegations from a group of four companies that assemble the iPhone and other products on behalf of Apple. The accusations, made in a filing late Tuesday, are counterclaims to a Qualcomm (NASDAQ:QCOM) lawsuit filed in May seeking to force the contractors to pay license fees that Apple directed them to stop paying.
"People say ICOs [initial coin offerings] are great for ethereum because, look at the price, but it's a ticking time-bomb," former Ethereum CEO Charles Hoskinson told Bloomberg in interview. "There's an over-tokenization of things as companies are issuing tokens when the same tasks can be achieved with existing blockchains," he said. "People are blinded by fast and easy money." Related: COINOTCPK:BTCSOTCPK:BTSCOTCPK:GAHC
Google Glass is back from the dead, but this time it's targeting corporate customers. Dubbed Glass Enterprise Edition (GOOGGOOGL), the product has been in testing at about 50 companies, including Boeing (NYSE:BA), General Electric (NYSE:GE) and Volkswagen (OTCPK:VLKAY). The device allows workers to see instructional content and permits them to broadcast what they are viewing to others.
Baidu first revealed its open source self-driving tech platform back in April, but Microsoft (NASDAQ:MSFT) just threw its weight behind the initiative, providing cloud services to companies using "Apollo" outside China. More than 50 groups have signed on to build and improve Baidu's (NASDAQ:BIDU) project, including top Chinese carmakers Chery Auto, Great Wall Motors (OTCPK:GWLLY) and Changan Automobile.
More autonomous news? General Motors (NYSE:GM) and Softbank (OTCPK:SFTBY) are among the latest investors in Nauto, a Silicon Valley startup developing self-driving software. "Our aim is to provide the data, intelligence and a cloud platform" to automakers that plan to begin putting self-driving cars on the road from 2020," said CEO Stefan Heck. Previous investors included BMW (OTCPK:BAMXF) and Toyota (NYSE:TM), as well as Allianz (OTCQX:AZSEY).
Daimler is seeking to head off a growing crisis over potential emissions cheating by voluntarily recalling more than 3M Mercedes-Benz diesel vehicles in Europe. The plan, which involves a software patch and avoids complex component fixes, will cost the automaker about €220M. If accepted by officials, it could help Daimler (OTCPK:DDAIF) avoid the massive penalties that beset Volkswagen (OTCPK:VLKAY).
BP is considering spinning off some of its U.S. pipelines into a publicly traded MLP. Tentatively called BP Midstream Partners, it would house its Gulf Coast and Midwest pipeline assets that transport its crude oil, natural gas and refined products. Out of the global oil giants, only Royal Dutch Shell (RDS.ARDS.B) has an MLP, launching Shell Midstream Partners in 2014.
Akzo Nobel CEO Ton Buechner is stepping down due to health reasons, and will be replaced by the company's current chemicals division chief, Thierry Vanlancker. It's the second time he resigned on his doctor's advice, having announced his departure in September 2012, before resuming work a few months later. Earlier this year, Buechner repelled an Akzo (OTCQX:AKZOY) takeover attempt from U.S. rival PPG.
Time for another made-up food holiday. Today is National Hot Dog Day, which means restaurants across the country have free or discounted dogs. It comes in the middle of barbecue season. The National Hot Dog and Sausage Council estimates Americans will eat 7B hot dogs between Memorial Day weekend and Labor Day. Related tickers: TSNKHCNATHCAGOTCPK:NSRGY
Pass the mustard. McCormick (NYSE:MKC) is set to buy Reckitt Benckiser's (OTCPK:RBGLY) food business for $4.2B, adding French's to the company spice rack by beating out several competitors. The American seasonings maker hopes the move will help it achieve "meaningful accretion" to margins and adjusted earnings per share, while Reckitt said it will use the funds to pay down debt.
NBC News is launching a twice-per-day news show called Stay Tuned on Snapchat (NYSE:SNAP) as part of its push to attract younger viewers who tend to watch TV on mobile devices. "This is a concerted effort that is crucial to our future," said Nick Ascheim, head of digital at NBC News. NBCUniversal (NASDAQ:CMCSA) invested $500M in Snap during its initial public offering.
Deal time! Discovery Communications (NASDAQ:DISCA) and Scripps Networks Interactive (NYSE:SNI) are in merger talks, revisiting a deal that was scrapped three years ago. Stocks of both companies shot up in AH trading on the news. Separately, Broadcom's (NASDAQ:AVGO) $5.9B deal to merge with Brocade Communications (NASDAQ:BRCD) has been delayed to allow more time for a governmental review of the transaction.
AT&T is in talks about acquiring the balance of Otter Media, their 3-year-old joint venture, sources told the NY Post. The move is part of a wider effort by AT&T (NYSE:T) to clean up a host of joint ventures ahead of its expected acquisition of Time Warner (NYSE:TWX). Those JVs include stakes in the MLB Network, the NHL Network and the Game Show Network.
Tuesday's Key Earnings
BofA (NYSE:BAC-0.5% posting a drop in net interest income.
CSX (NYSE:CSX-1.9% AH following disappointing guidance.
Goldman Sachs (NYSE:GS-2.6% stung by its trading division.
IBM (NYSE:IBM-2.7% AH with revenue down for another quarter.
Johnson & Johnson (NYSE:JNJ+1.8% raising its profit forecast.
Lockheed Martin (NYSE:LMT-0.6% on strong F-35 sales.
United Continental (NYSE:UAL-3.6% AH issuing flat guidance.
UnitedHealth (NYSE:UNH+0.3% beating earnings estimates.
Today's Markets 
In Asia, Japan +0.1%. Hong Kong +1.4%. China +1.4%. India +0.8%.
In Europe, at midday, London +0.1%. Paris +0.1%. Frankfurt flat.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude +0.4% to $46.79. Gold -0.2% to $1239.20.
Ten-year Treasury Yield +1 bps to 2.27%
Today's Economic Calendar
Companies reporting earnings today »

Will These Be the Top Marijuana Stocks to Own in 2018?

GW Pharmaceuticals, Canopy Growth, and Insys Therapeutics have catalysts that could cause their shares to soar next year.

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The marijuana market is growing rapidly and that's creating a lot of interest in owning marijuana stocks. However, investors need to pick what marijuana stocks to buy carefully. There's likely to be more losers in this industry than winners, and it could be a long time before any of these companies deliver consistent earnings per share.
If you're wondering what marijuana stocks could be top stocks in 2018, you might want to consider the catalysts ahead for GW Pharmaceuticals (NASDAQ:GWPH)Canopy Growth (TSX:WEED)(NASDAQOTH:TWMJF), and Insys Therapeutics(NASDAQ:INSY).

Eyes on the finish line

Unlike marijuana companies that are selling medical marijuana at dispensaries in states with medical marijuana laws on the books, GW Pharmaceuticals is pursuing Food and Drug Administration approval of a marijuana-based drug for epilepsy, and a decision from the FDA could happen early in 2018.

The drug -- Epidiolex -- has already delivered impressive efficacy in late-stage clinical trials, and if the FDA gives it a blessing, Epidiolex can sidestep the risk that Washington, D.C., starts enforcing federal laws prohibiting marijuana sales in states that have legalized it.
Although an approval of Epidiolex isn't guaranteed, results from its trials shows that it reduces the number of monthly seizures in patients with rare forms of childhood-onset epilepsy by about 40%. What makes this finding particularly impressive is that patients participating in trials were heavily pre-treated, having received a median of four prior therapies.
Clearly, Epidiolex offers important new hope to patients whose disease is inadequately controlled by currently available options. According to GW Pharmaceuticals, that's a big addressable market. There are 470,000 children with epilepsy in the U.S. alone, and one-third of epilepsy patients continue to endure seizures despite receiving treatment with existing medicines. Since epilepsy drugs can cost thousands of dollars per year, if Epidiolex is approved and it's priced similarly, it could generate annual sales into the nine figures.
While GW Pharmaceuticals hasn't filed for FDA approval of Epidiolex yet, management has said it's on track to file in the middle of 2017. That suggests a filing will happen soon. If the FDA awards Epidiolex a priority review, then a decision could come six months after the application is accepted by the FDA. Based on that timeline, Epidiolex could be commercially available by the middle of 2018, assuming manufacturing inspections go well and the Drug Enforcement Administration is quick to schedule it.

Going global

The U.S. marijuana market is getting bigger as more states pass pro-pot legislation, but it faces risks because federal laws still schedule marijuana as a Class 1 drug.
Rather than risk the Trump administration's crackdown of marijuana markets in America, it may be a better bet to look north of the border to Canada, where medical marijuana has been legal since 2001 and recreational marijuana could become legal soon.
A person rolls a marijuana cigarette.
The biggest marijuana stock in Canada is Canopy Growth, the well-funded marijuana producer behind the popular marijuana brand Tweed. Canopy Growth has over $100 million on its balance sheet, and it did $40 million in marijuana sales last fiscal year. It's using its deep pockets and cash flow to boost grow capacity, acquire smaller competitors, and establish itself as the go-to online marketplace for legal weed when recreational marijuana gets the green light in Canada.
As of now, the Canadian marijuana market is worth about $80 million per year, but analysts think it could grow to $5 billion once recreational marijuana markets are up and running. Undeniably, Canada offers Canopy Growth a big opportunity, but the company isn't relying solely on Canada to fuel future sales.
Last year, it acquired Medcann to gain access to Germany's emerging marijuana market, and in September, German regulators are expected to announce whether Canopy Growth will be awarded one of 10 licenses to grow marijuana within its borders. Canopy Growth also owns part of Bedrocan SA, giving it exposure to Brazil, and AusCann, allowing it access to Australia.
Currently, Canopy Growth's share price values the company at about $1.3 billion. Undeniably, that's a rich valuation for a company with only tens of millions of dollars in sales and no profits last year. However, if the recreational market in Canada (and elsewhere) leaps forward in 2018, shares could still head higher.

Getting back on track

It's been a rough go for Insys Therapeutics investors. The company's been under scrutiny ever since former executives were arrested on charges of illegally marketing its opioid spray Subsys for off-label use. A revolving door in the C-suite and ongoing investigations have done little to help the company stay focused on launching its marijuana-based drug, Syndros, and developing cannabidiol drugs like Epidiolex for tough-to-treat epilepsy.
The challenges have sent shares reeling, but Insys Therapeutics has a new CEO, and he's saying all the right things.
On the company's last quarterly conference call, management said it wants to resolve outstanding investigations, and now that it has DEA scheduling in hand for Syndros, it should begin marketing it soon. Furthermore, it appears ready to jump-start its drug research program for cannabidiol, a non-psychoactive chemical cannabinoid found in cannabis that's the active ingredient in Epidiolex.
It's anyone's guess when (or if) the company settles investigations, but investors would likely applaud news of that happening. It's also unclear how much of the market Syndros will capture, but the opportunity there is big enough to move the needle for investors, too. Syndros is an oral formulation of the THC-drug Marinol, and the generic Marinol market is worth about $200 million annually. 
Getting its marijuana research and development back up to speed could also be good news. In addition to researching CBD in epilepsy, it's evaluating CBD as a pain treatment alternative to opioids as well.
Overall, this is a beaten-down marijuana play with a lot of potential market-moving news in the coming year or two, and that could make it a top-performing marijuana stock in 2018. 
By Todd Campbell

Tuesday, July 18, 2017

Watch out, Tesla: This Warren Buffett-backed Chinese electric vehicle maker plans US expansion

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  • Warren Buffett-backed Chinese electric vehicle maker BYD has plans to expand its U.S. production
  • BYD sells its electric buses across the U.S., and Denver is one of its biggest customers
When President Donald Trump pushed "Made in America" week starting on Monday, Chinese electric vehicle maker BYD might not have been top of mind.
But the Warren Buffett-backed company has its sights set on expanding in the U.S. market with its Lancaster, California, production facility set for completion next month, Stella Li, president of BYD Motors, told CNBC's "Squawk Box" on Tuesday.

The facility, which employs around 700 people, will be able to annually produce 1,500 electric heavy-duty vehicles, such as municipal buses.
Li said BYD was also expanding into new product lines, such as electric refuse trucks and forklifts.
All in, BYD has already given better-known rival Tesla a run for its money: Tesla sold around 76,000 vehicles in 2016, while BYD clocked in more than 100,000 units in sales.
Li said that BYD's U.S. customer base wasn't just confined to green-focused California — the city of Denver is among its biggest customers.
"Our customer [base] is expanding into multiple [arenas] from public transit bus to the private one," she said, noting her company had orders from Facebook, Stanford University and the University of California, San Francisco.
A BYD Co. electronic vehicle (EV) is charged at an EV charging station at the company's campus in the Pingshan district of Shenzhen, China.
Brent Lewin | Bloomberg | Getty Images
A BYD Co. electronic vehicle (EV) is charged at an EV charging station at the company's campus in the Pingshan district of Shenzhen, China.
Latin America was also a key developing market, she said, with BYD buses widely distributed there.
Li said her company initially faced customer resistance in the U.S. amid concerns that a Chinese company wouldn't stick around very long.
"Now it's much easier," she said, adding that attitudes changed as the company explained it was among the largest battery-makers in the world and could offer a 12-year warranty.
"Then we demonstrate the technology over and over," she said, noting that there were initial concerns about electric vehicles' range and performance, but the technology was now mature and accepted.
"Now more people view BYD as a global company," Li said.
By Leslie Shaffer


Monday, July 17, 2017


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If someone were to ask which types of stocks outperformed all others for the last 50 years, undoubtedly most people would guess that technology, biotech, or energy stocks would be the biggest winners. But shockingly the best performing sector of the S&P in the last 50 years has been Food, Beverage & Tobacco within the Consumer Staple Sector as you can see in the graphs and tables below. (1)
So, while many investors continue to hunt for the next Google, Facebook or some other innovative new technology, software or services company, history reminds us that some of the most lucrative returns are generated by companies that service what people will use every day… staple items such as food and beverages.

As it so happens, Rich Allen, the former CFO of Snapple (one of the biggest winners in this best performing sector in the last 50 years) is back at it again, and this time may have an even bigger opportunity ahead of him.

As you may recall, Snapple was a tiny Long Island beverage company that eventually sold for $1.7 billion dollars (2) and after several other divestitures, mergers and acquisitions, is now called the Dr Pepper Snapple Group – with  a market cap of approximately $17 billion (3).  Let us take a moment to review why Snapple was such a hit and why Long Island Iced Tea Corp. (NASDAQ:LTEA) could be the next Snapple. First, consider their business sector.

Experts are saying the same market conditions which created Snapple’s meteoric rise (consumers replacing carbonated beverages with healthier non-carbonated options) will repeat over the next 5 years as consumers continue to demand better quality and healthier ingredients in almost every food and beverage category (4).

This powerful consumer trend toward better quality and healthier beverage options being experienced in the ready to drink (RTD) tea segment is why experts expect explosive growth over the next decade (4).

US sales were estimated to be $7.1 billion in 2015 according to Tea and Ready-to-Drink Tea: U.S. Retail Market, 6th Edition. The global growth trend is estimated to come in at over 6.6% annually. The projected annual global sales are expected to balloon to an estimated $75 billion globally by the year 2019 and as much as $103 billion by 2024 (4).

Rich Allen (previously of Snapple) has joined Long Island Iced Tea Corp. (NASDAQ:LTEACEO Philip Thomas on a mission to create a sequel to Snapple’s original Long Island success story.

Philip Thomas and Rich Allen lead a qualified team with over 100 combined years of experience with popular brands like Cadbury Schweppes, Arizona Beverage and Independent Liquor.

Why History May Repeat Itself for Rich Allen (previously of Snapple) and Long Island Iced Tea Corp. (NASDAQ:LTEA)

Annual Consumption (US):
In 2015, Americans consumed well over 80 billion servings of tea, or more than 3.6 billion gallons. About 85% of all tea consumed was Black Tea, 14% was Green Tea, and the small remaining amount was Oolong, White and Dark Tea. The U.S. is the third largest importer of tea in the world, after Russia and Pakistan, and the only western country to grow in tea imports and consumption (4).
Approximately four in five consumers drink tea, with Millennials being the most likely (87% of millennials drink tea) to choose tea as their beverage of choice (4).
Daily Consumption (US):
On any given day, more than one half of the American population drinks tea. On a regional basis, the South and Northeast have the greatest concentration of tea drinkers (4).
Iced Tea Consumption:
Approximately 85% of tea consumed in America is iced (4).
Ready-To-Drink Iced Teas:
Over the last ten years, Ready-To-Drink Tea has grown more than 15 fold  (4).

Long Island Iced Tea Corp (NASDAQ:LTEAhas managed to (incredibly) secure the trademark to this very familiar cocktail name.

Leveraging this built-in brand familiarity with management’s industry relationships and distribution channels could result in explosive sales growth for this well positioned beverage company. In fact, since its inception just a couple years ago,

LTEA delivered an incredible 140% sales increase for the year ended December 31, 2016 over the same period in 2015.

LTEA’s beverage product line is currently available for purchase in 23 states, 4 of which have advanced distribution (NY, NJ, CT, MI).  However the 2015 US Ready to Drink Tea Market is estimated at $7.1 Billion in the US (6) and Long Island Iced Tea Corp (NASDAQ:LTEA) has already managed to secure a 3.5% market share in certain channels by leveraging its initial distribution partners (7)Applying this rather conservative 3.5% market share estimate, this translates into future revenue potential of $248 million (or 55 times their current revenue). Could they do it? Based on their past performance as represented in the following chart we will let you come to your own conclusion. 

Long Island Iced Tea Corp. (NASDAQ:LTEA)’s success extends beyond its immediately identifiable brand asset and name. It also has a lot to do with capitalizing on the current consumer trend towards healthier non-carbonated beverages.

Even more fundamental, Long Island Iced Tea Corp. (Nasdaq: LTEAis winning customers over with its outstanding taste. We were impressed by the genuine reactions of taste-test customers captured in the following video

The Value Add:  Long Island Iced Tea Corp. (NASDAQ:LTEA) believes it has positioned the product in a larger container size but at a lower price point than many of the established competitors in their space.  In this light, the company believes it has an attractive replacement option for more established brands. Management has wisely chosen to position the product as a premium brand at $1.00-$1.20 for the 20 oz. size. Compare this to competitors like Tazo, Honest and Gold Peak which sell for $1.49-$1.69 but offer approximately 20% fewer ounces. This clearly makes LTEA a better value proposition which should also positively impact market share above the current 3.5%.

Growth Potential:  
BREAKING NEWS:  On April 19th, Long Island Iced Tea Corp. (NASDAQ:LTEA)announced that it has signed a long-term strategic distribution agreement with Big Geyser, the largest independent non-alcoholic beverage distributor in metro New York.

Big Geyser will be the exclusive distributor of the Company’s flagship iced tea and lemonade with a splash of tea 18oz bottle products in the metro New York region. The new partnership will become effective on April 24, 2017 and cover the five boroughs of NYC, Westchester, Putnam, Nassau and Suffolk counties.
Philip Thomas, Chief Executive Officer of the Company, commented, “Big Geyser is the single strongest distributor in the New York metropolitan market and we are proud to join their dynamic portfolio of iconic brands.

This partnership is transformational in having the potential to increase our metro New York footprint by over ten times to 25,000 doors, and allow us to restructure our business and focus on building our brands alongside Big Geyser.”

In addition to its US growth (not to mention their future US growth potential) the management team has significant international relationships which the company plans to leverage so as to realize market penetration throughout Canada, Central America, and South America.

Acquisition:  In the fourth quarter 2016, Long Island Iced Tea Corp. (NASDAQ:LTEA) announced the proposed acquisition of the assets of ALO Juice® brand in an all stock deal. 

Additionally the ALO products market itself grew 11% in 2016 which represents an additional opportunity for the company to capture even greater market share in the consumer trend away from traditional carbonated beverages to more healthy alternatives.

Lets recap:  Strength in long term returns on lower volatility Consumer Staples and in particular, the stellar returns of Food and Beverage,  a recognizable name, experienced management and a paradigm shift in the types of beverages consumers are demanding. The upside for LTEA appears very strong.

Bai Brands Cast Study (1)

  • Sold to Dr. Pepper Snapple In November 2016 for $1.7bn cash, with stated 2017E revenue of $425mn
  • Represents a 4.0x 2017E revenue multiple
  • Revenues of $5mn in 2013, $17mn in 2013, $50mn in 2014E, $120mn in 2015 and $300mn in 2016

Body Armor Case Study (2)

  • $20mn equity investment from Dr. Pepper Snapple Group (“DPS”) in August 2015 at $171mn valuation
  • Revenues of $30mn in 2014 and 180% YoY growth through August 2015
  • 5.7x 2014 revenue

KeVita Case Study (4)

  • Sold to PepsiCo in November 2016 for $250mn, with 2016E revenue of $60mn
  • Represents a 4.2x 2016E revenue multiple
  • “Latest global food and drug company pursuing bolt-on dealmaking in order to make its’ product portfolio future proof”

To use an example, if you compare the possible $1 billion valuation to the current market cap, this could represent a 3000% return on investment for every dollar invested today, or for an example, approximately $120 a share. In this example, it could mean every $10,000 invested could earn $300,000.

Calculate your return on investment

$x return =$300000

Most investors look back on what we could have made if we had just bought the right stock and gotten in early, but fortunately for you, today you have the opportunity to look forward and actually get in at the ground floor. has received permission to send its readers a special investor kit prepared by the company. To register to receive this kit and future updates on Long Island Iced Tea Corp (NASDAQ:LTEA), enter your email address in the box below. To read our general disclaimer click here.