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How to be the world’s best ‘drug dealer’

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From Stansberry Research:

Most companies try to get you hooked on their products.

Some do it literally…

Take cigarette makers, for instance. As anyone who has tried to stop smoking can tell you, quitting can be an awful experience.

Research shows that nicotine can be just as addictive as “hard drugs,” like heroin or cocaine. Symptoms of nicotine withdrawal include irritability, headaches, insomnia, and even depression.

For cigarette makers, the addictiveness of nicotine-laden products creates a lot of repeat buyers.

As a result, companies that sell addictive products like these often make great investments.

Altria (MO) makes Marlboro cigarettes, the top-selling cigarette brand in the United States. Over the past decade, Altria’s stock has produced a return (including dividends) of more than 470%. That has far outpaced the S&P 500’s 280% return.

Alcoholic-beverage producers are another great example… Constellation Brands (STZ) distributes Corona beer in the U.S. and also owns Svedka, America’s second-most popular vodka brand. The stock is up nearly 1,500% since 2008.

Or look at companies that sell sugary and caffeinated drinks…

Monster Beverage (MNST) is a leader in the energy-drink market. Many of its popular drinks are made with sucrose or glucose (both types of sugar) and caffeine. Its stock is up about 1,100% over the past 10 years. And last week, we told you about America’s favorite chocolate maker, Hershey (HSY). Readers who followed Porter’s advice in December 2007 are enjoying gains of more than 200% so far.

Of course, some investors avoid businesses that sell products they don’t personally use or that they disapprove of… But our job isn’t to pass judgment or promote “moral” trends. Our job is to look for the best investment ideas to share with our readers.

That said, nobody who works a 9-to-5 job objects to the product sold by the company we’re looking at today.

Like Monster Beverage’s drinks, most Starbucks (Nasdaq: SBUX) products are loaded with caffeine… And its stock is up about 1,600% in the past decade.

The company has been around since 1985 and now brings in $24 billion in annual revenues. It produces more than $2 billion in free cash flow… and has almost 30,000 locations around the world where customers can get their fix. The company is also rapidly adding more international locations, especially in China.

With its ubiquitous coffee shops and iconic brand, we call Starbucks a “Global Elite” business. According to Forbes‘ ranking, Starbucks’ $16 billion brand is the 34th-most valuable in the world. The company uses its brand to generate tremendous shareholder value.

Caffeine is a part of millions of people’s daily routines. It’s not hard to see why, considering its positive side effects include increased alertness, higher energy levels, and a generally improved mood.

Plus, this “drug dealer” is conveniently located… You’ll find a Starbucks on almost every corner in urban areas. Starbucks has about 14,000 locations in the U.S. That’s roughly the same amount as McDonald’s. So Starbucks is reaching saturation in the domestic market…

With growth slowing in the U.S., you might think Starbucks’ brightest days are behind it. They aren’t. Its biggest potential market – China – is still largely untapped. Starbucks opened its first store in China in 1999. By early 2008, the company still had just 250 stores there.

But today, it has 3,400 stores in 140 Chinese cities. Its goal is to operate 6,000 stores in 230 cities across mainland China by the end of fiscal 2022. The company plans to add about 600 net new stores in the country per year.

Management believes that China can become the company’s largest market in the world. Yet, China still only represents about 20% of Starbucks’ total annual revenue. That goes to show the massive potential in the most populated country on Earth.

Despite Starbucks’ bright prospects and rapid expansion in China, its shares have dramatically underperformed the S&P 500 over the past three years. And an announcement this summer didn’t help…

Back in June, Starbucks warned that same-store sales growth was slowing. The company also announced it would close about 150 poorly performing U.S. stores in cities where many Starbucks stores already exist. That’s about triple what it typically closes per year.

Starbucks shares plummeted 9% the day after the warning. By the end of June, the stock had fallen by more than 15%. It hit $49 a share, the lowest price in more than three years.

But the market was focused on the wrong thing…

Despite slowing same-store sales growth in the U.S., international expansion has fueled top-line growth.

Overall, Starbucks’ sales growth has averaged more than 11% since 2010. The company grew revenues from China 17% last quarter.

Investors need to look at the long-term growth opportunities in the largest country in the world.

Since hitting lows at the end of June, Starbucks shares have rebounded. And with a lot of growth ahead of it – thanks to China – the company should continue to do well in the coming years.

Sometimes investing is simple.


Porter recommended Starbucks to Stansberry’s Investment Advisory readers in October. Subscribers who followed that advice are sitting on gains of around 20%.


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Charts show steady investor optimism, more upside for stocks

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The stock market rally that began 2019 has not yet run its course, even with Tuesday’s Washington-induced surge, CNBC’s Jim Cramer said after consulting with technician Carley Garner.

“The signs suggest that this market can have more upside before the rally exhausts itself,” Cramer recapped on “Mad Money.” “Eventually the market will become too optimistic and stocks will peak, but we’re not there yet.”

Garner, the co-founder of DeCarley Trading and author of Higher Probability Commodity Trading, has an impressive track record. In mid-December, one week before the Christmas Eve collapse and subsequent rebound, she told Cramer that pessimism was peaking and stocks were due for a bounce.

But now that the S&P 500 has gained over 15 percent since those midwinter lows, it’s worth wondering the reverse: what if optimism is approaching its peak?

Lucky for Wall Street, Garner says it’s not. She called attention to CNN’s Fear and Greed index, which uses a variety of inputs to measure what CNN sees as investors’ chief emotional drivers.

Right now, the index sits at 67 out of 100, signaling more greed than fear, but still “a far cry from the extreme levels where you need to start worrying,” Cramer explained. When the major averages peaked going into the fourth quarter of 2018, the index hit 90, and according to Garner, “we usually don’t peak until we hit 90 or above,” he said.

Add to that the fact that only half of professional traders and investors polled for the most recent Consensus Bullish index said they felt bullish; the recent downtrend in the Cboe Volatility Index, which tracks how much investors think stocks will swing in the near future; and that, historically, this is a good time of year for stocks; and Garner sees more momentum ahead.

The S&P 500’s technical charts seem to uphold Garner’s theory. Its weekly chart shows fairly neutral readings for two key indicators: a momentum tracker called the Relative Strength Index and the slow stochastic oscillator, which measures buying and selling pressure.

“Even if the S&P 500 keeps climbing to, say, … 2,800 — up 2 percent from here — Garner doesn’t anticipate either the RSI or the slow stochastic [to] hit extreme overbought levels,” Cramer said, adding that the technician could even see the S&P climbing to 3,000 if it breaks above the 2,800 level.

If Garner is wrong and the S&P heads lower, she said it could trade down to its floor of support at 2,600, and if it breaks below that, fall to 2,400. But that scenario is highly unlikely and, if it happens, would be a buying opportunity, she noted.

The S&P’s monthly chart told a similar story, Cramer said. The index is currently trading at 2,746, between its “hard ceiling” at 3,000 and its “hard floor” of 2,428, he said, which means it’s “basically in equilibrium.”

“To Garner, that means going higher is the path of least resistance for the S&P,” the “Mad Money” host said. “Once the S&P climbs to 2,800, or perhaps … to the mid-2,900s, that’s where Garner expects things will turn south and the pendulum will start swinging in the opposite direction.”

“Remember, … Carley Garner has been dead-right, and the charts, as interpreted by Carley, suggest that this market still has some more upside here,” Cramer continued. “But if we get a few more days like this wild one, she thinks we’ll need to start worrying about irrational exuberance. For now, though, she thinks we are headed higher, and I agree.”



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What Jeff Bezos’ private life means for investors

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Daniel Ek, chief executive officer and co-founder of Spotify AB.

Akio Kon | Bloomberg | Getty Images

Daniel Ek, chief executive officer and co-founder of Spotify AB.

Cramer said Wall Street has misread Spotify‘s latest earnings report and guidance, and that misunderstood stocks like these give investors an opportunity to make some money.

he called out stock analysts like Everscore ISI’s Anthony DiClemente who have downgraded the equity over concerns about subscriber growth.

“I think this is lunacy,” said Cramer, who has been bullish on the music streaming platform since it went public last April. “It’s like the market just doesn’t know how to read this company or its quarterly guidance. In my view, Spotify is very much on the right track.”

The stock was rocked after a seemingly mixed quarterly earnings released Wednesday, Cramer said. After Spotify reported lower-than-expected sales, tight cash flow and conservative guidance across the board including subscriber growth, shares sold below $129 at one point in Thursday’s session.

But Cramer noted that the company beat expectations on operating profit and gross margin, which was 120 basis points higher than was asked for.

“I think the sellers were missing a lot of context here and the context is something I like to talk about a lot and it’s called UPOD. They under promise … and then they over deliver,” he argued. “At this point, CEO Daniel Ek and his team have established a track record of giving cautious guidance—under promise—and then beating it—over delivering.”

Spotify’s guidance includes planned investment costs and the company could “become the premier platform for podcasts,” a hot market for hard-to-reach millennials, Cramer said.

Click here to read Cramer’s full take.



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Charts show investors ‘can afford to be cautiously optimistic’

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Investors can afford to be “cautiously optimistic” at this point in the stock market’s cycle, CNBC’s Jim Cramer said Tuesday after consulting with chartist Rob Moreno.

Moreno, the technician behind RightViewTrading.com and Cramer’s colleague at RealMoney.com, sees a convoluted path ahead for stocks. After calling the December bottom, Moreno noticed that the Nasdaq Composite’s late-2018 decline was about a 24 percent drop from peak to trough.

That’s important because, in a bull market, stocks tend to see “periods of consolidation — pauses in a long-term bull run,” Cramer explained. “To [Moreno], the decline here looks very similar to what we saw from the Nasdaq in 2011, 2015 [and] 2016,” three consolidation periods of recent past.

If he’s right, that could be bad news for the bulls, who may have to wait at least seven months for stocks to break out of their consolidation pattern, during which they tend to trade in a tight range, Cramer warned. But Moreno still sees some opportunity for investors.

“If you believe his thesis about the market — that we’re in a consolidation period, one that will last until September — then you can afford to be … cautiously optimistic right now,” Cramer said on “Mad Money.”

Part of Moreno’s confidence came from his analysis of the S&P 500’s daily chart, which also included the support and resistance levels from its weekly and monthly charts.

Even after a 16 percent rally from its December lows, Moreno saw more room to run for the S&P based on its Relative Strength Index, or RSI, a technical tool that measures price momentum. The RSI, he explained, hasn’t yet signaled that the S&P is overbought, and the Chaikin Money Flow, which tracks buying and selling pressure, shows big money pouring in.

“Moreno thinks that these new buyers are the kind of investors who won’t be panicked out of their positions by short-term volatility,” Cramer said, adding that the technician sees about 3.5 percent more upside for the S&P before it hits its ceiling of resistance at 2,818.

But if the S&P manages to trade above its ceiling of resistance and return to its October highs, Moreno expects a “synchronized reversal” in the stock market that could crush the major averages, the “Mad Money” host warned.

“At least until September, Moreno says you should be a seller if the averages approach their October highs — that’s around 2,930 for the S&P 500,” Cramer said. “Eventually he expects a breakout from these levels, but it won’t happen any time soon.”

So, what’s the right move for investors? According to Moreno, not all is lost. He still expects to see strong gains — a roughly 7.5 percent move — before the current rally peters out. But he doesn’t want buyers to get too trigger-happy, especially considering the months of sideways trading he’s predicting for 2019.

“Until [September], he expects the market to trade in a fairly wide range, with the S&P bouncing between 2,350 and 2,930. For now, we’re headed higher, but he says you should use these key levels as entry and exit points until the consolidation pattern finally comes to an end later this year and the averages resume their long march higher,” Cramer said. “Even if he’s right and this rally will lose its steam after another 7.5 percent gain, that’s still pretty good, but I am very wary and it makes me want to do some selling after this run.”



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