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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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Retail earnings reports, China trade impact

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CNBC’s Jim Cramer on Friday said he expects more of the same in the week ahead of stock trading.

“Next week, once again, is all about trade and retail,” the “Mad Money” host said. “This is the week when most retailers report, so we will be listening closely to what they say about the trade war.”

Monday: Trade watch

The stock market will confront the same issues on Monday as the week prior. The days following will see a lot of retailers hold conference calls, and Cramer is looking to see what they have to say about tariffs on Chinese imports.

“The market will punish companies that source in China and reward companies that don’t, because that’s what [President Donald Trump] is doing,” he said.

Tuesday: Home Depot, TJX, Nordstrom

Home Depot: The home improvement retail giant reports earnings before the bell. Cramer is expecting weather to weigh on earnings again.

“There’s much too much rain this gardening season, and I bet that hurt them,” he said. “I still believe Home Depot can tell a decent story about trade, but it won’t matter if gardening season, their equivalent of Christmas, turns out to be a bit of a bust.”

TJX: The T.J. Maxx parent delivers its quarterly results to shareholders in the morning.

Nordstrom: The luxury department chain has an earnings call at the end of trading. The stock is down more than 20% this year and more than 27% in the past 12 months.

“At these levels, it pays you a 4% yield. I think it may be too cheap to ignore,” Cramer said.

Wednesday: Lowe’s, Target

Lowe’s: Lowe’s, the main rival to Home Depot, presents its quarterly earnings before the market opens. CEO Marvin Ellison is guiding the home rehab chain through a turnaround.

“Wall Street loves Ellison, though,” Cramer said. “If Lowe’s gets hit, either before or after the quarter, I’d be a buyer of the stock.”

Target: Target comes out with its latest results before trading begins. The stock is about $20 per share off its September high and has a 3.6% yield.

“I know it’s battling both Walmart and Amazon, which might be too much competition for any one company, ” Cramer said. “But I think CEO Brian Cornell’s doing a terrific job. You know what, I like the stock here.”

Thursday: Best Buy, Splunk

Best Buy: The tech gadget store reports earnings in the morning. The stock is up 30% this year, and Cramer is warning not to take a chance on it at current levels.

“I’m betting they’re going to have to talk about tariffs on the whole darned conference call,” he said.

Splunk: The software analytics company, one of Cramer’s “Cloud King” stocks, presents its financial report after the market closes. Cramer expects Splunk to put up a good conference call out of CEO Doug Merritt. He said Merritt continues to deliver on promises.

“I like it a lot. … [It’s got] no China exposure — I say buy,” he said.

Friday: Foot Locker

Foot Locker: The shoe retailer will lay out its quarterly report for investors before stocks start trading. With a presence in shopping centers across the country, Foot Locker carries Nike, Adidas, Under Armour and a range of other sports apparel brands in its stores.

“The stock’s been held back by trade war worries,” Cramer said. “I bet it will prove to be immune, or at least more immune than most people think.”

WATCH: Cramer breaks down the week ahead in earnings

Disclosure: Cramer’s charitable trust owns shares of Amazon.com and Home Depot.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer’s world? Hit him up!
Jim Cramer TwitterFacebookInstagram

Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com



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Charts suggest markets could soon get a deep correction

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CNBC’s Jim Cramer said Thursday that his colleague is warning that danger could be on the horizon for the stock market.

The “Mad Money” host took a look at chart analysis as interpreted by technician Carolyn Borogen, Cramer’s coworker at RealMoney.com who also runs FibonnacciQueen.com, to understand what could come of this volatile market.

The major U.S. averages were taken for a ride this week as investors attempted to gauge whether the United States would raise existing tariffs on imports from China on Friday. Because of this uncertainty, the best way to get an empirical reading of the market is through studying chart action, Cramer said.

The high-to-high cycles, as explained by Boroden, in the weekly chart of the S&P 500 is cause for concern, the host said.

Highs on the index have ranged between 31 weeks and 36 weeks, and the most recent peak was recorded last Friday, he said. Prior to that, the last major high was set in September, which preceded the stock sell-off in October.

Markets tend to repeat themselves, and because stocks sold off this week after a big run, Boroden thinks there could be cause for concern.

“In fact, she’s looked at a series of previous high-to-high cycles, and what she’s noticed is that there’s a whole confluence of them coming due this month,” Cramer said. “That’s why she’s throwing up a caution flag, because Boroden thinks we might finally get a deep downside correction — even deeper than what we’ve already experienced during hell week.”

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These 6 stocks could make or break the S&P 500’s run

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Call them the Supersized Six.

Microsoft, Amazon, Apple, Alphabet, Facebook and Berkshire Hathaway — six of the most highly valued companies in the S&P 500 — don’t just boast the index’s biggest market caps.

In fact, those six companies are worth about as much as the bottom 290 companies in the S&P combined. Taken together, their market caps total $4.2 trillion, while the bottom 290 S&P companies are worth roughly $4.3 trillion.

It’s fairly common knowledge that the top 50 S&P stocks are worth more than the bottom 450, and it’s not unusual that the market is frequently this “top-heavy,” says Carter Worth, chief market technician at Cornerstone Macro.

But the concentration in these six names is noteworthy, and it could mean trouble for the market, Worth said Tuesday on CNBC’s “Fast Money.”

Considering the influence they have over the S&P’s direction, it makes you wonder: “Is it an index, or is it a few big names that drive everything?” Worth said. “That’s what makes beating the index so hard.”

He called attention to this chart tracking the six-stock basket against its 150-day moving average, as well as the number of times it has traded above or below that average.

“Literally, every single time we have gotten this far above the 150-day moving average, we have peaked. It is right at that level yet again,” Worth said, pointing to the uptick in the bottom panel’s trend line. “So, as this goes, so goes the market. I think you’ve got a crowding that’s not so good. Just to put it in real context, think of those six names relative to the S&P. It’s all so dependent on these big names.”

Moreover, while the market’s “heavy hitters” have made up 15% of the S&P’s total market cap, on average, since at least the 1990s, that percentage is also ticking up, Worth noted.

“We’re starting to get back to a level that is typically indicative of when markets peak. That’s ’07, so forth and so on,” he said. “None of this is particularly healthy.”

By market cap, Microsoft is worth about $963 billion, Amazon is worth $949 billion, Apple is worth $969 billion, Facebook is worth $540 billion, and Berkshire Hathaway is worth $515 billion.

The broader market mounted a recovery Wednesday, with the S&P lifting off its Tuesday lows early in the session.



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