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Category: Super Stock (Page 1 of 11)

Marijuana Sales Strong During Covid Enviroment

For investors looking to get ahead of current trends, you need to look at the current environment especially in covid-19 to see what businesses are thriving currently and will continue to prosper going forward. There has been much positive news about the marijuana industries. During the shutdowns, the marijuana retail store was considered an “essential business” which meant it was one of the few businesses that remained open.

In Illinois, there were lines to get in the first opened retail marijuana dispensaries when they first legalized marijuana. There was a recent article mentioned that “US retail marijuana sales are on pace to rise 40% in 2020, near $37 billion by 2024”. The Chicago Daily Herald mentioned June was the best month for the Illinois marijuana dispensary.

A major growth initiative for the marijuana business would be having access to bank lending. Currently, this is not allowed in the United States of America. You cannot allow lending to a product that is deemed illegal. The marijuana businesses would get this growth with the passing of the Safe Banking Act which would allow lending to cannabis businesses. Last month, the House passed the Heroes Act which included the Safe Banking Act as part of the stimulus plan.

To get the Safe Banking Act finally approved, it would need to be approved by the senate and signed by the President. These are a couple tough hurdles to get through but something that will eventually need to be passed as the legalization of marijuana becomes more prevalent.

Granite Point Mortgage Trust – Strong Buy!

Granite Point Mortgage Trust (GPMT) is a mortgage reit that purchases floating-rate mortgage loans. From the initial outlook, especially at this time, purchasing commercial loans is risky. That means their loans are not backed federally like agency debt. To remedy this concern, they do use less leverage than other mortgage reits. At 63% loan-to-value, they are more conservative in the other players in this space.

However, even with a 63% loan-to-value, there is still lots of risk for default. However, their earnings report showed from a couple weeks ago that their is plenty of upside in this stock. First, their book value was a very high $17.43. At their current stock price of $5, the stock is trading at a very discounted value that is more than 70% off. This is the most discounted mortgage reit out of all the stocks that invest in commercial loans.

Digging deeper into the earnings report, they reported that only one of their commercial loans did not make the payment for the quarter. That means 123 out of 124 of their mortgage loans are current. This shows that the management is experienced to handle this recession and are conservative to make the company can survive.

You might wonder why their price is so cheap compared to their competitors. One of the main issues is they suspended their dividend. Their competitors continued to pay a dividend which kept their stock price higher. The should be a positive for investors wishing to get into GPMT.

You get in at a very affordable price for a stock that will pay a strong yield over 10% when they put the dividend back in place. There was a sell-off when the dividend was suspended. Many expected that GPMT might go bankrupt or get “margin called” on their portfolio. However, none of this was true. The company was just acting conservatively and making sure they have enough reserves to handle the situation.

At the current price of $5, there is plenty of upside in the stock in both price appreciation and dividend yield. Their most recent dividend was $0.42 which was recorded on December 31, 2019. If that dividend gets reinstated on the 2nd half of 2020, you can expect a dividend yield of 33.6% at a purchase price at $5. I would be more conservative and expect them to put the yield at 10% though. Either way, the stock is really cheap and you have plenty of upside from here.

America First Multifamily Investors – Tax Exempt Income

ATAX, America First Multifamily Investors LP, holds mortgage revenue bonds in majority multifamily apartments and student housing. They hold the first lien on these buildings which means they are the first to be able to foreclose if the landlord cannot make payment. The company has been around for almost half a century and have been consistently paying dividends every quarter. They are a very conservative company with a very experienced team.

With the covid-19, there stock has had a dramatic drop from being over $8 to now being under $5. Since they offer a $0.50 per year dividend, you are getting over a 10% dividend at today’s levels. It’s rare to see the current price being below $5. Each time that it fell below $5 per share the stock ripped back upwards. For the long-term buy and hold investor, you are getting a nice 10% dividend that is majority backed by tax-free income.

That means if you have a federal income tax at 32% you still do not pay any taxes for the dividend that comes out of ATAX. They are able to do this by investing in low-income housing which gets tax benefits. Of course, not all their income is tax free, but they will do their best to make sure it is tax exempt.

With an experienced team in place and first lien holders to housing, America Family Multifamily Investors is a great long term investment. Even for those looking for appreciation, there is plenty of upside in this investment. I expect the price to spike upwards with the after stock market earnings call later today.

Expect More Downside and More Bargains

This has been the most rapid drop in the stock market EVER! The closest one to do this dramatic drop was in 1987 with the oil crisis. We are now facing an oil crisis but that is in small part of the major issue with the Covid-19 virus shock which is a global epidemic that will affect substantially affect the economy. The government has just started the stimulus plan early to keep the economy and banks going. The House has just passed the $2 trillion stimulus plan which was recently signed by Senate and President Trump. In 2009-2009 in the Great Recession, the stimulus plan came later in the recession which meant a major mess for the economy and affected many households and businesses.

This expected stimulus plan will bring money for big businesses, small businesses, wall street, and families almost immediately. The form of this stimulus is planned to come quickly without major paperwork to help Americans as quick as possible. In addition, the Fed Chairman Jerome Powell also planned earlier this week to provide Unlimited QE, purchasing of Mortgage-backed Securities and stocks, and possibly even supporting the stock market by purchasing ETFs. The government even has given a contract to BlackRock to stimulate the economy by purchasing in the bond market.

There will be plenty of bargains moving forward but a couple recent ones that come to mind are in the mortgage-backed securities market. There are two stocks AGNC Investment Corp (AGNC) and Annaly Capital Management (NLY) that invest in primarily Agency securities. These Agency securities are backed the government which means they are insured by the government. These are the safest of the mortgage reits and will perform well in the long term. The short-term will have plenty of volatility and can definitely go down further in the market.

On the closing of March 27, 2020, Annaly Capital Management (NLY) closed at $6.13 with a yield of 16.3%. AGNC Investment Corp (AGNC) closed at $13.15 with a yield of 14.6%. These dividend yields are absurdely high and most likely will drop as book value goes down with the economy recession. However, there stock prices are very cheap and for the long-term investor will bring massive returns.

For the more conservative investor, I recommend the preferred shares which all earn a substantial return over 10%: NLY-PD returns 8.9%, NLY-PG returns 8.3%, AGNCN returns 7.8%.

I recommend watching these and purchasing them at a LOWER price as the bear market continues. There will be plenty of bargains for the long-term investor.

Investing in Marijuana and Arbitrage Opportunity in Origin House

The Safe Banking Act held a hearing last week on tuesday AKA the SAFE (Secure and Fair Enforcement) Banking Act. This act was passed on March 26, 2019 by the House Committee. If this act passes the senate, then it will be sent to the president Donald Trump to give the final approval.

President Donald Trump was asked by reporters during before his flight to the G-7 summit in Canada about the bill regarding marijuana. He told them that “I support Senator Garner. I know exactly what he’s doing. We’re looking at it. But I probably will end up supporting that, yes.”. Just like that, Donald Trump is giving huge approval for the SAFE act. There is no reason why he wouldn’t especially since this would bring additional revenue to the USA and it would mean access for more funds to go into marijuana businesses.

Currently, marijuana is considered a “Schedule I” drug in the USA. It is estimated at $10.4 billion in 2018 and has 250,000 jobs devoted to the handling of plants. There are ten states that have legalized marijuana for recreational use and there are 33 states that have legalized it for medical use.

In 2019, New York, New Jersey, Illinois, and Connecticut are up next for legalizing marijuana. Illinois actually just recently passed the act and it will become legal for recreational usage on January 1, 2020. Illinois is also the home of the headquarters of Cresco Labs (CRLBF).

Cresco Labs Inc. (CRLBF) is a publicly traded US cannabis company. They have been very active acquiring and merging with multiple companies to become a powerhouse in the marijuana industry. They hold dispensaries for wholesaling the products and retail stores to sell recreational use and medical use of marijuana.

Earlier this year in April 1, 2019, Cresco Labs Inc. made a partnership to merge with CannaRoyalty Corp. d/b/a Origin House (ORHOF) for an all stock transaction where holders of common shares of Origin House would receive .8428 subordinate voting shares of Cresco Labs for each Origin House share.

However, the merger had a hurdle with the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 which required Cresco Labs to file a notification with the U.S. antitrust authorities and observe a waiting period before completing the transaction. This also gives the U.S. time to review the merger and require certain conditions to allow the acquisition to occur.

On July 26, 2019, Origin House annouced the sale of AltMed where it owned a 5.1% equity interest. Cresco Labs Inc. is prohibited under state law from acquiring additional positions in the Florida market therefore this was part of the conditions to allow the acquisition to occur.

On the closing of July 26, 2019, Origin House closed at a price of $4.79. If the merger were to happen today, a single share of Origin House would convert to .8428 of a Cresco Lab share which would be $6.93. This would mean your stock value would increase 45%!

Right now, you have an amazing and rare opportunity to acquire Origin House shares at a really lucrative arbitrage opportunity with Cresco Labs. This could not have occurred with the U.S. antitrust authorities intervening with the transaction. There are many investors that sold out not being patient with this investment but also not believing that the merger will happen.

On July 17th, Curaleaf Holdings (CURLF) acquired Grassroots for a value of $875 million. Origin House only has a market cap of $331 million. Cresco Labs has an opportunity to use the acquisition by Curaleaf Holdings as an argument to acquire Origin House to remain competitive if the U.S. antitrust authorities still have issues with the transaction.

This is a great opportunity to go long in the marijuana industry. Even if the acquisition does not go through, Origin House will most likely succeed on their own or be acquired by another company as the cannabis industry continues to mature in the future.

Getting Defensive with Treasuries

The stock market has made an amazing run this year. The S&P has had a 14% gain starting from December 23, 2018 where it bottomed. As much as I hear the bullishness of this market and confidence in the market, I have to fathom that we are at turning to the month of May where statistics show that going forward the returns are much less which gives the saying “Sell in May and go away”.

With that knowledge, I plan to trim my stock holdings and start increasing my position into treasuries. TLT is an ETF of the iShares 20+ Year Treasury Bond. It is a defensive position that tends to go up when the stock market goes down. I feel this run is almost over now that the best earnings have been posted this week. I also feel that the long-term trend is heading towards a more bearish market.

NXP Semiconductors Target to $125

NXP Semiconductors (NXPI) dropped over 4% after management stated that they have already spent $3.7 billion of the $5 billion dollars on buybacks from the Qualcomm (QCOM) breakup. Many investors thought that they haven’t or used very little of the buyback since there was never a public announcement until now. The stock price ended Tuesday below $90 which is a very nice buy level. On the same day, Credit Suisse gave the stock a target of $125. This is a 38.9% gain if their analyst is correct. Today, the stock is went below $86 as they received a downgrade by Stifel analysts for the entire industry of analog and mixed-signal semiconductors. This is a great buying opportunity for a short-term issue that the analysts are seeing. Remember, NXP Semiconductors’ chips are in both Apple and Samsung phones. It doesn’t matter who wins the phone industry for them. They have chips in both.

The CEO of NXP Semiconductors and President was on Mad Money with Jim Cramer on Tuesday. He had sold millions of dollars of stock when the stock was over $120 per share. He announced that he was buying at these levels at $90 including his CFO was buying their stock as they believe the company is undervalued. He also showed a processor that integrates with the cloud and internet to take advantage through edge processing. NXPI’s largest customers also include Garmin, Continental, and many car manufacturers since their chips are on the sensors of the cars.

I am long this stock and I believe it will do well in the future. The technicals do indicate that the stock could go down further for those that wish to be more conservative but don’t wait too long!

Facebook at Buy Value!

Facebook, ticker FB, dropped in stock share price yesterday and even further today currently down over 4% today after the hearings with congress yesterday. Much of the drop earlier in 2018 was related to fake users that they had to remove which showed that Facebook has less users than originally stated. Remember, that Facebook also owns Instragram which continues to grow its user base and is valued at $100 billion by Forbes if they were its own separate company.

Also, remember that Facebook is still widely known around the world even if their growth has slowed down in the USA market. They also have a cash holdings of $42 billion that should be factored into your fundamental analysis. FB has a PE of 25 while GOOG is at a PE of 50. That fact alone shows you the undervaluation that the market is giving to Facebook. I believe there is plenty of growth in the stock and the stock price does not factor this in.

At the current price, you can’t go wrong purchasing below $163.

NXP Semiconductors – Great Fundamentals but Poor Technicals

As I mentioned in an early article, NXP Semiconductors (NXPI) is a great buy in a fundamental standpoint.  Qualcomm (QCOM) had to abandon the merger without the approval from China.  As a result, Qualcomm also had to disburse $2 billion in breakup fees to NXP Semiconductor as well.

The breakup caused a huge drop in the price as many hedge funds exited their positions.  Many investment funds thought that the merger would get approved at $127 per share.  Therefore, many hedge funds continue to exit their positions causing a rapid drop in NXPI price.

This has caused the stock chart to look rather poor in a technical standpoint.  In such a poor outlook, I even exited my position in the stock.  I will await a better outlook before coming back into the stock.  I will be looking for a modest uptrend to enter a position again.  This means it will be at minimum 2-3 months before I look at this stock.  However, I do believe in the long-term this should be a winner even for those wishing to just buy and hold.

Twitter to $52!

Twitter (TWTR) is such a hot commodity that news outlets produce quotes from it every single day.  The most popular candidate is the President of the United States, Donald Trump, who tweets often multiple times in a single day.  Each tweet getting quoted by CNBC and being deeply debated for the content that he has given.  Recently, even Elon Musk made the Twitter headlines as he mentioned that his company Tesla (TSLA) has the investors to get bought out at $420 per share.  This caused huge changes in the stock price and even had the stock ticker to be pulled from the market while people digested the news.  It has also caused the SEC and many lawsuits to come to Mr. Elon Musk.

Who know that such a small one sentence tweet can cause so much trouble?  Who also knew that you can cause such an impact?  You even see Twitter becoming the top broadcast to the World Cup with over 115 billion impressions.

In June, Twitter hit a stock price high at $46.80.  Goldman Sachs has a target price of $52 and it got nearly close.  However, a couple missteps and the price of Twitter has fallen over 20% recently reaching a low of $31 but slowly creeping back just almost at $33 as of today.

What happened to the stock price?

First, Twitter had a huge announcement about fake accounts.  The amount of fake accounts was much greater than expected.

Second, Facebook had the largest single-day decline on its stock price after second quarter earnings.  Twitter took a lot of impact being part of the same sector.

However, since these two events, the stock price has steadily and slowly gone up.  This proves that the uptrend is in place.  It also shows we have a safety net that the stock price will stay steady instead of continuing to drop.

Now, let’s do some research on why this is a super stock:

  1. Citron predict a $52 price target at end of year
    1. Their research shows that a similar company in China was recently valued at $75 billion.  Twitter has a current market cap at $25 billion.  With a current valuation, Twitter should be at $90 per share.
  2. Goldman Sachs predicts a $48 price target

I believe Twitter is a great buy at prices below $34.  There’s plenty of upside for this debt free company.  It is already priced for worse-case scenario.

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