Bitcoin Soars Above $7,000 for the First Time
Sales are booming at Corning... Why Apple's iPhone could push shares even higher... Bitcoin soars above $7,000 for the first time... In the mailbag: 'Get a clue'...
It was a great quarter for Stansberry's Investment Advisory recommendation Corning (GLW)...
Last week, the glass-and-fiber giant reported better-than-expected third-quarter results.
Sales rose 4% year-over-year to $2.6 billion, while net income grew more than 35% to $390 million. And the company pointed to heavy demand for its hearty, scratch-resistant Gorilla Glass as a big driver of this growth...
Sales in its specialty materials unit – which produces Gorilla Glass – increased 26% to $373 million. Earnings surged 71.4% to $71 million.
Corning shares rallied more than 6% on the news and closed just shy of a new 52-week high. Shares are up about 32% this year, as of Wednesday's close.
Corning's success is no surprise to us...
The company's specialty glass is a critical component in every Apple iPhone and Samsung Galaxy sold (among myriad other smartphones and high-tech devices). And Porter and his team have been following the company closely for years.
They originally recommended Corning in 2012, and folks who followed their advice closed out a better than 70% gain in two years. A second recommendation in 2015 stopped out at a loss. And they just recommended Corning for a third time this August.
But their enthusiasm isn't just about how much Gorilla Glass the company is selling today. It's also about what could come next...
Corning could soon solve a huge problem for Apple...
You see, the consumer-electronics giant has been anxious to makes its flagship iPhone waterproof. But this isn't possible as long as it uses a physical home button on the front of the device.
And as you may have heard, the company's brand-new iPhone X has no home button. It uses a front-facing camera and facial-recognition technology to secure and unlock the device, instead of the fingerprint sensor that was previously located in the home button.
But what you may not realize is that Apple didn't originally intend to do this.
The company originally wanted include both facial-recognition security (Face ID) and fingerprint security (Touch ID) in its new phone. And for good reason...
Apple's facial-recognition software is good, but not yet as reliable as a fingerprint. There are likely to be many "kinks" that need to be worked out. And more important, having both features would enable a far higher level of security than either one alone.
But Apple abandoned this idea...
The company simply couldn't make it work. Why? Because today's glass screens are too thick to work with existing fingerprint scanners. But Corning already has a potential solution to this problem. As Porter and his team explained in the August issue of Stansberry's Investment Advisory...
Corning has been the leading supplier of the screen glass for five generations of smartphones. Its Gorilla Glass – an ion-locked, rugged, thin-plate glass – has been on the market for a decade. Today, it's in its fifth generation...
We think Apple needs Corning's next edition – Gorilla Glass 6 – to restore its lost fingerprint sensor. And we know this can happen because we saw the prototype at the Consumer Electronics Show (CES) in 2016.
In one of the meeting rooms at Corning, we saw an early, working prototype. Corning told us that was future design stuff, though – that the glass was thinner than Gorilla Glass 4 or 5.
What Corning's prototype offers is a way to produce a waterproof phone with a fingerprint sensor. But the challenge is mass producing this glass. It requires complex glassmaking techniques, since Gorilla Glass is built with subatomic processes. But as we said, Corning has released five prior versions of Gorilla Glass, each one thinner than the last – so we are confident Corning will make it possible.
Now, to be fair, Apple is denying this...
It says the move away from its Touch ID fingerprint software was deliberate, and it never intended to include it in its latest iPhone. But its own moves suggest otherwise.
The company made a huge, unsolicited investment in Corning earlier this year. As Apple itself reported in a press release back in May...
Apple today announced Corning Incorporated will receive $200 million from Apple's new Advanced Manufacturing Fund as part of the company's commitment to foster innovation among American manufacturers.
The investment will support Corning's R&D, capital equipment needs and state-of-the-art glass processing. Corning's 65-year-old Harrodsburg facility has been integral to the 10-year collaboration between these two innovative companies and will be the focus of Apple's investment.
Porter's team suspects Apple may still be working on a fix. But even if they're wrong, this large investment is a bullish sign. More from the August issue...
We could be wrong about the coming Apple crisis with no fingerprint sensor... Perhaps Apple is giving Corning $200 million because it needs a Lotus Glass factory for OLED screens.
Regardless, Corning trades at a fair price today... And a $200 million investment from the world's largest company Apple gives us confidence in Corning's future profit growth.
Of course, Corning isn't just a mobile-phone supplier...
It's a large, well-diversified business. It makes glass for televisions and computer monitors, car windshields, and pharmaceutical containers... as well as fiber-optic cable and wireless technology solutions.
Most important, Corning isn't just your typical high-tech growth story...
Corning also qualifies as the kind of business we love to buy cheap and hold forever – it's an example of the kinds stocks we call "capital efficient," or "Global Elite." It also generates plenty of free cash flow. And like the best capital-efficient/Global Elite businesses, it rewards shareholders. As Porter and his team explained...
As you know, we love to see management looking after shareholders. Over the past five years, Corning generated $44 billion in sales. It sent $14 billion – roughly 32% of sales – back to shareholders by way of dividends and share buybacks. What we really like is that Corning has bought back shares when they were selling cheap. Often management does the opposite. But here, Corning's management has excelled.
Normal operating businesses like Corning are valued based on earnings... and how much you pay for them. Between 2007 and 2011, the company's enterprise value ("EV," which is market cap plus debt minus cash) traded on average for about 15 times EBITDA. The company's shares outstanding remained flat over this period. But since 2012, its EV traded on an average of around 10 times EBITDA – a third cheaper.
Management has been on a spending spree since – cutting the share count by 40% since 2012. In general, we like management buying back shares. But we love it when they do it sensibly. Remember, buying back shares means your stake as an investor in the company increases a little each time it reduces the share count. That means you have a larger claim to its earnings.
Porter and his team expect earnings to grow by 50% over the next two years... and to double by 2020.
This quarter's results show they're already off to a great start. And Stansberry's Investment Advisory subscribers already up nearly 10% in about three months.
Elsewhere in the market, bitcoin continues its march to shocking new heights...
This morning, the digital currency surged to a new all-time high above $7,300. It's now up 600% this year alone.
The latest high follows new speculation that online retail giant Amazon could soon begin accepting bitcoin and other cryptocurrencies as payment.
While the company has officially denied the move to date, reports show it registered three new "crypto"-related websites this week. As Internet trade publication DomainNameWire reported...
Amazon.com registered three domain names yesterday related to blockchain and cryptocurrencies: amazoncryptocurrencies.com, amazoncryptocurrency.com, and amazonethereum.com.
The domain name registrations might suggest that Amazon is getting ready to do something on the Ethereum blockchain or release its own cryptocurrency.
And yes, the company already owns amazonbitcoin.com...
As we've discussed, the entire cryptocurrency market is undeniably 'frothy' today...
Yet, despite the big run-up in prices, one big factor suggests prices will go even higher: Most investors still don't own any cryptocurrencies.
However... we've also reminded you to be very careful if you choose to dabble in these new cryptocurrency markets... They are still in the "Wild West" stage today.
We don't know how this will all play out... It certainly reminds us of the Internet bubble in the late 1990s. Fortunes were made... And then fortunes were lost.
If you decide to speculate, we recommend you do your homework before you put a penny into these "boom and bust" assets.
If you're interested in learning about cryptocurrencies but don't know where to start, we urge you to check out our colleague Tama Churchouse's new advisory, Crypto Capital.
Tama has worked for major investment banks for nearly a decade. He understands the currency markets from the inside out. And he remains incredibly bullish on bitcoin and a select group of other cryptos today.
Again, Tama's special post-webinar offer for Crypto Capital has expired. But it's not too late to take advantage of his 100% risk-free guarantee to try it yourself today. If you're interested, don't wait... This offer will only be available for a few more days. Click here to learn more.
New 52-week highs (as of 11/1/17): Allianz (AZSEY), Alibaba (BABA), Cisco (CSCO), WisdomTree Japan Hedged Equity Fund (DXJ), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), iShares MSCI Japan Fund (EWJ), iShares MSCI Singapore Capped Fund (EWS), iShares MSCI South Korea Capped Fund (EWY), Facebook (FB), Fairfax Financial (FRFHF), Alphabet (GOOGL), Intel (INTC), iShares U.S. Home Construction Fund (ITB), KraneShares Bosera MSCI China A Fund (KBA), AllianzGI Equity & Convertible Income Fund (NIE), Nvidia (NVDA), Overstock.com (OSTK), Sabine Royalty Trust (SBR), iShares MSCI India Small-Cap Fund (SMIN), Tencent (TCEHY), and short position in GGP (GGP).
In the mailbag: An angry subscriber believes we're clueless. What do you think? Let us know at email@example.com.
"You have the audacity to call the title of your [Digest] 'The Lowest Point in Our Nation's History,' and yet no mention of the moron in the White House? Seriously? Why do you think that there is such despondency among so many people? It isn't our debt. It isn't our health care (which was doing just fine until the Administration decided to de-finance it). C'mon guys. Get a clue." – Paid-up Stansberry Alliance member George Gagliardi
Brill comment: Sorry, George, we hate to disappoint you, but these problems didn't begin last November. If you could set your political biases aside for a moment, you might see that it was despondency that likely got Donald Trump elected in the first place.
And – at the risk of angering many more readers – no, you can't place the blame for today's problems solely on former President Barack Obama, either.
This trend began decades ago when the dollar was unlinked from gold. Real wages have gone nowhere for nearly 50 years... slowly hollowing out the middle class in the process.
Economists like to talk about the "recovery" from the 2008-2009 financial crisis. But the reality is huge swaths of this country have been in recession – or even depression – for an entire generation. The problems we're seeing today... the violence... the hatred... the epidemic of drug abuse and suicide... the erosion of traditional middle-class values... these are merely symptoms, or "second-order effects," of this trend.
Of course, foolish and corrupt politicians on both sides of the aisle have done plenty to make things worse. They've confused the issues, promised "something for nothing," and placed the blame on whichever scapegoat was popular or convenient at the time. They've blamed outsourcing, globalization, the rich, the poor, foreigners, immigrants, speculators, and more... never understanding (or worse, intentionally concealing) that the fundamental problem is the fiat currency system itself.
November 2, 2017