A Trophy Asset has its 'best quarter ever'... China stocks are rallying... How Jeff Clark got subscribers in on the trend... One critical factor boosting Microsoft's commercial business...
Union Pacific (UNP) railroad is heralding its "best quarter ever"...
Rising shipping volumes have helped the Stansberry's Investment Advisory portfolio stock set records for operating income and revenue...
The railroad pulled in nearly $5.7 billion in second-quarter operating revenue, up 10% from the same period last year. And it reported almost $2.2 billion in second-quarter operating income (earnings before interest and taxes), up from $1.9 billion in the second quarter of 2013.
The stock is trading for more than $101 a share, close to an all-time high.
Union Pacific's big quarter shouldn't have snuck up on anyone. The railroad's results have been improving steadily for several years. Operating revenue in 2013 reached nearly $22 billion, up from $21 billion in 2012 and $19.6 billion in 2011. Operating income at Union Pacific has increased from $5.72 billion in 2011 to $6.75 billion in 2012, and to $7.45 billion in 2013.
Shipping volumes for Union Pacific have been rising this year, up 8%. But they were flat in 2013 and 2012. The railroad attributed much of the rising earnings and revenues to its ability to raise prices...
Union Pacific is the quintessential example of what Porter and his team describe as a Trophy Asset. It's one of two dominant U.S. railroads that operate west of the Mississippi (Warren Buffett-held BNSF is the other). Its rail network is the largest in the U.S. It would be virtually impossible for a new competitor to try and replicate that infrastructure. From 2004-2013, Union Pacific invested $30 billion maintaining and expanding its network.
The companies that hold these one-of-a-kind – or "trophy" – assets make outstanding long-term investments, when you can buy them at the right price. As Porter explained in his special report "How to Own the World's Trophy Assets"...
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Porter originally recommended the railroad in 2012 as part of a broader strategy to protect against inflation as the European Central Bank joined our Federal Reserve in combatting financial crises with huge volumes on newly printed money. Porter predicted that, despite its heavy debt levels, Union Pacific had assets that were likely to become more valuable in the future.
When Porter recommended UNP, it had a market cap of $34.4 billion and traded for a little more than $56 a share. Today, the railroad's market cap totals almost $92.9 billion. The stock is up 88%, including dividends, since his recommendation.
China stocks are rallying...
The Hang Seng Index – which tracks 50 of the largest stocks traded in Hong Kong – is at 24,141, just a few percentage points off the 52-week high it hit in December.
According to the Wall Street Journal, China's new stimulus measures and loosened property restrictions seem to be improving the economy and sparked the rally. In June, China's manufacturing index – maintained by the global bank HSBC Holdings and the research firm Markit Economics – was at 52, exceeding the median estimate of 51. Any number above 50 indicates expansion.
According to Bloomberg, Chinese factory activity hit an 18-month high in July. And government officials in Beijing said China will meet its 2014 economic-growth target of about 7.5%.
Hong Kong – the only place Westerners can buy Chinese stocks – remains one of the world's cheapest markets. But it's drawing more interest from investors looking for inexpensive stocks as the U.S. trades near record highs and other emerging markets extend rallies. The Hang Seng Index is currently trading 9.8 times forward earnings, compared with 16.7 times for the S&P 500.
Three weeks ago… S&A Short Report editor Jeff Clark got his subscribers in on the trend. In the July 2 issue of his service, Jeff recommended his subscribers open a trade on E-House Holdings – a Chinese real estate services company.
Since then, the options Jeff recommended buying shot up in value. When the position was up 79%, Jeff advised subscribers to close half the position to lock in some of those gains. The remaining half-position is up roughly 100%. Subscribers who followed his advice are enjoying a blended return of about 90%.
While it's too late to get in on Jeff's China trade… Jeff just recommended a new position to his Short Report subscribers. This one is on a beaten-down resource stock. Most investors have given up on the commodity it produces… But Jeff says subscribers who follow his recommendation could see returns of 86% in the next five months. And it's not too late to open that trade.
Out of respect to Jeff's subscribers, we can't reveal the details of this trade here. But if you want to find out about it, we encourage you to try a subscription to Jeff's S&A Short Report.
And if you subscribe, you should do it today… because tonight at midnight is your last chance for a big 25% discount on Short Report...
In addition to the big discount, signing up tonight will also give you instant access to all of Jeff's Short Report research, including a special report titled "The Ultimate Home Business." The report highlights two of Jeff's favorite options-trading techniques. He says folks can use these simple techniques to generate significant money from home – without putting in much effort. You won't need to spend money on advertising and you don't need a website to get started. All you need is a computer and an Internet connection. To learn more, click here.
Yesterday, we noted Microsoft's solid earnings. Extreme Value analyst Mike Barrett sent us a few more comments on the software giant's numbers...
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New 52-week highs (as of 7/23/14): Apple (AAPL), Automatic Data Processing (ADP), Apache (APA), Activision Blizzard (ATVI), SPDR S&P BRIC 40 Fund (BIK), Blackstone Group (BX), Chevron (CVX), Dorchester Minerals (DMLP), EMC (EMC), Kinder Morgan Management (KMR), Eli Lilly (LLY), Microsoft (MSFT), AllianzGI Equity & Convertible Fund (NIE), Qualcomm (QCOM), PowerShares QQQ Fund (QQQ), ProShares Ultra Technology Fund (ROM), ProShares Ultra S&P 500 Fund (SSO), Steel Dynamics (STLD), and Vanguard Natural Resources (VNR).
In today's mailbag, two subscribers disagree that our newsletters are "too long." Give us your take at feedback@stansberryresearch.com.
"I am writing in response to the gentleman whose feedback is that everyone thinks the letters are too long and you should 'get to the point.' I disagree completely. The detail in the letters is crucial. I have several research services and yours is my favorite due to the in-depth analysis. If someone wants to get to the point just skip to the last page. You can always not read the whole issue, but you can't read what isn't written. Thanks for your excellent work." – Anonymous
"Today's mailbag letter from David Cobb is a conundrum. How do you explain with bulletproof logic and artful persuasion the merits of a stock recommendation to your new (therefore hesitant) subscribers when your longtime folks trust you with their lives and just want a list of symbols? Sure they could just skip the palaver and scroll down, but the sizzle's in the story. Keep those awesome writers on the payroll – they're worth every penny!" – Paid-up subscriber LAF
"One newsletter says 'go go go on stocks,' then another says the 'sky is falling,' then multiple more pro and con. Then other sources quote the Buffett meter as nasty on stocks and so and so is going to cash getting out of this and that, and then simultaneously the news says the Dow has hit a new high. I'm not drunk yet over it all, but how's a reasonably intelligent person supposed to glean any heads-up common-sense long-term or even short-term strategy out of all the contradiction guys?!" – Paid-up subscriber J.R. Smith
Goldsmith comment: Porter pays his analysts to write freely about what they believe… not to parrot what he believes. Naturally, there will be times where our analysts don't see eye to eye. Ultimately, we provide you with analysis, and it's up to you to decide whether you agree or disagree.
"I enjoy your letters, but do not grasp what you recommend I buy. You talk about top-performing companies you have recommended in the past, but I suspect they have made their run in the market. But WHAT do you recommend that I buy today so that I can have such runs in the future? Frankly, I feel left in the dark." – Paid-up subscriber Dawn Wride
Goldsmith comment: To clarify, you receive the S&A Digest free of charge with any of our subscription-based newsletters. We don't make specific recommendations in the Digest. Whatever newsletter you subscribe to – whether it's True Wealth, Stansberry's Investment Advisory, or something else – will provide you with the actionable research you're looking for.
Regards,
Sean Goldsmith
July 24, 2014
Kim Iskyan: Boots-on-the-ground research in Thailand...
S&A Global Contrarian editor Kim Iskyan recently returned from a trip to Thailand in search of his latest contrarian investment. In today's Digest Premium – excerpted from the June issue of the S&A Global Contrarian – Kim shares some insights from his trip...
To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.
Kim Iskyan: Boots-on-the-ground research in Thailand...
Editor's note: S&A Global Contrarian editor Kim Iskyan recently returned from a trip to Thailand in search of his latest contrarian investment. In today's Digest Premium – excerpted from the June issue of the S&A Global Contrarian – Kim shares some insights from his trip...
As I (Kim) exited the airplane in Bangkok, Thailand's capital, just days after the coup, I was handed a piece of paper.
"The National Peace and Order Maintaining Council have enforced a curfew order from 22:00 to 05:00," it read.
I had never been to a country with martial law... or where the government had just been toppled through a coup. I didn't know what to expect. Camouflaged militia bristling with military hardware on every corner? Fields of barbed wire in downtown Bangkok?
Photos in the international media showing angry protestors screaming into the scared faces of policemen cowering behind large plastic shields stirred my imagination.
The flight from Dubai to Bangkok was two-thirds empty.
"Usually we're packed, but people are staying away because of the coup," an Emirates flight attendant told me.
What I found was not what I expected.
I saw no soldiers, no tanks... not even any police. During my entire time in Thailand, I saw nothing remotely out of the ordinary.
Of course, every coup is different, but Bangkok was just another city going about its regular business. I didn't see any protests while I was there. And as far as I could tell, Bangkok under martial law was just like Bangkok any other day... except that because of the curfew, the day ended at 10 p.m... and there was no CNN or BBC to watch, as a number of television channels were blocked after the coup.
In fact, a lot of people in Bangkok were happy the military stepped in.
Today, an interim government has been installed and a rough timetable for new elections has been announced. Days after the new government took over, it released delayed public investment funds, delivered long-overdue subsidy payments to rice farmers, and approved a long list of pending foreign-investment projects.
Most of the people I spoke with in Bangkok are happy to have a government that can focus on critical policy issues instead of how to quell another round of protests. And the reality is the military government has gotten more done in a month than the democratically installed governments have over the past several years.
And despite its political troubles, Thailand has a lot going for it. The Southeast Asian country is a magnet for investment. It has been dubbed the "Detroit of the East" by the Economist, as it is the world's seventh-largest automotive exporter. Thailand also produces around a third of the world's computer hard drives. And Bangkok regularly figures on the list of cities most visited by tourists in the world... The country annually hosts 27 million tourists.
But a coup (and anti-coup protests) isn't much of a tourist draw... so tourism has been hurt. Thailand's economy shrank by 0.6% in the first quarter of 2014. Also, government investment programs in infrastructure and other projects have been put on hold by the interim government. And in most cases, a military takeover isn't viewed as a good thing by investors.
So on the surface, Thailand looked like it had the criteria for a great contrarian investment. That's why I found myself in Thailand last month, digging deeper into the situation.
– Kim Iskyan
Editor's note: Out of fairness to S&A Global Contrarian subscribers, we can't give away all the details about Kim's trip. To gain access to the rest of his issue – and to get started with your 90-day trial – click here to learn about a subscription to the S&A Global Contrarian.
Kim Iskyan: Boots-on-the-ground research in Thailand...
S&A Global Contrarian editor Kim Iskyan recently returned from a trip to Thailand in search of his latest contrarian investment. In today's Digest Premium – excerpted from the June issue of the S&A Global Contrarian – Kim shares some insights from his trip...
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