The 'Oprah Effect' Continues
'God' is throwing in the towel... A sign of a long-term bottom in crude oil... U.S. producers are 'hedging' again... Weight Watchers soars 25%... The 'Oprah Effect' continues... Doc's 'legal monopoly' keeps churning out cash...
One of the world's most successful oil traders is calling it quits...
Hedge-fund manager Andy Hall – known to other traders as "God" for his prescient energy-market calls – is closing his main fund following big losses this year. As Bloomberg reported on Thursday...
The capitulation of one of the best-known figures in the commodities industry comes after muted oil prices wrong-footed traders from Goldman Sachs to BP's in-house trading unit. At least 10 asset managers in natural resources have closed since 2012, including Clive Capital and Centaurus Energy. Goldman Sachs reported its worst-ever result trading commodities in the second quarter.
"I'm shocked," said Danilo Onorino, a portfolio manager at Dogma Capital in Lugano, Switzerland. "This is the end of an era. He's one of the top oil traders ever."
Hall shot to fame during the global financial crisis when Citigroup revealed that, in a single year, he pocketed $100 million trading oil for the U.S. bank. His career stretches back to the 1970s and includes stints at BP and legendary trading house Phibro Energy, where he was chief executive officer. "Andy Hall is one of the grandees of oil trading," said Jorge Montepeque, a senior vice president of trading at Italian energy major Eni.
According to reports, Hall made leveraged bets that OPEC-led production cuts would cause crude prices to move significantly higher. That clearly didn't happen... and his flagship Astenbeck Master Commodities Fund II lost nearly 30% through June.
As longtime readers know, bear market bottoms are often preceded by the capitulations, failures, and even deaths of the former bull market's heroes. While we're not yet ready to turn bullish, this news suggests a significant bottom could be approaching.
U.S. shale producers are 'hedging' again...
In the meantime, rising shale oil production could keep a lid on crude prices awhile longer. The latest data show U.S. producers are using the recent rally to hedge their production again. More from Bloomberg...
Demand for the contracts that producers use to guarantee price levels soared after 2018 West Texas Intermediate crude returned to $50 a barrel. At the same time a raft of trades were reported to U.S. regulators last week that showed some producers hedging at levels as low as $45 a barrel, according to data compiled by Bloomberg...
After OPEC and its allies agreed to cut production late last year, U.S. producers hedged in droves, turning the oil market's structure upside down as they sold later contracts to lock in their output. Banks including Société Générale said that this activity had stopped when prices entered a bear market in June. Now, producers are at it once again, adding to the specter of a rising supply outlook in the market.
Most notably, at least 65% of oil production in the Permian Basin – the most important and prolific shale region – is now hedged at $50 per barrel for the rest of the year, according to industry-data firm IHS Markit.
This suggests U.S. shale production could be surprisingly resilient over the next several months, regardless what oil prices do in the short term.
The 'Oprah Effect' continues...
As Porter noted on Friday, Stansberry's Investment Advisory subscribers were up nearly 90% on weight-loss company Weight Watchers (WTW) as of last week.
Shares surged more than 25% on Friday, following the firm's strong second-quarter earnings report Thursday night.
Weight Watchers reported diet-program subscribers jumped 20% in the quarter. Revenue rose 12% year-over-year to $342 million. Earnings jumped an unbelievable 48% to $45.2 million, from just $30.5 million during the same quarter a year ago. And the company raised its sales and earnings forecast for the rest of the year.
In short, the "Oprah Effect" continues to drive the company's turnaround. As new CEO Mindy Grossman noted during Thursday's conference call with analysts...
There is no doubt that the Weight Watchers' long-term collaboration with Oprah Winfrey has certainly accelerated the company's progress since October 2015, with high awareness of her success and happiness with the programs sparking interest and excitement. I am personally looking forward to partnering with her as we transform the brand and business...
By presenting a holistic approach towards a healthy lifestyle, we are shifting consumers' perception of what it means to join Weight Watchers. Yes, it's important that the program deliver weight-loss results, but we are so much more than the number on a scale.
More and more of our target audiences are beginning to view us as a lifestyle-oriented, more modern and relevant brand. And I believe our partnership with Oprah is also helping accelerate this positive shift.
This is exactly what Porter and his team predicted when they recommended shares this spring. As they wrote in the May issue of Stansberry's Investment Advisory...
Many have argued that the Oprah Effect is petering out. At this point, every disciple of the media mogul who might use Weight Watchers has tried it. The low-hanging fruit is gone, they say. But the fact is, most new Weight Watchers customers are not "new" at all. They are previous customers who either got bored with an old program or met their weight-loss goals, but find themselves needing to shed a few pounds again.
As Porter's team explained, Oprah understands this. And she's ready to bring them back. Here's what she told a group of Weight Watchers executives in December...
What I'm most excited about, actually, are all of the ex-members who are a part of the Weight Watchers family who, for whatever reason, left the program or think that the program no longer was suitable to them. I'm interested in bringing those members back or reigniting their excitement about the way they felt when they were first on the program.
Don't underestimate the Oprah Effect. Porter's team pointed out that while the company doesn't disclose statistics, most industry followers estimate that 90% of Weight Watchers customers are women, the majority of whom are older than 35...
Oprah Winfrey is the Pied Piper for this demographic. On The Oprah Winfrey Show, the 70 books selected for Oprah's Book Club episodes sold 55 million copies. And 59 of them made the Top 10 on USA Today's Best-Selling Books list. Oprah wasn't simply cribbing already popular books, either. In 2004, Leo Tolstoy's Anna Karenina topped the best-seller lists on Oprah's recommendation... 127 years after it was written.
When Oprah talks (or tweets), women listen.
Of course, this wasn't exactly a popular opinion at the time...
Weight Watchers was one of the most heavily shorted stocks in the market. Around 10 million shares were held short, out of a total "share float" of only about 13 million actively traded shares.
And it was this combination of massive short interest and quietly improving results that made Weight Watchers such a compelling opportunity. More from that issue...
Many of these investors who claim Weight Watchers is dying a long, slow death shorted shares in 2015 and 2016... and that could hasten our gains. It could lead to a "short squeeze" as the business continues to improve.
If you are unfamiliar with the concept of a short squeeze, Weight Watchers shares offer a great illustration. Short interest reached more than 20 million shares in February 2016. It peaked again in early February this year, when more than 18 million shares were held short. The company's impressive numbers in the fourth quarter 2016 and first quarter 2017 sent the short sellers buying back shares – at any price – to cover their positions. The result? Shares more than doubled in a few months.
Its improving numbers have led to renewed optimism for Weight Watchers... But a meteoric rise like that can only be attributed to frantic short sellers trying to cover. With almost 10 million shares still held short, the short-squeeze dynamic is still in play.
Weight Watchers shares closed up another 4.2% today, hitting a new four-year high. Stansberry's Investment Advisory subscribers are now up more than 95% in just three months.
Once again, this blistering rally is sure to slow eventually. But this short squeeze may not be over yet... More than 8 million shares are still held short today, according to Bloomberg data.
'This legal monopoly is set to profit for the next 30 years'...
In other earnings news, Retirement Millionaire recommendation Huntington Ingalls Industries (HII) also reported impressive second-quarter results on Thursday.
The shipbuilding giant said revenue increased 9% year-over-year to $1.86 billion. Net income rose 11% to $147 million. And earnings per share grew 15% to $3.21, compared with analyst expectations of just $2.62.
The company also reported it now has a backlog of $21.1 billion – following $3.4 billion in new orders in the quarter – suggesting the strong performance should continue.
Doc Eifrig's Retirement Millionaire subscribers aren't surprised. The firm operates the closest thing to a "legal monopoly" you're likely to find in the market today. As Doc explained when he originally recommended shares back in January...
Huntington Ingalls doesn't just build the [Navy's] new ships. It also strips down the old ones. When a ship is no longer fit for service, the Navy doesn't just crush it like a '72 Vega. It's a painstaking and costly process. It first pulls out all the equipment, tools, and spare parts. Then it drains the fuel and hydraulic systems.
Sometimes the de-fueling equipment needs to be specialized for the ship... Huntington is the only company with the tools for the job. Starting at the end of 2012, it began work to inactivate the USS Enterprise – a $745 million project. As the Navy's fleet gets upgraded, more of its older ships will be inactivated. Huntington will profit on both ends of the process – building the new ones and scrapping the old ones.
Put simply, Huntington Ingalls holds the monopoly on specialized ship inactivations... And it holds a virtual monopoly when it comes to building ships as well. You see, Huntington Ingalls doesn't just build aircraft carriers. It also builds nuclear attack submarines, the National Security Cutter fleet for the Coast Guard, amphibious assault vehicles, and Navy destroyers.
Huntington Ingalls earns nearly all its revenue from spending by the U.S. Navy and Coast Guard. Best of all, the Navy's 30-year spending plan assures that this monopoly will profit no matter what happens in the coming months or years. That combined with excellent leadership, profitability, and valuation make it an attractive opportunity today.
Still a 'strong buy' today...
Shares jumped nearly 3% following the news. Folks who took Doc's advice are up 12% in a little more than six months so far.
If you aren't among them, take note: Doc believes the stock is headed much higher.
In fact, he still considers the company a "strong buy" today... And even included it in his brand-new special report: "The Five Investments You Must Buy Now to Build Your War Chest." This report details the five surest ways to profit from the ramp up in military spending over the next several years that Doc is predicting.
As you'd expect from Doc, they're all high-quality companies that treat their shareholders well. So they're likely to outperform, even if military spending doesn't rise as expected. But if Doc is right, they could absolutely soar over the next few years... And should the U.S. become involved in another major conflict, the sky is truly the limit.
You can access this report for FREE with a 100% risk-free trial to Retirement Millionaire. Better yet, for a limited time only, Doc will also throw in one full year of the excellent U.S. & World Early Warning Report – written by legendary historian and geopolitical expert Richard Maybury – absolutely free. And you'll get it all for LESS than the usual cost of Retirement Millionaire alone.
There has never been a better time to try Doc's research for yourself. Click here for the details.
New 52-week highs (as of 8/4/17): AMETEK (AME), American Express (AXP), Berkshire Hathaway (BRK-B), WisdomTree Emerging Markets High Dividend Fund (DEM), WisdomTree Japan Hedged Equity Fund (DXJ), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), iShares MSCI Italy Capped Fund (EWI), Barclays ETN+ FI Enhanced Europe 50 Fund (FEEU), First Trust Emerging Markets Small Cap AlphaDEX Fund (FEMS), National Beverage (FIZZ), iShares U.S. Aerospace and Defense Fund (ITA), iShares U.S. Home Construction Fund (ITB), JD.com (JD), Lockheed Martin (LMT), PNC Financial Warrants (PNC.WS), Travelers (TRV), U.S. Concrete (USCR), ProShares Ultra Financials Fund (UYG), and Weight Watchers (WTW).
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Brill comment: You can't win 'em all...
Regards,
Justin Brill
Baltimore, Maryland
August 7, 2017