When Smartphones Fall in the Toilet
From trash to treasure... When smartphones fall in the toilet... So much e-waste... The money in garbage-picking... 'One of the greatest businesses of all-time'... How Joel Litman finds the 'next big winners'...
One man's trash is another man's treasure...
Continuing the theme from yesterday on trusting what you see, we'll begin today with a brief item from off the beaten path...
While researching gold – and its soaring value – and gold stocks recently, we came across an interesting report that the United Nations ("UN") published on July 2 about "e-waste."
The UN considers e-waste as all the electronics that are thrown out in the trash, taken to the dump, or melted each and every day around the world. So basically, it's anything with a plug or a battery... the things we use every day, like smartphones, computers, refrigerators, and lamps.
According to the report, Earth has never had more of this garbage... A record 53.6 million metric tons (or 11 trillion pounds for us non-metric-system users) of e-waste was produced globally in 2019. That's the weight of about 350 huge cruise ships.
Now, the fact that a lot of electronics are thrown away probably isn't surprising to anyone.
The world produces a lot of gadgets that we find useful one day and useless a few months later... Or they break and take too much effort to fix... Or the USB cords change just a little bit so that they don't fit anymore.
The point we want to bring up in today's Digest, though, is that...
Only 17% of the e-waste collected last year was recycled...
And all of these devices have valuable components in them, which means, according to the report...
Gold, silver, copper, platinum and other high-value, recoverable materials conservatively valued at $57 billion – a sum greater than the Gross Domestic Product of most countries – were mostly dumped or burned rather than being collected for treatment and reuse.
This scale is kind of mind-boggling... That number is up 21% from just five years ago. And e-waste is rising three times faster than the world's population and 13% faster than the world's GDP during the past five years.
Most of the e-waste was generated in Asia, with 24.9 million metric tons, followed by North and South America with 12 million metric tons.
The small amount of e-waste that was recycled last year saved 15 million tons of carbon dioxide from getting into the atmosphere.
We're not here to preach about environmental sustainability – though this ratio of trash-to-GDP seems like it has an ultimate ending point. But the fact that nearly $60 billion in a finite supply of materials pulled from the Earth is thrown away each year – never to be used again – is not an insignificant idea...
This is where the environmental considerations intersect with financial factors...
As Vanessa Forti, a lead author of the report, said...
If we cannot recycle electronic waste, we're also not taking back materials into the loop, which means we have to extract new raw materials.
In the grand scheme of things, the amount of precious metals in our technology might be a relatively small amount compared with the Federal Reserve and other central bank policies that can devalue the U.S. dollar and other currencies with a single decision...
There's only about 1/35 of an ounce of gold in a cellphone, for instance. And it can be messy and expensive to recycle these metals.
But every battery and refrigerator thrown away in every corner of the world – or every smartphone accidentally dropped in the toilet – clearly adds up to billions of dollars in the trash.
Whether these devices are tossed away (more scarcity) or recycled, these trends – paired with increased demand for electronics – are a good mixture for helping the value of assets like gold, silver, and copper rise in the years ahead.
But "e-waste" is just part of a bigger story...
In the bigger picture, you can make money in garbage-picking...
Trash... It's not sexy, and it can smell. And taking it out is a chore for many of us.
But it's one of those things that doesn't change. Pandemic or not, the trash trucks will keep coming.
Our colleagues Dan Ferris and Mike Barrett most recently wrote about this industry in their June issue of Extreme Value. Specifically, they recommended that subscribers buy shares of a garbage-industry leader that they call "one of the greatest businesses of all-time."
This company maintains a spectacular balance sheet, including gobs of free cash flow ("FCF")... an unmatched network of assets and competitive advantages... and a business model that allows it to consistently raise prices enough to offset all or most of its cost inflation.
This company checks all of the boxes for Dan and Mike's criteria that help them identify and measure the performance of great businesses.
And a capital-efficient company like this is precisely the kind that's positioned to weather any market conditions and pounce on the kind of underreported opportunities that other companies can't afford to take advantage of.
For example, it's like how cash-rich Alphabet (GOOGL) acquired free video platform YouTube in 2006 for $1.65 billion... That deal looks like a steal today, as Google made $15 billion in revenue last year alone from YouTube.
In the less flashy area of trash, the company that Dan and Mike recommended has an imminent acquisition lined up that's expected to add a $1.6 billion revenue stream through recycling – e-waste included.
You can learn much more about this leading company – and why its business model works so well to make money and deliver investors a reliable return – in Dan and Mike's Extreme Value service.
Click here for more information on how you can give their newsletter a try. The stock is up about 3% since Dan and Mike's recommendation just about a month ago... and it remains well within their suggested "buy" range right now.
Moving on, we want to give you a taste of a 'new' perspective...
It's another play on the "one man's trash is another man's treasure" idea... And it comes from Joel Litman of our corporate affiliate Altimetry.
Joel has an ability to identify the next big stock market winners before most people know about them. For instance, he recommended chipmaker Advanced Micro Devices (AMD) before it soared 2,000%.
Joel says investors often forget one important fact... Today's largest businesses and biggest names, the ones that a lot of people want to pile their money into, once started small.
Of the more than 100 mega-cap companies in the U.S. – those with a market cap greater than $50 billion, like Amazon (AMZN), Apple (AAPL), or Alphabet – 47 were once microcap companies, with a market cap less than $1 billion.
And identifying these companies "way back when" is where the big money can be made.
It's like the joy you get from knowing and liking that small local band before they get wildly popular...
As Joel recently wrote to readers in his free Altimetry Daily Authority newsletter...
An investor who bought software company Salesforce (CRM) when it broke a $100 billion market cap has seen the firm grow by 65%... But someone who bought Salesforce in 2004 when it was a less than $1 billion microcap name has seen the stock rise by 59 times. If he put $10,000 in the stock in 2004, it'd be worth $608,000 today.
Back in 2002, Netflix was a $115 million microcap stock... Today, its market cap is more than $215 billion.
Even Amazon was a $400 million microcap stock at one point in 1997, before it became a $1.5 trillion behemoth.
As Joel noted, some investors only focus on mega-cap names... hoping they'll just keep getting bigger. But savvy investors search for smaller companies that can get big. More from Joel...
And the best place for individual investors to find those ideas before Wall Street starts to pile onboard and cause stock prices to take off is in the microcap space.
Big institutional investors are just too large to invest down here, because the stocks aren't liquid enough for them to put money to work. On the other hand, individual investors who can do sound research, identify the next wave, and avoid companies with more questionable backgrounds can therefore build positions before these stocks start to rise... and before they appear on institutional investors' radar.
And that's when these names take off.
Joel recently announced a brand-new product that can do just that for his subscribers – identify the microcap companies primed to take off that big investors aren't paying attention to yet.
He believes following this strategy could be the biggest moneymaking opportunity of the next decade... It's a chance to realistically make 10 times your money on a single investment.
Click here to get all the details. And by the way, you'll hear much more from Joel – learning about his story and his strategy – in tomorrow's Digest. Stay tuned.
Can I Avoid Investing in China?
Extreme Value editor Dan Ferris discusses the tension between where you put your values and where you put your money... especially when it comes to China, which has a troubling record on human rights, yet amazing growth for investors.
Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and follow us on Facebook, Instagram, and Twitter.
New 52-week highs (as of 7/14/20): Sprott Physical Gold and Silver Trust (CEF), Quest Diagnostics (DGX), Emergent BioSolutions (EBS), Fortuna Silver Mines (FSM), General Mills (GIS), SPDR Gold Shares (GLD), Green Thumb Industries (GTBIF), Home Depot (HD), Hecla Mining (HL), KraneShares Bosera MSCI China A Fund (KBA), Lonza (LZAGY), MAG Silver (MAG), Pan American Silver (PAAS), ResMed (RMD), Global X Silver Miners Fund (SIL), Silvercorp Metals (SVM), Trulieve Cannabis (TCNNF), TFI International (TFII), Vanguard Inflation-Protected Securities Fund (VIPSX), and Wheaton Precious Metals (WPM).
In today's mailbag, feedback on unemployment and Alan Gula's Monday Digest. Do you have a comment or question? E-mail us at feedback@stansberryresearch.com.
"Everywhere I go in WNY [Western New York], I see signs NOW HIRING. I have spoken to two of those employers. They have employees who won't come back because the $600 extra per week unemployment. I hope that they find workers and leave those unemployed run out of unemployment.
"The Rochester paper said that there are 11,000 job openings in the area. We went for my wife's 79th birthday at a normally very busy place at supper time. They had people at only four tables." – Paid-up subscriber Robert H.
"I'm glad Alan Gula brought up and described Gregory Zuckerman's book titled The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution. I read that book last year, and I was riveted to it until I finished it.
"It was a fascinating biography of not only Simons himself but also his highly intelligent Ph.D. mathematicians and physicists who worked under him at Stony Brook University on Long Island, NY. Anyone interested in quant trading should read this book without hesitation." – Stansberry Alliance member Al V.
All the best,
Corey McLaughlin
Baltimore, Maryland
July 15, 2020