Very quietly, gold and the gold miners have consistently pushed higher. Despite the recent downturn, and the fact that naysayers constantly bemoan the fact that the precious metal offers no earnings potential, it does offer a safe store of value.
The SPDR Gold Shares ETF (NYSE: GLD) is up over 10% since last October, after being hammered for the first half of 2018. Sure the massive fourth-quarter sell-off sparked some of the buying, but a cauldron of continued political issues at home, combined with trade conflicts and geopolitical worries abroad, have kept investors nervous, and with good reason.
On March 6, the bull market reached the staggering age of 10 years, as the upward move started in March of 2009. The sell-off last Friday showed just how nervous investors are, so we screened the Merrill Lynch research database looking for gold stocks rated Buy and found three outstanding values.
This is one of the largest mining companies, and its stock is a solid buy for more conservative accounts. Newmont Mining Corp. (NYSE: NEM) is a leading gold and copper producer. It employs approximately 29,000 employees and contractors, with the majority working at managed operations in the United States, Australia, Ghana, Peru, Indonesia and Suriname. Newmont is the only gold producer listed in the S&P 500 index.
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Last year Newmont announced that “first gold” has been poured at its new mine, called the Merian gold mine, in Suriname in South America. It reported Merian contains gold reserves of 5.1 million ounces and that annual production is expected to average between 400,000 and 500,000 ounces of gold at competitive costs during the first five full years of production.
Newmont has indicated that it could increase the dividend this year by at least 50%. Merrill Lynch feels the miner has sufficient free cash flow to pay higher dividends and continue reducing debt and investing in projects.
Shareholders receive a 1.6% dividend. The Merrill Lynch price objective for the shares is $45, and the Wall Street consensus target is $40.21. The shares closed trading on Monday at $34.90.
This is a solid stock for investors looking for a gold presence with somewhat less risk. Royal Gold Inc. (NASDAQ: RGLD) is a precious metals royalty and stream company engaged in the acquisition and management of precious metal royalties, streams and similar production-based interests. The company owns interests on 193 properties on six continents, including interests on 38 producing mines and 24 development stage projects.
Many on Wall Street feel that the company is very undervalued when compared to its sector peers. Backed by three new or expanding assets, Royal Gold’s revenue could grow by 13% to nearly $500 million by fiscal 2019. Royal Gold’s strong liquidity position also means it can compete for royalty and stream acquisitions.
Shareholders receive a 1.15% dividend. Merrill Lynch has a $93.50 price target, and the consensus target is $94.71. The shares closed at $93.25 on Monday.24/7 Wall St.
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Wheaton Precious Metals
This is another stock that makes good sense for more conservative accounts looking to have exposure to the sector, and it is the top streaming pick at Merrill Lynch. Wheaton Precious Metals Corp. (NYSE: WPM) is a Canada-based, precious metals streaming company with approximately 60% of its revenues from the sale of silver and 40% from gold.
Under the terms of long-term contracts, the company purchases silver and gold from a variety of mines, including Goldcorp’s Penasquito mine in Mexico, Vale’s Salobo mine in Brazil, the Lundin Mining Zinkgruvan mine in Sweden and Glencore’s Antamina and Yauliyacu mines in Peru, then sells the silver and gold into the open market.
In December the company announced it had reached a favorable settlement with the Canada Revenue Agency with respect the 2005 to 2010 tax years. This tax case had depressed the valuation, and this should help to boost the shares.
Shareholders receive a 1.45% dividend. The $32.50 Merrill Lynch price target compares with the $29.36 consensus target. The stock closed at $24.83 a share.I'm interested in the Newsletter
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Proper asset allocation should always include a single-digit percentage holding of precious metals like gold and silver. Not only do they hedge inflation over the long term, but they also really help if the market goes into correction or bear market mode, as they tend to trade inverse to markets.
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Daniel Cullinane CPA
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A Pentagon decision to redirect up to $1 billion to build 57 miles of fencing along the Mexican border was slapped down Tuesday by a House panel that rejected the "reprogramming action."
Acting Defense Secretary Patrick Shanahan on Monday authorized the Army Corps of Engineers to plan and build the 18-foot-high fencing and to construct and upgrade roads and install lighting near the border in Yuma, Arizona, and El Paso, Texas.
Shanahan said the $1 billion plan was in support of the national emergency declaration President Donald Trump issued last month after Congress refused to appropriate the $5.7 billion he wanted for construction of the wall.
"The committee denies this request," U.S. Rep. Adam Smith, D-Washington and chairman of the House Armed Services Committee, said in a letter to the Defense Department comptroller. "The committee does not approve the proposed use of Department of Defense funds to construct physical barriers and roads or install lighting in the vicinity of the United State border."
Some Republicans also were skeptical. Texas Rep. Mac Thornberry said he opposes using defense funding for other purposes but suggested Shanahan wa facing “a lot of criticism for decisions that you had nothing to do with.”
Shanahan said he understood the concerns but added that he was executing a “legal order from the commander in chief.”
It was not immediately clear what impact the committee's decision would have on the construction effort. Trump has repeatedly claimed the wall is needed to keep criminals from entering the U.S. Shanahan cited the need to "block drug-smuggling corridors across international boundaries of the United States in support of counter-narcotic activities of federal law enforcement agencies."
[A razor-wire-covered border wall separates the United]
A razor-wire-covered border wall separates the United States, at left, from Mexico east of Nogales, Ariz. Saturday, March 2, 2019. (AP Photo/Charlie Riedel) ORG XMIT: OTKCR (Photo: Charlie Riedel, AP)
Shanahan, in testimony Tuesday before Smith's panel, reiterated his claim that the transfer of funds to the wall won't jeopardize national security.
Shanahan announced the $1 billion plan late Monday. It immediately drew a sharp response from Democrats, with several senators on the Appropriations Committee signing a letter blasting Shanahan for failing to seek approval of the congressional defense committees.
“We have serious concerns that the department has allowed political interference and pet projects to come ahead of many near-term, critical readiness issues," the letter said.
Trump's emergency declaration sparked controversy, some of it from his own party. The House was schedule to vote Tuesday on Trump's veto of a congressional resolution that would have voided the emergency declaration. Foes of Trump's plan, however, did not appear to have the two-thirds majority required to override.
"The President’s veto will be upheld," Tweeted Minority Leader Kevin McCarthy, R-California. "We will #SecureTheBorder."
Trump says his declaration of a national emergency to build the wall allows him to tap billions targeted for military construction projects ranging from garages and air traffic control towers. The projects have been approved by Congress, but contracts have not yet been signed.
Last week, Shanahan forwarded to Congress the list of construction projects the Pentagon could delay but not cancel to redirect funds to the wall.
Here's everything Apple announced on Monday
Apple launched a streaming video service called Apple TV+, featuring Apple-produced content, at its campus in Cupertino, California.
The company did not specify how much Apple TV+ would cost when it launches in the fall, nor how much it would cost to add specific "channels" like HBO or Starz.
It also announced a new $9.99 tier of the Apple News app called Apple News+ that includes magazine content as well as a video game bundle called Apple Arcade.
The company also says it will release its own credit card, called Apple Card, in partnership with Goldman Sachs.Kif Leswing | @kifleswing
Published 11:59 AM ET Mon, 25 March 2019 Updated 23 Hours AgoCNBC.comApple unveils new Apple TV+ streaming service 3:06 PM ET Mon, 25 March 2019 | 01:55
Apple announced three new subscription services, including a TV service, gaming bundle, and all-you-can-read magazine subscription on Monday at its campus in Cupertino, California. Apple also announced an Apple-branded credit card in partnership with Goldman Sachs.
Apple stock was down almost 2 percent during intraday trading on Monday after the event.
The iPhone giant is focusing on subscription services at a critical time for the company as it searches for new areas of revenue growth to compensate for stalling iPhone sales.
"We've also been creating a growing collection of world-class services, and that's what today is all about," Apple CEO Tim Cook said on Monday.LIVE, NEWS-MAKING DISCUSSIONS
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Investors and analysts say that Apple's services business, which includes revenue from the App Store and licensing fees in addition to monthly subscriptions, is going to drive the majority of revenue growth over the next few years.
Some details of TV service announced, but no price[Apple TV App]
Apple TV App
Apple announced a new service for streaming online video called Apple TV+.
Apple's new TV app will soon enable users to subscribe to individual streaming services, such as HBO Go or Starz, and watch shows or sports through Apple's TV app, a feature called Apple TV Channels, which will launch in May.
When users subscribe to a channel, they are able to browse all shows made by that channel inside Apple's TV app, instead of in the service's individual app.
Channels confirmed by Apple include HBO, Showtime, Starz, CBS All Access, and Smithsonian Channel. Apple did not announce pricing for any channel.
Apple TV+, a separate service, will include original video content produced by Apple. Apple has been associated with 34 different TV and movie productions, according to a tally from Goldman Sachs.
The second half of Apple's launch event on Monday included a long series of Hollywood celebrities attached to Apple productions — including Steven Spielberg, Reese Witherspoon, Steve Carrell, Oprah Winfrey and Jennifer Aniston —discussing their upcoming shows.
Apple's original content will be available to consumers in the fall. It's a subscription service, which suggests a monthly fee, but Apple did not mention a price.[Steven Spielberg talks about Apple TV+ at the Apple Spring Event on March 25th, 2019.]
Steven Spielberg talks about Apple TV+ at the Apple Spring Event on March 25th, 2019.
The Apple TV app is compatible with iPhones, iPads and Apple TV set-top boxes. Support for Mac computers is due in the fall, Apple said, and the new service launches in May.
Apple also said that people with select TVs from Samsung, LG, Sony and Vizio as well as set-top boxes from Roku and Amazon will be able to download an Apple TV app.
A news package[Roger Rosner, vice president of applications at Apple Inc., speaks during a company product launch event at the Steve Jobs Theater at Apple Park on March 25, 2019 in Cupertino, California.]
Michael Short | Getty Images
Roger Rosner, vice president of applications at Apple Inc., speaks during a company product launch event at the Steve Jobs Theater at Apple Park on March 25, 2019 in Cupertino, California.
On Monday, Apple announced a new paid tier of the Apple News app called Apple News+ that includes magazine content for $9.99 per month in the United States and $12.99 per month in Canada.
Some banner features in the new paid tier include layouts specifically designed for a phone, including covers that subtly move, as well as other design and layout features. Users can access full current and past issues.
Apple announces new Apple News subscription service 1:25 PM ET Mon, 25 March 2019 | 04:18
Apple highlighted several magazines in its new paid tier, including Wired, Popular Science, National Geographic and Essence. Apple News+ also includes access to Los Angeles Times and Wall Street Journal content. Apple said that the subscription includes over 300 magazines.
One of the service's new selling points is privacy. Apple said that it won't let advertisers track its Apple News+ users.
Apple is offering a month-long free trial to the service, which will become available to Apple users in May.
A titanium credit card[Titanium Apple Card]
Titanium Apple Card
Apple also said on Monday it would release its own credit card, called Apple Card. The physical card itself is made out of titanium.
"We saw an opportunity to transform another fundamental form of payment, and that's the credit card," Apple CEO Tim Cook said.
The Apple Card will show how much users have spent and when payment is due inside the iPhone's Wallet app. The app will track spending by category, and will provide a more detailed version of transaction history that integrates with Apple Maps. The card also has several rewards incentives, which Apple calls "daily cash."
Apple said that customer service, such as changing an address, would be handled through a text message bot.
Apple reveals Apple Card digital credit card 1:42 PM ET Mon, 25 March 2019 | 04:16
"Our goal with Apple card is to provide each customer with an interest rate which is the lowest in the industry," Apple VP of internet services Jennifer Bailey said. Apple said the card did not have late fees or annual fees.
The Apple Card uses the Mastercard network, and is operated by Goldman Sachs, Apple said. Neither Apple nor Goldman Sachs will use personal data for advertising, Apple said.
Apple's game bundle: Apple Arcade[Tim Cook, chief executive officer of Apple Inc., speaks during an event at the Steve Jobs Theater in Cupertino, California, U.S., on Monday, March 25, 2019.]
David Paul Morris | Bloomberg | Getty Images
Tim Cook, chief executive officer of Apple Inc., speaks during an event at the Steve Jobs Theater in Cupertino, California, U.S., on Monday, March 25, 2019.
Apple also announced a new bundle of video games, called Apple Arcade. A single subscription will provide access to more than 100 games, all of which are exclusive to Apple devices.
New games will be added regularly, and Apple Arcade games will be available to play without an internet connection after they are downloaded.
The gaming bundle will be available to customers this fall, Apple said. Games include new titles from companies including Konami, Cartoon Network, Sega and Lego. It will also include indie titles from creators including Will Wright, the inventor of SimCity.
Apple did not reveal a price for its gaming bundle.
MARCH NEWSLETTER 7
The two most common methods of returning capital to shareholders are via dividends and share buybacks. Dividends have a straightforward benefit because they are sending income back to their investors, and it is often said that dividends can account for a significant portion, maybe as much as half, of investors’ total returns over time. Stock buybacks have come under more scrutiny by the public and politicians in recent years, but companies still aggressively are buying back shares of their own stock.
According to S&P Dow Jones Indices, the fourth quarter of 2018 set a quarterly record of $223.0 billion in buybacks, the fourth consecutive quarterly record. This beat the prior record of $203.8 billion set in the third quarter of 2018, and it was up some 62.8% from the $137.0 billion used for buybacks in the fourth quarter of 2018.
The year 2018 as a whole saw a record $806.4 billion used for buybacks. That’s up 55.3% from the prior year’s $519.4 billion and up 36.9% from the prior annual record set in 2007 of $589.1 billion.
A company will buy back its own shares for many reasons. It can offset employee stock options and can shrink a company’s free float, and it can also be used to artificially increase earnings per share even if net earnings are not growing. It is also a strategy that companies can employ when they think their shares have fallen too much, and in many instances the largest acquirer of a company’s stock at any given time is the company itself. What makes the record buybacks in the fourth quarter of 2018 stand out so much is that the average share prices were in serious decline. S&P put that average share price drop at 5.3%, and this in turn allowed for companies to buy more shares than if share prices had risen.
It turns out that a handful of companies are driving the bulk of the buyback trends. We tracked the largest repurchasers from 2018, and ordered them by companies spending the most on buybacks in the calendar fourth quarter. Additional timelines and dollars spent information have been included on each.
Apple Inc. (NASDAQ: AAPL) has the most cash of any public company, and it has been the largest repurchaser of its own shares. The company spent $10.1 billion on buybacks in the fourth quarter alone, lower than the $19.4 billion spent in the third quarter. Apple spent $74.2 billion on buybacks in all of 2018, up from $34.4 billion spent in calendar year 2017. In the past five years, Apple spent $229.0 billion buying back its own shares.
Oracle Corp. (NYSE: ORCL) continues to overly spend on buying its own shares. It spent $10.0 billion in the final quarter of 2018, down from $10.3 billion in the third quarter. The software giant spent $29.3 billion in all of 2018 on buybacks, a gain of $4.0 billion from 2017.
Wells Fargo & Co. (NYSE: WFC) has been placed on a do-not-grow-assets list by regulators, but the bank has used its cash and weaker share price to keep buying back stock. It spent $7.3 billion on buybacks in the fourth quarter and $7.4 billion in the third quarter. For all of 2018, Wells Fargo’s $21.0 billion spend was more than double the $10.3 billion spent on buybacks in 2017.
Microsoft Corp. (NASDAQ: MSFT) spent $6.4 billion buying its own shares in the fourth quarter of 2018, up from $3.7 billion in the third quarter. Its total spend of $16.3 billion in calendar 2018 was up from the $8.4 billion spent in 2017, according to S&P.
Merck & Co. Inc. (NYSE: MRK) was the top-performing Dow stock of 2018, with a 35.8% total return, but that didn’t keep Merck from spending billions to buy back its own shares. Merck spent $5.9 billion in the fourth quarter of 2018 after spending just $1.0 billion in the prior quarter. For all of 2018, its spend rose to $9.1 billion for buybacks from $4.0 billion in 2017.
S&P also showed the remainder of the top companies spending the most on stock buybacks. We have included the figures on buybacks for the fourth quarter (Q4), the year 2018 (2018) and for the past five years (5YR). These are ranked in order of the largest stock buybacks by dollars spent in the fourth quarter of 2018 rather than just the year as a whole in an effort to reflect more current spending trends:
JPMorgan Chase & Co. (NYSE: JPM) was a tad more aggressive in the fourth quarter of 2018 than its pace for the prior three quarters.
Q4: $5.928 billion
2018: $19.983 billion
5YR: $54.851 billion
Bank of America Corp. (NYSE: BAC) kept a steady pace in the fourth quarter compared with all of 2018, but the pullback meant it was able to buy slightly more shares.
Q4: $5.231 billion
2018: $20.094 billion
5YR: $42.069 billion
Cisco Systems Inc. (NASDAQ: CSCO) has been impressive with $81.8 billion over the past decade spent on buybacks, more than one-third of its current $232 billion market cap.
Q4: $5.182 billion
2018: $22.936 billion
5YR: $46.276 billion
Starbucks Corp. (NASDAQ: SBUX) has been more aggressive lately than when it was still growing its store counts faster. More than half of its buybacks in the past five-year and 10-year periods were made in 2018, and it recently committed even more for buybacks ahead.
Q4: $5.170 billion
2018: $10.709 billion
5YR: $18.828 billion
Pfizer Inc. (NYSE: PFE) has remained a steady acquirer of its own shares over time and actually has outpaced Merck’s buybacks over the past five-year period and 10-year periods.
Q4: $5.030 billion
2018: $12.198 billion
5YR: $32.035 billion24/7 Wall St.
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S&P further pointed out that buybacks were yet again favored over dividends in both the rate of growth and aggregate dollars spent. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said:
Companies continued to spend more of their tax savings on these share repurchases as they boosted earnings through significantly reduced share counts. Adding to the share reduction, and therefore the EPS impact, was Q4’s stock price decline, which permitted companies to buy even more shares for their dollars and reduce share count more efficiently.
Buybacks broadened out in Q4, as the top 20 issues accounted for 44.4% of all S&P 500 buybacks, near the recent historical average of 43.7%, down from Q3’s 54.3%, Q2’s 49.7% and Q1’s 49.5%. For the year, however, the top 20 accounted for 42.2% of the buybacks, substantially up from 2017’s 32.3%.
Apple Inc. (NASDAQ: AAPL) introduced its new Apple TV+ subscription product and its Apple News+ products. Wall Street was not impressed and sold the shares down slightly. That modest sell-off is part of a much larger trend. Over the past six months, the stock is off 16% while the S&P 500 is down 5%. Whatever confidence investors lost in the large company has not come close to returning.
Almost certainly the reason the stock is down is a flattening and perhaps falloff of sales of Apple’s flagship iPhone. It cannot dodge the fact that in its most recent quarter, iPhone revenue was down 15%. Apple’s management wants investors to turn their eyes to the Apple services business, which grew to $10.9 billion last quarter, up 19%. However, that is a small portion of the quarter’s total revenue of $84.3 billion. Apple TV+ and Apple News+ are meant to drive that revenue higher more quickly. They will, but perhaps not fast enough to fill in the collapse of iPhone revenue.
There are three common explanations for why iPhone sales are down. The first is that the newest iPhones are too expensive. The next is that they sell poorly in China, the largest wireless customer nation in the world. The last is that the features of new iPhones are much of an advance from the previous generation. Wall Street’s sentiment is that none of these problems can be overcome.
If the new services strategy does not work, Apple eventually could become a smaller company than it is now. That would reverse one of the most impressive growth stories in tech history. There is a very good chance, as a matter of fact, that the revenue shrinking has begun already.
Copyright © Daniel Cullinane CPA.
McDonald’s Corp. (NYSE: MCD) is not exactly the type of company you expect to hear about in merger and acquisition news. The king of fast food is acquiring a seven-year-old Israeli startup company called Dynamic Yield for a reported $300 million. This appears to be the company’s largest acquisition in the past two decades.
The company’s digital food menus may help to tackle a problem of higher drive-thru window times. Its digital screens will track wait times and also will allow McDonald’s to better identify which items on its menu will be quicker and easier for the staff to prepare. McDonald’s already has started migrating to digital ordering kiosks, and if this move works as well as the test markets would indicate, then McDonald’s very well may become the king of artificial intelligence within the fast-food industry, along with its 37,000-plus locations.
McDonald’s executives already have said that they will focus on curbing those drive-thru wait times. Those times reportedly have been rising over the past five years.
There is a reason that McDonald’s is high on our own list of 15 defensive stocks that will easily survive and continue to thrive the next market sell-off. That said, there is also an ongoing question about how many jobs will be lost to the technology here.
McDonald’s said in its release that it plans to utilize the decision technology to provide a more personalized customer experience by varying outdoor digital menu displays in its drive-thrus. It will show food based on the time of the day and will account for items based on the weather, current restaurant traffic and the current “trending” menu items. Using this decision technology also will allow instant suggestions and display additional items to a customer’s order based on their current selections.
The acquisition comes after McDonald’s tested the technology in several U.S. restaurants during 2018. After the merger closes, the company plans to roll this decision technology out in drive-thrus in the United States in 2019 and then expand it to other top international markets.
The company is not going to only keep the AI-powered Personalization Anywhere platform all to itself. The press release indicates that Dynamic Yield, based in Tel Aviv and in New York, will remain a standalone company and that the company will continue to serve its existing clients and will attract future clients. Dynamic Yield currently serves more than 300 brands across the world.
Steve Easterbrook, president and CEO of McDonald’s, said of the effort:
Technology is a critical element of our Velocity Growth Plan, enhancing the experience for our customers by providing greater convenience on their terms. With this acquisition, we’re expanding both our ability to increase the role technology and data will play in our future and the speed with which we’ll be able to implement our vision of creating more personalized experiences for our customers.
McDonald’s shares were last seen up 1.2% at $188.00 on a day that the Dow Jones industrials and the S&P 500 were each up by 0.9%. Its 52-week trading range is $153.13 to $190.88.