Three Trends to Own Now
There are three trends to buy into next year: fintech, 5G, and the IMO 2020 sulfur cap.
Six years ago, on July 11, 2013, I wrote an article called “Three Cloud Stocks Set to Outperform the Market.”
The stocks I talked about were PANW, CSCO, and MU. If you owned those stocks for five years, you would have made 375%, 300%, and 103%. And CSCO, the 103% gainer, would have paid a fat dividend over that time, growing from $0.17 to $0.49 a quarter...
In May of 2016, I told my readers to buy Bitcoin and Ethereum, well before the mainstream market got hold of them. They returned 2,528% and 1,040.32%, respectively.
First, let me acknowledge that I don’t own tarot cards, nor am I a wizard. I don’t sacrifice white goats during the summer solstice and ream omens from their entrails.
I make my predictions on the markets using time-tested models, historical research, and a broad knowledge and practical experience of how markets work. Here are three trends you want to own for 2020.
Verizon, Sprint, AT&T, and T-Mobile have initiated 5G services in some U.S. cities. And 5G services are also already available in parts of Europe and Asia.
It's expected that by the end of this year, every major mobile carrier will be offering 5G services nationwide with new phones and plans. By 2024, it's expected that 1.5 billion people around the world will be connected to 5G networks.
The next generation of mobile technology will upgrade your smartphone with faster speeds and greater connectivity. It will essentially upgrade your cell phone's speed and connectivity from dial-up to broadband.
But 5G is bigger than just faster smartphones.
5G is expected to propel innovation across multiple fields, including transportation, manufacturing, defense, health care, agriculture, shipping, warehousing, education... the list goes on.
In manufacturing, 5G is already being implemented and experimented with in efforts to improve efficiency, prevent maintenance, and generally lower costs associated with the manufacturing process.
In health care, 5G will offer more customers new access to care outside of traditional hospital environments, provide new methods of delivering treatments and services, and give hospitals much-needed data management programs.
In my investment service, I’ve found three safe plays that will profit from this super trend. They are up 24%, 34%, and 46% over the last six months. They all pay nice dividends.
Three years ago, when I picked up my stepdaughter from Virginia Tech, she said something offhand to her roommate about splitting a storage unit. “I’ll Venmo it to you.” This is the first time I heard about Venmo, but I was intrigued.
For those who don’t know, Venmo is a mobile payment system owned by PayPal (NASDAQ: PYPL). You want to split grocery costs with your roommate? You Venmo your friend $50. Five people eating dinner and no cash? Venmo.
It is simple, fast, and clears in half an hour. You can pay directly into a Venmo account, or you can link it to your debit or credit card.
In the first quarter of 2018, the company moved $12 billion. In the latest quarter, earnings grew 56%. It is also why PayPal’s share price has tripled over the past three years and is still undervalued.
Venmo is popular because it makes money transfers easy and instantaneous. With kids in college and high school, it makes paying for field trips and coaches’ gifts simple and easy. Every team parent needs to pay $20 for new pompoms? Boom, done.
No forgotten checks, trips to the bank, or tracking down parents who aren't there. A wire transfer may take three days; Venmo settles in half an hour. The company charges a 1% fee for each transfer.
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Venmo is just one example of the emergence of fintech in the financial industry. It isn’t even the most exciting.
You see, like many other industries that have been transformed by creative destruction over the past 20 years that have lowered costs to consumers and added benefits, the big banks and financial institutions have hidden behind regulations and sheer size to prohibit new technology. But this is changing rapidly.
Finance is seen as one of the industries most vulnerable to disruption by software because financial services, much like publishing, are made of information rather than concrete goods. In particular, blockchains have the potential to reduce the cost of transacting in a financial system.
After all, what is a bank but a company that leverages knowledge? Smartphones for mobile banking and investing and cryptocurrencies are changing how and where the money goes.
Global investment in financial technology increased more than 2,200% from $930 million in 2008 to more than $22 billion in 2015. In 2018, fintech companies raised $51 billion with 1,707 deals. By February 2019, that number hit $112 billion.
GlobeNewswire recently reported that the fintech market will reach $205.7 billion by 2023. It is that type of growth that I want to be investing in.
I’ve found four companies that will benefit from this growth. I will give you the research on December 5.
IMO 2020 Sulfur Cap
The International Maritime Organization is a United Nations group that sets rules and regulations for international shipping.
In 2008, it decided to change the rules for what type of fuel ships can use. It decreed that after January 1, 2020, ships must switch from high-sulfur fuel oil (HSFO) to low-sulfur fuel oil (LSFO).
HSFO has 3.5% sulfur; LSFO has 0.5% sulfur.
Now, engines that push massive ships around are made for HSFO. So the rules will cause problems. Think about how ethanol has caused trouble with your lawnmower — now multiply that by 10,000.
Here is how the IMO explains it:
The main type of “bunker” oil for ships is heavy fuel oil, derived as a residue from crude oil distillation. Crude oil contains sulphur which, following combustion in the engine, ends up in ship emissions. Sulphur oxides (SOx) are known to be harmful to human health, causing respiratory symptoms and lung disease. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contributes to the acidification of the oceans.
Limiting SOx emissions from ships will improve air quality and protects the environment.
IMO regulations to reduce sulphur oxides (SOx) emissions from ships first came into force in 2005, under Annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention). Since then, the limits on sulphur oxides have been progressively tightened.
From 1 January 2020, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas will be reduced to 0.50% m/m (mass by mass). This will significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.
The thing is that there isn’t enough 0.5% sulfur fuel to go around. Some people think there will be a 1 million barrel-a-day shortage. The price of LSFO is hitting all-time highs, while the price of HSFO is dropping.
The spread just hit a record high. Platts recently wrote: “The delivered MF 0.5%/380 CST bunker fuel spread was assessed at $230/mt on Wednesday, having risen steadily for the last five consecutive trading sessions to reach its highest value on record.”
Now, some ships are putting in expensive scrubbers that can take HSFO and turn it into LSFO. These companies will be in the enviable position to buy HSFO on the cheap.
That said, it is estimated that less than 10% of global shipping has scrubbers installed. And those that have to pay the premium for LSFO will pass the cost along at a price of $600 per container on the transpacific route.
Other companies that will benefit are refineries that have invested in LSFO plants. Obviously, they will be able to sell at a much higher price than those who didn’t invest in the switch.
Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.
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