It’s Friday in the Wall Street Daily Nation!
That means the long-winded analysis is out. (Hallelujah!) And some carefully selected charts are in. (Amen!)
So without further ado, check out these snapshots showing the biggest potential beneficiaries of President Trump’s new tax plan, the single data point behind my continued bearishness on Twitter and why too much of a good thing can be a curse.
Show Me the (Tax) Money
After much anticipation, President Trump revealed his tax plan this week. Or at least the framework of one. One of the biggest components is a tax holiday for U.S. firms that have been hoarding profits overseas.
We highlighted this cash pile earlier in the month. But it’s worth sharing again.
Why? Because once the tax plan becomes official, this cash is guaranteed to make its way from company coffers to shareholders in the form of increased dividends, share buybacks and acquisitions.
It’s the last use of cash — acquisitions — that interests us most here.
If we can identify the small-cap firms in the takeover crosshairs beforehand, we stand to make overnight gains of 50% or more.
Buyout premiums are already on the rise, recently reaching levels not seen in almost a decade. If the market is suddenly flooded with excess cash from tax repatriation, watch out! Bidding wars are bound to erupt.
If you want to make sure you benefit from the action, test-drive our premium advisory True Alpha. Our current portfolio of 21 companies are almost all tempting takeover targets.
The other important observation here is this: With the NASDAQ eclipsing the 6,000 mark this week, everyone is panicking and screaming, “Overvalued, overvalued!”
But when we take these high cash balances into consideration, many tech giants aren’t that expensive after all.
Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), Cisco Systems Inc (NASDAQ:CSCO), Apple Inc (NASDAQ:AAPL) and Google (NASDAQ:GOOGL) are all trading between 14 and 20 times forward earnings. That’s a far cry from the nosebleed valuations witnessed during the dot-com days. And if we back out the mountains of cash on hand, the valuations get even cheaper.
I hesitate to say it, but it’s different this time. At least for tech. Speaking of different…
Tweet This: #LessBadIsNotGood
Social media darling-turned-dud Twitter Inc (NYSE:TWTR) reported earnings this week. Historically, it’s a terrible stock to own into quarterly reports.
The majority of the time (70%) shares get dinged by an average of about 11%.
Heading into this quarterly report, analysts expected the worst… but Twitter surprised to the upside and shares headed higher.
Nevertheless, I still wouldn’t go near the stock!
I shared several reasons why during an appearance on Fox Business News with Maria Bartiromo.
This single chart sums it up best. While user growth might be on the mend, sales growth — which is obviously a more significant business fundamental — is plummeting.
While Twitter might be regaining some popularity, I’m sticking to my longtime position (see here) since the company went public: Steer clear of the stock.
Apple: Blessing and a Curse
Recently, shareholders of Imagination Technologies Group Plc (LON:IMG) learned the hard way what happens when you rely on Apple Inc. (NASDAQ:AAPL) for a majority of revenue.
Shares plummeted over 60% in a single day on news that Apple will no longer use the company’s technology. With that in mind, here’s a list of other publicly traded companies at risk of the same fate. Caveat emptor!
That’s it for this week. Be sure to let us know what you think about this column or any of our recent research by leaving a comment below.