Intel Corporation (NASDAQ:INTC) fell into the red after slashing its revenue forecast for the first quarter by $1 billion as the company continues to struggle with declining demand for personal computers. Challenging macroeconomic, as well as currency conditions, continue to mount more pressure on the giant chip maker. Fox Business’, Adam Shapiro, believes the only way out of the current debacle for investors is investing in companies that are not affected by currency fluctuations.
The macro environment has remained suppressed in the recent months forcing many people to shy away from upgrading their PCs the way they used to. The Dollar, on the other hand, continues to clock record highs against the Euro a key market for Intel Corporation (NASDAQ:INTC)’s PCs. Meaning the company will always end up with reduced income when converting earnings in Euro’s to dollars.
“I am not going to tell you what company you are going to buy the dollar is not going to get any cheaper over the next year or two. You should be looking at a company, which is not going to have to translate foreign currency back in the U.S dollar because you are going to take a big hit. That’s what is hitting Intel as well,” said Mr. Shapiro.
Intel Corporation (NASDAQ:INTC)’s problems, on the other hand, have been compounded by its late entry into the mobile business an area where QUALCOMM, Inc. (NASDAQ:QCOM) continues to reap big. The growth in popularity for smartphones and tablets has only gone to hurt Intel’s PC business as many people opt not to upgrade their old models at the expense of shifting to the small handheld devices.
Any investor should not be considering investing in the chip business, says Price Futures Group senior market analyst, Phil Flynn, as the situation could get worse going forward. Instead of investing in Intel Corporation (NASDAQ:INTC), Portfolio Wealth Advisors Co-founder, Lee Munson, believes NXP Semiconductors NV (NASDAQ:NXPI) would be the best option as it is not exposed to the effects of declining PC demand.
“What they have done is they have this similar to vertically integrated ecosystem, but it’s all about the internet of things and selling chips that have to do with high security. Security is a big issue it’s a big topic of conversation on Wall Street. So if you can find a chipmaker that does not have those legacy issues of making PCs and going to high security and all this little devices with smaller specialty chips. I think you’ve got out a winner,” said Mr. Munson.
Feb. 24, 2015 – 4:35 – FBN’s Cheryl Casone, Portfolio Wealth Advisors Co-Founder Lee Munson and Kaltbaum Capital Management President Gary Kaltbaum on the copper industry, what copper price movements mean for investors and the smart watch
Feb. 24, 2015 – 5:42 – FBN’s Cheryl Casone, Portfolio Wealth Advisors Co-Founder Lee Munson and Kaltbaum Capital Management President Gary Kaltbaum on where to invest as the Russell 2000, putting money in small caps and the homebuilders industry.
The words “oil” and “crude” don’t appear anywhere in Dunkin’ Donut’s Q4 earnings press release. The coffee and donut slinger reported what Yahoo Finance’s Jeff Macke calls a “squishy” quarter that included comparable sales that grew less than 2%. The company’s press release celebrates “growing transactions in the Dunkin’ Donuts U.S. business in the face of macroeconomic and competitive headwinds”.
A drink and a doughnut are seen at a Dunkin’ Donuts location in the Chicago suburb of Niles, Illinois, February …
“This just in,” Macke says, “You sell sugar and caffeine to motorists in America. The price of gas fell 50%, you can’t sell sugar and donuts, are you kidding me Dunkin’ Donuts?”
The problem, says Lee Munson of Portfolio, LLC, is that as American’s find a little extra cash in their pockets after paying at the pump, they are looking to spend it at a higher end establishments, at least higher compared to Dunkin’ Donuts.
“They’re not paying [that extra money] at Dunkin’s Donuts, they want to go to Starbucks,” he contends, adding McDonald’s is suffering from the same problem.
“When we have our next bear market Dunkin’ Donuts is gonna be the little darling even though I question the management at this time.”
Even with dismal sales, Dunkin’ did raise its quarterly dividend by 15%. Munson would like to see more companies do the same while energy prices are low. That way, he argues, when energy prices inevitably pop sometime down the road management can roll those payouts back.
As for Dunkin’ Donuts, Munson says, “If you can’t make money now there’s something really wrong.”
Source: Yahoo Finance
(Click on the Image to view video)
Lee Munson, CFA and Chief Investment Officer Portfolio Wealth Advisors recently told Yahoo Finance “the economy is rocking and people are making big cognitive mistakes.” We asked him to highlight those rookie mistakes that are all too common in a bull market and how to avoid them.
Chasing Returns: Rear view mirror investors
U.S.A.! U.S.A! 2014 was a banner year for U.S. stocks which continued the long running bull market which will mark year six in March. 2014 was not so great for other regions. The iShares MSCI Emerging Markets ETF (EEM) dropped about 4%. So far this year the U.S. economy, for the most part, appears to firing on all cylinders, which may pull many investors into the foxhole. “They are going to leave emerging markets for dead and they’re going to put everything into large U.S. stocks because that’s what’s been working for the last couple of years.” Don’t chase returns cautions Munson, its usually the wrong bet.
Trading small-cap for large cap superstars
It’s happened to the best of us, you see a stock like Dow (^DJI) member Disney (DIS) this past week rally to an all-time high after earnings. Now you’re tempted to trade some of your small-cap, value oriented holdings, for large cap winners. Understandable, but the wrong move says Munson. “People are going to start dumping everything that’s small cap and everything that’s value oriented.”
Investors who owned small-cap shares are likely frustrated with the performance in 2014. The Russell 2000 (^RUT), the benchmark for small-to-mid cap stocks, returned just 3.5%, trailing the S&P 500’s 12% return. However, in Munson’s opinion, eliminating all exposure to last’s years underperformers does not make sense.
Inflation Hedges: One size does not fit all
Gold, Oil, Treasury Inflation-Protected Securities (TIPS for short)…take your pick! There are plenty of ways to hedge inflation. The problem is nobody can accurately pick which one will be the best bet cautions Munson. “People are trying to choose a particular outcome and they are putting all their money to hedges.” Instead, investors should have a diversified portfolio which can offer purchase power protection, inflation protection and growth of principle.
Dec. 30, 2014 – 4:09 – Portfolio Wealth Advisors CIO Lee Munson, SFG Alternatives CIO Larry Shover and FBN’s Cheryl Casone on the NYPD/Mayor de-Blasio turmoil and its impact on the NYC real estate market.
Dec. 30, 2014 – 5:29 – Portfolio Wealth Advisors CIO Lee Munson, SFG Alternatives CIO Larry Shover and FBN’s Cheryl Casone on the biggest bargains in the stock market.
Wall Street Wednesday toasted another banner year, with US equity markets finishing near all-time highs following a steady stream of improving economic data and investor-friendly monetary policy.
In 2014, the broad-based S&P 500 gained 210.54 points (11.39 percent) to 2,058.90, easily outpacing forecasts that the index would gain only about six percent for the year.
The Dow Jones Industrial Average rose 1,246.41 (7.52 percent) to 17,823.07, while the tech-rich Nasdaq Composite Index climbed 559.46 (13.40 percent) to 4,736.05
All three indices dropped in the final session of the year in lightly traded volumes.
With the gains from 2014, the Dow has now risen six years in a row and the S&P 500 has lodged three successive years of double-digit gains, which is unusual, though not unprecedented. That has raised questions about whether the market can go much higher.
Lee Munson of investment firm Portfolio Wealth Advisors said the rally is “long in the tooth,” but still expects it to continue due to the comparative strength of the US economy with the rest of the world.
“You have to put your emotions aside and look at the facts,” Munson said. “The facts are we’re still expanding.”
Key worries for US investors in 2015 include weak growth in Europe and emerging economies, the hit from sharply lower oil prices to Russia and other petroleum exporters, and the blow from an eventual hike in US interest rates.
- Buying the dip -
While trending higher throughout the year, US stocks experienced intermittent fits of weakness in 2014.
These included a mid-winter swoon amid frigid weather that depressed economic activity; an April pullback on worries that technology stocks were a bubble about to burst; an October slump on global growth fears; and most recently a December retreat due to low oil prices and the plunging Russian ruble.
However, in each of these cases, investors stepped in to buy the dip, ultimately pushing markets higher.
The most recent rally was fueled by the Fed’s December 17 pledge that it would be “patient” before raising interest rates, which was quickly followed by a government report showing third-quarter US economic growth came in at a staggering annual pace of five percent.
The back-to-back developments lifted the Dow above 18,000 for the first time and pushed the S&P 500 closer than ever to 2,100.
Standout sectors that rose more than 18 percent in the S&P 500 were health care, which was propelled by elevated spending under the new health care program dubbed Obamacare and a stream of mergers; technology, thanks to strong performances from companies like Facebook (NasdaqGS: FB – news) and Intel (Swiss: INTC.SW – news) , which led the Dow; and utilities, which drew investors who sought dividend payouts at a time when interest rates remained low.
The weakest sector by far was energy, which fell about 10 percent, as oil prices dropped nearly 50 percent from last year.
Some analysts think retail-sector stocks could have more upside in 2015 as investors take advantage of low gasoline prices and increase their spending.
Consumer discretionary stocks in the S&P 500 underperformed the overall index in 2014.
“People are still concerned about what they’re spending,” said Howard Silverblatt, an analyst at S&P Dow Jones Indices.
- A dangerous rise? -
Despite the heady gains of the last couple of years, many analysts believe the US stock market still has significant running room in 2015.
Wells Fargo Advisors strategist Gary Thayer predicted more volatility, but noted that US stocks typically decline when the dollar is weak and inflation is high.
“These conditions do not exist today,” Thayer said. “We continue to advise investors to be positive, not defensive, because we do not see the conditions that historically have been negative for stocks.”
Munson of Portfolio also sees US stocks gaining, albeit at a more modest pace. He is eyeing the S&P 500 at 2,200, in part because he does not anticipate the Fed to significantly hike rates anytime soon.
Jack Ablin, chief investment officer at BMO Private Bank, agreed that US stocks could rise further in 2015 due to continued central bank easing, but cast such a rise in a cautious light.
Ablin warned that the combination of sharply lower oil prices, a higher dollar and weak overseas growth could plant the seeds for a big correction as was the case after similar conditions in the late 1990s sparked an eventual correction when the technology bubble burst.
“The market could continue to surprise to the upside, but at the same time get more and more dangerous from a valuation standpoint,” he said.