Back in February, I was at a company retreat with my Money & Markets team along with Banyan Hill.
Before you groan, this wasn’t a “mai tais on the beach” kind of retreat. This was a “notepads in a conference room, drain the coffeemaker, bring up the slide deck, get stuff done” kind of retreat. (OK, we did go to Medieval Times, and it was a hoot.)
In any case, I spoke at this retreat about the major investment themes on my radar. One or two of them raised eyebrows … which I saw as a good sign.
Several of those in attendance, even those with considerable investment experience, were surprised at the kinds of opportunities I’m watching.
They aren’t all that “off the wall” if you ask me… Sure, they haven’t been in fashion for some time. But we haven’t been in a market like this for some time.
I’ve spoken about some of these ideas already, here in The Banyan Edge and to my paying subscribers. And three months removed from those early discussions, their importance hasn’t wavered one mite.
Today, you’re going to walk away knowing exactly what I think will be the dominant investment trends for the rest of 2023 and beyond.
5 Ideas to Define the 2020s
Here’s the current problem…
Investors this year, big and small, are still chasing the same old stocks from the last bull market. Namely, the mega-cap tech names that dominate the S&P 500 and Nasdaq 100.
This, I believe, is a grave error. The conditions that favored these stocks so greatly in the decade-plus bull market that preceded 2022 — low interest rates, low inflation and strong economic growth — are no longer in place.
The coming recession will erode forward earnings, and the valuations they command today could quickly unravel.
I’m not alone in this view, but I’m also not in the majority. That’s just fine by me. My Green Zone Fortunes model portfolio boasts a 31% average open return not because I follow the crowd … but precisely because I don’t.
With that in mind, here are the key themes I’m watching to build a robust investment plan for my subscribers right now. If any of these raise your eyebrow, I encourage you to take that as a sign to look into them further.
- Emerging Markets
Those who say the U.S. is the only game in town plainly haven’t done their homework. Above all other asset classes, emerging market stocks present both the greatest value and the greatest growth prospects today. That means strong returns ahead.
Over the next five-plus years, I expect emerging market (EM) stocks to far outperform the more expensive “developed” markets.
EM economies are growing much faster than developed countries. Some of them, like an opportunity I recently shared with my 10X Stocks subscribers, are actually posting a positive stock market over the last year and a half.
And even more important, EM countries are growing energy consumers. That means they’ll play a big part in another key theme on my radar…
- A Global Energy War
War is a charged word, so let me explain what I mean.
Right now, the world faces a dilemma. There is a strong push from global leaders to quickly transition to green energy. This push, however, comes up against the hard reality that green energy is not enough to meet the world’s energy demands.
The result? Both old, dirty fossil fuels and green energy projects are set to capture a huge amount of capital as they compete for the growing energy demands of the emerging markets I just talked about.
Oil & gas companies are making gobs of free cash flow. Green tech is growing fast as world governments incentivize the shift to cleaner sources. Both will be excellent investments over the next three to five years.
I’ve already recommended plenty best-in-class energy companies from both sectors across my paid subscriptions, and I don’t see a reason to stop.
- Income Opportunities
Before Charles Sizemore made his home here in the Banyan Edge, we worked together on a robust income investment strategy.
Our mission was to find the safest, most lucrative yields in the market to help you beat inflation with as little risk as possible, lest you “reach for yield and get burned.”
This is something we already accomplished with the introduction of the Green Zone Fortunes income portfolio. But the mission doesn’t stop there.
If I see a great stock that’s paying out an inflation-beating and sustainable dividend, it shoots to the top of my watchlist. Inflation is simply too high not to bias your investments toward stocks that fit that criteria.
That’s why several of the $5 stocks I recently recommended to 10X Stocks subscribers also pay out a solid dividend.
You can do okay buying short-term T-bills, and there’s certainly a place for that in a portfolio. But I’m seeing even better yields in the stock market for a marginally higher risk, and I believe dividend investing will be in style for a long time to come.
- Value’s Return
Many investors are still paying top-dollar for companies that command absurd valuations. (Back in February, I hinted at one that may be included in your own retirement portfolio!)
Meanwhile, there are plenty of stocks hiding out in the market that you can buy at a discount to their true value.
All you need are tools, such as my Green Zone Power Ratings system, to help you find true value while avoiding low-quality stocks that trade at cheap valuations for a reason.
Historically, high value indicates high future returns in the aftermath of a bear market. Combine this fact with the returns of small-cap stocks, sweeten the deal with a strong dividend and you have an incredible investment story that most seem unwilling to hear right now.
That’s fine by me. It leaves the sector ripe for early investors to take advantage of.
- The Federal Reserve
I believe almost everyone is underestimating the Fed’s willingness to keep rates at the current level for a long time, potentially well into next year.
This is another example of our short memory span. We were all conditioned to expect low (near zero!) rates as the norm for the entirety of the last bull market — even when things were going well.
This accommodation certainly helped press the market higher. But it’s a double-edged sword. The helicopter money of 2020 has sent valuations into the stratosphere for stocks that can’t justify them. These stocks will fall as time presses on and rates stand stalwart in the face of impatient investors.
My advice to you is to expect rates to stay higher for longer. And don’t expect the Fed to slash rates to zero when it changes its tune.
That means stocks will need to compete with the risk-free Treasury rate, and you’ll need to find stocks that are in a fundamental position to provide those gains … and avoid the ones that are simply riding the coattails of the zero interest rate policy age.
Mark it now … these themes will be central to the biggest investment wins for the rest of the 2020s and maybe even beyond that.
I would advise keeping this email somewhere close at hand. Refer back to it as 2023 rolls on. (If you’re old school like me, print it out or jot down the five ideas above and keep it near your desk.)
As for me, I’ll keep uncovering the best opportunities possible with a combination of these key themes and my proprietary Green Zone Power Ratings system, only recommending the stocks I’m confident will bolster your wealth in 2023 and beyond.
Look out for more from me on these themes as we enter the summer months…
To good profits,
Target Store Earnings Shed Light on Americans’ Finances
I pay attention when Target Corporation (NYSE: TGT) reports its quarterly earnings.
As one of America’s largest retailers, the company gives a window into the finances of middle America.
“Macro” data like gross domestic product growth, employment figures or retail sales only tell you so much.
If you want to know how the average American is really doing, ask Target’s CEO.
It was exactly one year ago that Target fired a shot across the bow by announcing a major inventory overhaul. It essentially dumped the inventory that flew off the shelves during the pandemic and replaced it with “back to normal life” products.
This was a warning to the rest of retail America and a sign of things to come over the course of 2022.
So, what can we learn from Target’s new earnings report?
At first blush, it wasn’t too bad. Target beat analyst expectations on both sales and earnings, and total revenues were up about 1%.
But once you get into management’s comments, the story gets more interesting.
To start, growth is decelerating. Chief Growth Officer Christina Hennington reported that sales were strong in February, weaker in March and weaker still in April.
And the specific mix of spending shifted over the quarter as well.
Shoppers spent more on basic necessities and less on discretionary purchases. (Which makes sense, considering the current state of the U.S. economy.)
Online sales were also down about 3.4%, which is a pretty significant decline for a segment that, until recently, was growing at a fast clip.
But this is also consistent with the trend of shoppers sticking more toward basic necessities. You’re more likely to order an iPad or a TV for delivery than you are a jug of milk or a box of cereal.
This also suggests that Americans are really feeling the pinch of inflation. That extra dollar they’re spending on their everyday items is a dollar less to spend elsewhere.
But perhaps the most noteworthy comment of all was from CEO Brian Cornell.
He reported that “inventory shrink” (better known as “petty theft”) is expected to increase by about $500 million this year — to over a billion dollars.
Now, as for “why” people are stealing, that’s a longer story for another day. But we can probably assume, inflation is a major factor.
I’m more interested in what this means as an investing opportunity.
Target has the same problem every other retailer does today. Workers are in short supply, so good luck hiring enough people to keep an eye on potential thieves.
But what about cameras? Some are now equipped with AI technology, trained to detect the body language of a would-be thief. There’s even facial recognition software that identifies past thieves.
And what about “smart” price tags that send an alert when a product leaves the building without being deactivated by a cashier?
The potential here is limitless, and companies have a vested interest in making the investment.
Again, Target is expecting to lose a billion dollars this year. They could invest hundreds of millions of dollars in advanced anti-theft tech and still come out ahead.
This is why Ian King, our resident financial expert in the tech space, is so interested in AI software (and how to profit from it).
If you’ve been keeping up with The Banyan Edge, you’ll know that Ian’s latest research breaks down the foundational technology behind AI: microchips.
AI can’t evolve without chips, so it’s a massive investment opportunity that we can get in on now, while it’s still in the early stages. And despite the rapid nature of AI’s growth, believe me, it’s only going to keep developing.
His new report details his top-recommended chip stock for this year.
So if you want to get access to that report, just go here to get started.
Regards,
