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The Great Walled-Off China

The U.S.-China trade war has spawned a growing wall between the two countries. OK, it’s not really a wall. It’s more like a chain-link fence with lots of holes … and an unlocked gate … but that’s not the point!

In addition to tariffs on $200 billion in Chinese imports, President Trump has added Huawei Technologies and its 70 affiliates to the so-called Entity List.This list of shame prevents the Chinese telecom giant from buying parts, components and software from U.S. companies without U.S. government approval.

And we all know how that approval process will go.

Huawei: “We have these lovely phones we’d like to…”

U.S. government: “No.”

Huawei: “OK, then how about these 5G…”

U.S. government: “No.”

Huawei: “What about…”

U.S. government: “Look, our boss is in a really bad mood right now. Can you come back later?”

Secretary of Commerce Wilbur Ross backed the decision, stating that Trump’s move will “prevent American technology from being used by foreign-owned entities in ways that potentially undermine U.S. national security or foreign policy interests.”

In other words, this standoff isn’t ending anytime soon.

The Takeaway:

Huawei isn’t a publicly traded company, so there isn’t any direct impact to investors to worry about. However, the U.S. companies that supply Huawei could take a hit to their bottom lines. The Chinese company lists some 33 U.S. companies as core suppliers, including Intel Corp. (Nasdaq: INTC), Qualcomm Inc. (Nasdaq: QCOM) and Microsoft Corp. (Nasdaq: MSFT).


Good, Better … Best!

Good: Speedy Delivery!

The free next-day shipping revolution has arrived! A few weeks ago, Amazon.com Inc. (Nasdaq: AMZN) announced free one-day shipping to Prime subscribers. And, in a real little brother moment (is Walmart the little brother, or is it Amazon?), Walmart Inc. (NYSE: WMT) also jumped on the one-day shipping bandwagon.

But both come with a few caveats: Amazon hasn’t set a date for when it’s rolling out expedited delivery. This is obvious, ’cause I just ordered something with one-day shipping from them on Tuesday, and it still isn’t here! Come on, Amazon!

Walmart, meanwhile, is offering delivery on a “wide range of general merchandise,” but you must order at least $35 worth of stuff … so, a whole carload at Walmart prices. And it’s only available in “40 of the top 50 major U.S. metro areas.” Seems considerably lacking to me.

For customers, you’re going to have to wait for those speedy deliveries. For investors, spending to reach these goals will come at the expense of short-term earnings, but will bring long-term gains for both companies.

Better: Another Brick in the Wal

I know, I know … we just covered Walmart. But a company can have more than one bit of news about it in a day, right? And this one is stellar. The world’s largest retailer just added another earnings brick to its wall of successes.

Yes, that was a stretch. But my nine-year-old loved it … so there.

The company beat earnings and revenue expectations, posted its best same-store sales in nine years and saw a 37% spike in e-commerce sales. Pretty impressive figures for a company of Walmart’s size, especially one that competes with Amazon. WMT stock has responded by jumping back above $100 per share, which could be a buy signal for many Walmart bulls. Keep this one on your radar, if not in your portfolio.

Best: It Tastes the Same, if You Close Your Eyes

You can’t stop this vegetarian juggernaut! Beyond Meat Inc. (Nasdaq: BYND) soared another 9% on Tuesday, bringing BYND’s post-IPO rally to nearly 250%. That makes it the best IPO of 2019 — move over, Lyft and Uber.

The latest pop in BYND was brought to you by Tim Hortons. The Canadian coffee chain announced that it’s testing Beyond Meat’s plant-based sausages as part of three new vegetarian breakfast sandwiches.

I’m a meat eater at heart (Mmm … bacon!), but even I could be convinced to eat Beyond Meat regularly … it’s that good. So, I can see why there’s so much hype behind this stock.

But, with 40% of BYND’s float sold short, not everyone agrees. Has BYND come too far, too fast? If short sellers are wrong — and sentiment on Wall Street says they might be — BYND is in for one heck of a squeeze play. And that means more gains on the horizon.

Great Stuff’s Heard On the Street

“If you’re not a billionaire in the next 10 years, it’s your own fault.” — Erik Finman, 20-year-old bitcoin tycoon.

If you’re like me, you’re probably sitting on the sidelines watching the bitcoin and cryptocurrency drama unfold like an old-school soap opera. These are the days of our trading lives. I want to get in, but cryptos are either in too big of a rally or in too big of a decline. It’s literally been boom or bust for this market.

But Finman says otherwise.

“I 12,000% believe that,” he recently told MarketWatch. “I believe that you could be a millionaire by investing in blockchain and bitcoin.” Still, I’m not sure I’m convinced by a 20-year-old investor … or someone who believes there’s “12,000%” of anything. For now, I’ll stick with some real crypto investing advice. [Note: link to CYP promo].


Quit Calling Every New Company a Tech Company!

OK … it’s time for a rant.

The IPO boom this year has really gotten on my nerves, for multiple reasons. The biggest is companies going public while posting billions in losses.

I get it.

You’re a startup and there are going to be “investments” to take care of — startup capital and all that. One of the biggest areas of losses comes from hardware and technology development. It’s a tech thing, and investor understand that.

But just because your business heavily relies on technology, doesn’t mean you’re a tech company! Uber Technologies Inc. (NYSE: UBER) is not a tech company. Lyft Inc. (Nasdaq: LYFT) is not a tech company. (While we’re at it, Netflix Inc. [Nasdaq: NFLX] is also not a tech company.)

Beyond Meat relies heavily on technology to achieve its goals and manufacture its products. You don’t see it pitching itself as a tech company.
It’s time we stopped making excuses for the Lyfts and the Ubers of the world and their billions in losses. It’s time to look at them for what they are. In this case, they’re glorified taxi services that are using smartphone apps to disrupt the market and take advantage of the gig economy.

The latest affront in the IPO market is WeWork. WeWork, or as it’s recently rebranded itself, We Co., is a real estate rental company. Essentially, WeWork rents out portions of buildings, makes them look pretty for office settings — even including beer taps in offices — and re-rents those locations as shared office spaces to businesses. It’s a real estate rental company. Period.

However, it’s using the “tech” moniker to justify losing millions ahead of its IPO. Yesterday, WeWork reported a first-quarter loss of $264 million. Last year, the company lost $1.9 billion — putting it right up there with Uber and Lyft.

According to WeWork, it’s not losing money … it’s investing.

Stop! Just … stop.

I’m not buying it. And neither should you. If you want a real tech IPO to invest in, check out Slack’s offering later this year.

Until next time, good trading!

Regards,

Joseph Hargett
Great Stuff Managing Editor, Banyan Hill Publishing

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