Friday Mailbag: Grassroots Versus Astroturf
Shhh! It’s a dirty secret in the media….
Some publishers don’t get much mail from readers, so they create fictional letters for their question-and-answer sections. You’ve heard of “grassroots” opinion? Well, think of fake feedback as astroturf.
I face the opposite situation: I’m trying to keep up with all the reader emails that flood my inbox on a daily basis. It’s a nice problem to have. Let’s look at a sampling of the most recent batch of (actual) letters.
RFID: Big profits from tiny devices…
“I read your article on RFID. I agree with Avery Dennison as a pick. I’m a consultant in the industry and clearly the company has a commanding share in retail, luggage tags, and other growing markets.
But go down one more layer in the ecosystem, and ask yourself: where are they getting the RFID chips? Impinj. It’s a leading pure play that supplies the bullets to not only Avery, but also many others.” — Michael M.
Mike, you hit the nail on the head about Impinj (Nasdaq: PI). Our very own Linda McDonough, chief investment strategist of Profit Catalyst Alert, also likes the stock. As she observes:
“Impinj is the only public pure play for investors to capitalize on the trend in retail to fastidiously track inventory. Impinj is growing rapidly but like most cool tech stocks, reinvests most of its potential profits into sales and R&D.”
The rise of the machines…
“Please provide me with updated information on the Internet of Things. Which stock should I buy?” — Olivia N.
Olivia, the Internet of Things (IoT) is increasingly pervasive in our lives and represents a massive moneymaking opportunity. The aforementioned chipmaker Impinj is a leading IoT company.
Also consider Personal Finance Growth Portfolio holding IBM (NYSE: IBM), which has been deploying its huge cash hoard to gobble up a slew of smaller, innovative companies in the forefront of IoT. What you decide to buy ultimately depends on your risk tolerance and other factors, but those two IOT stocks are a good starting point for further research.
Drones: how to make a killing…
“I am considering shares of STMicro. I believe the company is based overseas and makes chips for drones. Can you comment on my choice?” — Richard W.
STMicroelectronics (NYSE: STM) is indeed a major beneficiary of the global boom in drones. STMicro also makes semiconductors and electronics for telecommunications and several industrial markets.
The Predator drone (pictured), which can shoot Hellfire missiles, has become synonymous with drones in the popular imagination. The fearsome hunter-killer Predator plays a starring role in a growing number of movies and television shows. However, the Predator is only one among a wide variety of pilot-less aircraft for military and commercial use.
In the military sector, drones of myriad sizes and types are revolutionizing the use of power in combat regions around the world, especially in “hot spots” in Afghanistan and Iraq. Drones also perform a growing number of non-military functions, from patrolling borders to spraying crops to inspecting oil pipelines. Amazon (NSDQ: AMZN) is currently testing drones for home delivery.
STMicro provides chips not just for drones but also for other groundbreaking fields, notably 3D printing and IoT. No surprisingly, the company faces stellar earnings growth. The average analyst expectation is that full-year earnings will grow by 103.4% on a year-over-year basis.
Problem is, the rest of the investment herd has caught on to STMicro. The stock has soared 136.9% over the past 12 months, pushing its valuation to nosebleed levels. The stock’s trailing 12-month price-to-earnings ratio is absurdly high at 237.33. Investors who own shares should consider booking profits, or waiting for pullbacks before accumulating more shares.
No middle ground with the Middle Kingdom…
“I am still holding Lattice Semiconductor since I read it might be taken over in 2017. Is there any credible news on a takeover? I have read lawyers are involved now. Also the investors are from China and congressmen don’t want them to buy it. By the way: I like your newsletter.” — Jon D.
Thanks for the kind words about this newsletter. As for the delayed deal to buy Lattice Semiconductor (NSDQ: LSCC), I wouldn’t hold your breath. I give it scant chance of going through.
Buyout fund Canyon Bridge Capital Partners announced in November that it intended to purchase Oregon-based Lattice for $1.3 billion. Lattice makes mission-critical chips for many of the Pentagon’s advanced weapons systems.
Turns out, though, that Canyon gets funding from (ominous music, please)… China’s central government. Ruh-roh.
In December, more than 20 members of Congress wrote to the U.S. Treasury Department, requesting that the planned acquisition of Lattice be blocked for reasons of national security.
The lawmakers expressed concern that the deal could undermine America’s military supply chain and cause the U.S. Department of Defense to rely on foreign-sourced chips. With the China-bashing Trump regime now in place, it’s increasingly unlikely that the deal will get approved. Meanwhile, shareholder groups are lawyering up, which is never a good sign.
The high cost of higher education…
Here’s an informative letter from a state official about a widely popular college savings plan:
“We read your ‘Boy, do we get mail … ’ response from January 20, 2017, regarding a reader’s questions about the CHET 529 college savings plan. We’re glad to see that people are asking about CHET and conversation is happening about college savings topics.
One clarification we wanted to ask that you provide has to do with financial aid. One of the frequent questions we hear from potential investors is how using CHET funds may affect financial aid. As each school applies its formula to determine the Expected Family Contribution (EFC), meaning what the school determines a family can afford to pay for college, CHET savings actually count less in that equation than other savings types. For example, the money that the family holds in a CHET account is considered a parental asset, which typically accounts for about 5% of EFC.
Any money held in the name of the child, for example in a custodial account or any savings the student has, accounts for about 50% of EFC. In that scenario it is better to have money saved in the parent’s name, rather than the child’s. And if the parent is saving for college, using a tax-advantaged vehicle like a 529 plan can make sense.” — David S. Barrett, Communications Director, Office of State Treasurer Denise L. Nappier, State of Connecticut
Go any questions? Send me an email: firstname.lastname@example.org — John Persinos
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