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Are We Really As Smart As We Think?

We humans are a smart bunch.

At least, we think we are.

I mean, we have smartphones, smart watches, smart meters, and smart cars, among other things.

Yet, for all this smart stuff, we’re finding it trickier to operate one of our longtime tech mainstays.

The television.

Far from embracing new-age smart TVs, Greg Miller explains in his article this week, “Americans watch nearly 2.5 hours of television per day – but sometimes, it seems much of that time is spent actually finding programming! The problem is only getting worse, too, what with programming coming from multiple sources – the cable company, Netflix Inc. (NFLX), Hulu, Chromecast, and others.”

However, another “smart” device is here to help us – and Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), and shortly Apple Inc. (AAPL) are falling over themselves for our business.

Welcome to the Smart Home

As Greg covers, Google used its recent Google I/O conference to unveil Google Home – “a dedicated in-home device similar to Amazon’s Echo. The goal? To harness its Big Data and machine-learning capabilities to make Google Home easier to use, more intuitive, and eventually more capable than Echo.”

In other words, a smart home, courtesy of Google.

Like Echo, it will be able to control many of the devices in your home – with some key benefits.

Greg also notes that Apple is poised to enter this growing field, with a big update planned for Siri.

In turn, “The FCC mandate for cable companies to make their programming information open-source creates an opportunity for a single device to track all that [TV] programming. And if that device can also do all the other things that Amazon Echo and Google Home do, it could become a true hub of information and expand the size of the potential market for these devices.”

You can check out Greg’s full article below.

That’s not all he’s been up to this week, though.

The Profits Keep Coming

On Thursday, he covered another new trade for Extreme Alpha subscribers. This time, on one of America’s leading home improvement and renovation companies that’s capitalizing on strong industry tailwinds, as Americans spend more money on their homes.

Extreme Alpha is based on the overriding premise that “share prices follow earnings.”

If a company’s earnings are rising, the stock price will follow. Conversely, if earnings are falling, the stock price will decline. Simple as that.

Extreme Alpha selects strong, well-established companies that have achieved a much sought-after “triple beat.”

In other words, they’ve just beaten Wall Street’s expectations for revenue and profit in their earnings reports, while also raising their future guidance.

Strangely, though, Wall Street often takes its sweet time to reward such terrific companies. Especially when the market is taken by surprise.

When analysts are right, it’s hard for a stock to move much because the news is already baked into the price.

But when they’re wrong, we profit from their miscalculations through a powerful concept known as the “post-earnings announcement drift” – or PEAD – where a company’s share price is powered higher as analysts and investors readjust their view.

But this doesn’t happen immediately after an earnings announcement – hence the “drift” aspect. But as more investors become aware that the company is mispriced, they bid shares higher.

Extreme Alpha selects the best triple-beat companies – and the best PEAD candidates.

To profit, it harnesses a strategy that locks in consistent, sizeable gains while slashing downside risk.

  • We deploy little capital upfront – a fraction of what it would cost to buy regular shares – thus massively boosting our leverage.
  • We don’t need the stock to move too far before we’re sitting on a huge gain.
  • We dramatically reduce the timeframe needed to bank those gains.
  • And we have downside protection in case the trade moves against us.

Since mid-March, Extreme Alpha has locked in profits of 89%, 76%, 43% (twice), 36%, 26%, and 20%.

Do yourself a favor and find out more.

Oh, and enjoy your weekend, too.

Martin Denholm

Around WSD

Elsewhere in Wall Street Daily this week…

  • Chief Technology Analyst Louis Basenese looks at the woeful state of the IPO market in 2016. To say it’s lagging previous years is an understatement. We’re on pace for just 78 IPOs this year – way down from the 214 deals in 2013, 254 in 2014, and 173 last year. But there’s hope for a rebound. Following a strong May, Lou lays waste to the myth that the summer is a traditionally sluggish period for IPOs – and says the upcoming Twilio IPO could ignite the market.
  • Chief Income Analyst Alan Gula warns investors about the perils of triple-leveraged ETFs. Alan notes, “Triple-levered ETFs seek a return equivalent to positive or negative 300% of the underlying index on a daily Because of this daily resetting, levered ETFs are unsuitable long-term investments.” He details why they’re “very poor performers in all but the smoothest of trending markets” – and with speculation ramping up, he warns, “Just as a diet of triple-decker burgers can be hazardous to your health, abuse of triple-levered funds can be dangerous to your wealth.”
  • Speaking of warnings, Global Markets Analyst Martin Hutchinson cautions of a global debt contagion, due to the irresponsible International Monetary Fund. In arguing for “unconditional” debt relief for Greece, the IMF has proved that it’s “morphed from being a stern (albeit fairly useless) defender of the norms of sound debt management to a reckless enabler of Keynesian boondoggles.” Indeed, Martin warns that Portugal, Spain, France, and Italy could all soon demand debt relief themselves “if the IMF encourages those governments’ resistance to fiscal discipline.” He even says the IMF “is now seriously damaging the integrity of the global bond markets, making some kind of universal default/write-down increasingly likely.” And proposes a solution for income investors.
  • Finally, Jonathan Rodriguez says that while most people are hanging on every word from the Fed, he’s watching the dollar. Specifically, how the dollar reacts to the Fed’s statements. And in applying the situation to oil, Jonathan contends that with oil up strongly in 2016, the dollar is driving the rally. However, while the dollar’s renewed strength spells near-term weakness for crude, it won’t hold oil down for long – and pitches investors on one of the energy sector’s strongest stocks to take advantage of oil’s pullback.

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Martin Denholm

, Managing Editor

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