Last week was an interesting one, to say the least. From the Italian elections and the sequester, to the essentially flat 4Q 2012 GDP revision, it paints a picture of increasing risk. Yet the major indices continued to move higher and, in some cases, close in on all-time highs.
As we saw with Friday’s Personal Income and Spending data for January, we only are beginning to see the impact of the payroll tax exemption expiration and higher gas prices. With gas prices climbing to painful levels in February, it’s a pretty good bet that the consumer, retailers like J.C. Penny (JCP), casual dining restaurants like Red Robin Gourmet (RRGB) and others will feel the pain in the coming weeks.
Making matters somewhat worse will be the impact of sequester-related spending cuts that phase in during the coming weeks. Despite the sequester, there remain bright spots in the domestic economy that capitalize on my Better, Smarter America PowerTrend.
In that PowerTrend, which is one of my Great 8 PowerTrends that I use to book big profits for subscribers to my investment newsletter PowerTrend Profits, we’re benefitting from the pain points in the housing and automotive industries. Those pain points are really what are behind the rebound in those two sectors during the last few months. Better yet, those pain points will carry that rebound well into 2013, not only for auto manufacturers like General Motors (GM) and homebuilders like Toll Brothers, but also for related companies in machine tools, paint, carpet, furniture and so on.
That rebound ripple effect will be felt by PowerTrend Profits subscribers, who are set to score big profits in the coming months with shares of USG (USG) and ADT Corp. (ADT), among others, as those sectors rebound.
Looking Past the Sequester to What Is Next in Mobile
While the sequester was bandied about by all of the talking heads, there was another event going on last week — the 2013 Mobile World Congress. Each year, the Who’s Who in the ever-expanding mobile industry get together at this industry event. As you can imagine, there usually are a flurry of press releases and other announcements. If you haven’t been to the show, or haven’t followed the industry and its technology the way I have during the last decade, you can confuse the noise for news.
At this year’s event, there were a number of confirming data points for my Always On, Always Connected PowerTrend. One of the key aspects of that PowerTrend is that mobile connectivity is moving past mobile phones, smartphones and tablets into other areas like the home, the car and mobile health.
In its smart-home booth, AT&T (T) Digital Life showcased energy consumption and home-security solutions. In a similar fashion, Vodafone (VOD) demonstrated security services, remote health monitoring and even the remote opening and closing of doors. Other mobile carriers, such as Deutsche Telekom (DTEGY), KT (KT) and Telenor (TELNY) also exhibited smart or connected home solutions at the trade show.
Companies showcasing those solutions are just what I’m talking about when I say mobile is moving beyond mobile phones. It also affirms the wildcard upside potential in ADT Corp. (ADT), which PowerTrend Profits subscribers got in at $46.54 a few weeks ago. Aside from having 93% of its revenue from the razor/razor blade business that is home security, the company is moving into other services, like remote monitoring, that will drive its revenue higher. Nothing is better than when two PowerTrends, like Safety & Security and Always On, Always Connected, intersect.
Subscribers to PowerTrend Profits know that I like to scour the food chain to find those companies whose business is set to explode as a PowerTrend catches fire. In the case of the connected home, I’m looking at what I call “buy the bullets, not the guns.” By that, I mean investing in those key enabling technology companies, rather than in the device or other hardware vendors.
That means connective technologies such as cellular, Bluetooth, Wi-Fi and so on. Understanding the shifts in the industry is key and can lead to big profits. Apple benefitted from the shift to smartphones. My readers scored big profits when I told them to buy shares of Qualcomm (QCOM) at $43 in July 2009, because that smartphone shift was just beginning, and mobile carriers were starting to roll out their 3G and 4G services. Qualcomm shares closed last week at $66.29 — a 54% winner.
In the coming weeks, I’ll be sharing the big profit potential of connected home companies with PowerTrend Profits subscribers, once I check in with industry contacts, decipher hardware tear-down reports and sift through company press releases and filings with the Securities and Exchange Commission.
I hope you’ll join us.
To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.