Look at Enphase, Selling NOC, Buying Apple

"Telecommunications providers relentlessly extol the power of fifth-generation (5G) wireless technology. Government officials and policy advocates fret that the winner of the "5G race" will dominate the internet of the future, so America cannot afford to lose out. Pundits declare that 5G will revolutionize the digital world. It all sounds very thrilling. Unfortunately, the hype has gone too far....the "race to 5G" is a myth...Even if there was a race, it's over: South Korea and China have already built much more extensive 5G networks than the United States."

- Kevin Werback

Kevin Werbach is a professor at the Wharton School, University of Pennsylvania, and the author of The Blockchain and the New Architecture of Trust.

​​The Portfolio

As I'm writing,

The portfolio is UP +35% YTD

Our benchmark, the S&P 500 is up about +7.78% YTD

Enphase Energy Soaring (ENPH) ENPH recently announced its partnership with Thailand’s solar installer Natura Living to jointly build a solar installation for PepsiCo Thailand. Natura Living is currently installing a 60 kilowatt (kW) solar array using Enphase IQ 7+ microinverters on PepsiCo Thailand’s agronomy division building. This is the second joint venture project between Enphase Energy and Natura Living. Natura installed another 60 kW solar array using Enphase IQ 7+ microinverters on PepsiCo Thailand’s snack division building.


Southeast Asia has emerged as one of the world’s fastest-growing economic regions, consequently, energy consumption is expected to double in this region. About $290 billion in renewable energy capacity will be needed in the region to achieve 23% of primary energy from renewable sources by 2025. In a region experiencing tremendous growth, Thailand has so far been the leader in promoting solar power.


Per the International Renewable Energy Agency (IRENA), global electricity generation from solar energy is expected to increase to nearly 360 GW per year by 2050 from the current level of 109 GW. Solar players like Enphase Energy are collaborating with other companies to grab available opportunities in the most efficient ways possible. In July 2020, Enphase announced a strategic partnership with SunPower to produce the new Enphase Energized Maxeon AC Module based on its seventh-generation IQ microinverters.


Selling Northrop Grumman (NOC)

I've been bullish on Northrop Grumman for a long time and with good reason. NOC is exceptionally well managed, has

a diverse executive team and board of directors. Their product line and services are highly diversified across air, land, sea, space, and cyber. I have every reason to believe that government spending, particularly from international customers will increase over the next few years. While earnings have been good, and revenues are good, I have a responsibility to my readers to provide a portfolio that performs better than the market. Recently NOC lost a significant contract to replace fighter jets, and it was Northrop Grumman jets that are being replaced. My thinking is I'd like to put this money to work elsewhere in higher-growth companies that are less reliant on government contracts.


SELL 13 shares of NOC @ $315


Buying Apple (AAPL) I've wanted to buy Apple for a long time, but the price just kept getting away from me. Yesterday I listened to the launch event for iPhone 12, and I have to say I'm impressed. The 5G capabilities are pretty amazing. LiDAR gives many features greater capability to focus, accurately measure, and warn at the speed of light. The cameras with 1.6f lenses, Dolby, and HDR are stunning. The new A14 chip will enable a lot of existing and new apps to advance in dramatic ways especially gaming, anything that requires connectivity or graphics. Sizes and price points are attractive in standard and pro models. The ecosystem of Apple products and services is not only elegant, it makes Apple products very sticky. The addition of bundled services through Apple+ I think will eventually make the ecosystem even stickier. While the pundits are numerous and mostly chime in around the quote at the top of this post or the price of iPhones, I disagree. 420 million iPhone owners have phones that are up to 3 years old. Upgrading half of those would qualify as a 'Super-Cycle' for iPhone sales. An iPhone provides users with a phone, internet access, a high-quality camera, video creation, and editor. We spend so much time on our smartphones that we can't imagine going back, So the value proposition is in the value received from the iPhone and all the devices that it replaces.


On valuation, there are a number of ways to value Apple stock. Is it cheap, no, is it expensive, that depends. Apple is the largest company in the world by market capitalization, as such moves in the stock price have an oversized impact on portfolios; I've reached a point where I think it's hard to not own Apple in a stock portfolio. What I want out of Apple are continued reliable earnings. On a trailing price/earnings basis, Apple stock is trading right around the same multiple as the overall stock market. On a forward earnings multiple, Apple trades at a slight discount. I put more emphasis on the future than the past. But let's look at the past to see if there is anything constructive to learn. In just over 2 years Apple has doubled its market capitalization from $1 trillion to $2 trillion.


Just looking at the stock price, investors have received generous returns. If we include dividends, the total returns are even better.


YTD: 70.63%

2018-19: +75.61%

2017-18: +40.08%

2016-17: +66.86%

2015-16: +10.16%

2014-15: +38.31%

2013-14: +47.30%

2012-13: +41.10%


If customers upgrade to iPhone 12 in order to prepare for 5G connectivity, and they hold their phones for 3 years, I think iPhone 12 and its 5G capability will turn out to be more impressive than the pundits are willing to admit right now. Globally 5G population coverage was around 5% at the end of 2019, with the most extensive coverage build-out in the US, China, South Korea, and Switzerland. IDC estimates that there will be about 1 billion 5G connections by 2023. That would mean a 217% compound annual growth rate (CAGR) over the five-year period spanning 2019 through 2023. Keep in mind that 1 billion connections are only 8.9% of all the expected mobile connections in 2023. My thinking is that there will still be substantial opportunities for growth beyond 2023. While 5G connections are very low right now, the growth rate is expected to climb substantially in the near term and long term.

BUY 25 shares of AAPL @ $121


"Markets don't go to zero, Portfolio's do.

Buy quality, be patient...and look twice for motorcycles."

- Clay Baker

Stay Invested,

Clay Baker

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Keep Me Honest 2020

  1. Today is a good time to carefully leg into stocks again (3-20-2020).

  2. Worst Case: S&P 500 decline further to around 2,100 - 2,150 (3-28-2020).

  3. Middle Case: S&P 500 level out around 2,650 - 2,700 (3-28-2020).

  4. Best Case: YE S&P 500 eventually rise to around 3,000 - 3,200 (3-28-2020).

  5. Market bottomed March 23, 2020 at S&P 500 2,237.40 (4-17-2020).

Clay's Rules

Rule #1: Don't lose money

Rule #2: See Rule #1

Rule #3: Portfolios go to zero, markets don't, Stay Invested

Rule #4: When good stocks you own drop 10% below your cost basis, add shares

Rule #5: Bull markets aren't sustained without the Transports

Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase

Rule #7: When an investment bank sells below book value, buy it

Rule #8: Tips are for waiters. Do your own homework.

Rule #9: Don't sell a stock because you're bored with it. Do your own homework.

Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:

AMD

I am invested short in these securities mentioned in this post: GSX

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved