Archive for February, 2018

  • The MOAT ETF
    , February 28th, 2018 at 3:13 pm

    There’s an ETF which focuses on competitive advantages, otherwise known as moats. The VanEck Vectors Morningstar Wide Moat ETF has the symbol MOAT.

    I don’t own any shares in it but their strategy is close to what we do with our Buy List. MOAT currently has 44 stocks while we have just 25.

    Here are the MOAT holdings as of January 31:

    VISA V
    VF VFC

    I can’t say I like all these names, but I see several former Buy Listers here. It’s interesting how similar strategies can yield different names.

    I couldn’t find a precise methodology for the fund. Judging what’s a long-lasting competitive advantage must involve some human guesswork.

  • Morning News: February 28, 2018
    , February 28th, 2018 at 5:22 am

    Stock Selloff Widens After Powell Boosts Expectations of Rate Rises

    Senate Democrats Push for Support to Reinstate Net Neutrality

    Amazon Acquires Ring, Maker of Video Doorbells

    Papa John’s Is No Longer the NFL’s Official Pizza

    Takata Airbag Scandal: Australia Recalls 2.3 Million Cars

    Baidu’s Netflix-Style App Marks Bumper Year for China Tech IPOs

    Comcast’s Roberts Has Anti-Murdoch Card to Play in Bid for Sky

    Bill Gates Says Cryptocurrency is `A Rare Technology That Has Caused Deaths in a Fairly Direct Way’

    Macy’s Just Confirmed the End of Department Stores as We Know Them

    Weight Watchers Looking to Expand Beyond Dieting

    How Defective Guns Became the Only Product That Can’t Be Recalled

    In N.R.A. Fight, Delta Finds There Is No Neutral Ground

    Cullen Roche: Here’s a (Not So) Pretty Picture – Buffett vs the S&P 500

    Joshua Brown: Where the S&P 500 Will Spend Their Cash This Year

    Michael Batnick: Why Doesn’t More Money Make Us Happy?

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  • Four Rate Hikes this Year
    , February 27th, 2018 at 7:27 pm

    According to the futures market, the odds of the Fed raising interest rates four times this year is 33.5%. That’s up from 25% a week ago. In my opinion, it’s closer to 5%. Alas, I’m not on the FOMC.

    I also wanted to mention that HEICO (HEI), a former Buy List all-star, reported earnings after today’s close. I like this stock a lot but I don’t like the price.

    As usual, the earnings report was very good. Q1 sales rose 18% to $404.4 million, and EPS hit 45 cents per share. That’s five cents more than estimates. Last month, HEICO also split its stock 5-for-4.

    HEICO is raising its full-year forecast. Before, they saw net sales and income rising by 10% to 12%. Now they see net sales rising by 12% to 14% and net income rising by 30% to 32%. That’s thanks to tax reform.

    HEI is up 3.1% after hours. I would love to have HEICO back on the Buy List, but it’s way too pricey.

  • “A 40% Chance”
    , February 27th, 2018 at 11:13 am

    Rolfe Winkler and Justin Lahart have a biting piece in today’s WSJ on how market gurus go about making their claims non-falsifiable.

    This is one of my pet peeves. You can see my Buy List all the time. My track record goes back more than a decade. Yet there are lots of famous market gurus who weasel their way out of one terrible call after another. Peter Schiff and Nouriel Roubini are prime examples.

    Winkler and Lahart say that when in doubt, claim that your forecast had a 40% probability. That’s the sweet spot. If you’re right, you’re a genius. If you’re wrong, then you never said it was absolutely going to happen.

    The nice thing about 40% is that you never have to say you were wrong, says Peter Tchir, a market strategist at Academy Securities. Say you predict the Dow Jones Industrial Average has a 40% chance of hitting 30000 before year-end.

    “Get it right and you can say ‘See, I was telling everyone it could happen,’ ” he says. “Get it wrong and you can weasel your way out: ‘I didn’t say it was likely, I just said it was a strong possibility.’ ”


    “Pundits and gurus master the art of going out on a limb without going out on limb,” says Philip Tetlock, a professor at the University of Pennsylvania who has made a career analyzing which people forecast well, and why. One of his pet peeves is how gurus use vague terms like “distinct possibility” instead of percentage odds when they describe probabilities. That makes it easy to wiggle out of, or take credit for a forecast, since it isn’t clear at all what a distinct possibility is.

    But one drawback of percentage odds, Mr. Tetlock says, is that people are often unclear on what they actually mean.


    Courageous contrarian calls are the best way forecasters capture the public’s attention, and get television time. New York University Professor Nouriel Roubini was dubbed “ Dr. Doom ” for correctly predicting the financial crisis. Then in 2010 he projected a 40% chance of a “double-dip recession” in the U.S. It didn’t happen.

    Mr. Roubini says he doesn’t remember the projection, but that he takes pride in sticking his neck out, as with his latest call that Bitcoin is the biggest bubble in history and will go to zero.

    “I would not rule out that I’ve committed the sin of the 40% rule,” said Prof. Roubini. “Everybody has done so.”

  • Powell Speaks and Durable Goods
    , February 27th, 2018 at 11:01 am

    We had two key economic reports this morning. The Case-Shiller Index said that home prices rose 6.3% in 2017. Also, orders for durable goods fell 3.7% compared with expectations of a 2% drop.

    Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.2 percent last month after declining 0.6 percent in December.

    That was the first back-to-back drop in these so-called core capital goods orders since May 2016. Economists polled by Reuters had forecast these orders rising 0.5 percent last month. Orders increased 8.0 percent on a year-on-year basis.

    Shipments of core capital goods edged up 0.1 percent after an upwardly revised 0.7 percent rise in December. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. They were previously reported to have increased 0.4 percent in December.

    We also learned this morning that consumer confidence hit a 17-year high.

    Fed Chairman Jay Powell is testifying today on Capitol Hill. Here’s part of his testimony:

    The U.S. economy grew at a solid pace over the second half of 2017 and into this year. Monthly job gains averaged 179,000 from July through December, and payrolls rose an additional 200,000 in January. This pace of job growth was sufficient to push the unemployment rate down to 4.1 percent, about 3/4 percentage point lower than a year earlier and the lowest level since December 2000. In addition, the labor force participation rate remained roughly unchanged, on net, as it has for the past several years–that is a sign of job market strength, given that retiring baby boomers are putting downward pressure on the participation rate. Strong job gains in recent years have led to widespread reductions in unemployment across the income spectrum and for all major demographic groups. For example, the unemployment rate for adults without a high school education has fallen from about 15 percent in 2009 to 5-1/2 percent in January of this year, while the jobless rate for those with a college degree has moved down from 5 percent to 2 percent over the same period. In addition, unemployment rates for African Americans and Hispanics are now at or below rates seen before the recession, although they are still significantly above the rate for whites. Wages have continued to grow moderately, with a modest acceleration in some measures, although the extent of the pickup likely has been damped in part by the weak pace of productivity growth in recent years.

    Turning from the labor market to production, inflation-adjusted gross domestic product rose at an annual rate of about 3 percent in the second half of 2017, 1 percentage point faster than its pace in the first half of the year. Economic growth in the second half was led by solid gains in consumer spending, supported by rising household incomes and wealth, and upbeat sentiment. In addition, growth in business investment stepped up sharply last year, which should support higher productivity growth in time. The housing market has continued to improve slowly. Economic activity abroad also has been solid in recent quarters, and the associated strengthening in the demand for U.S. exports has provided considerable support to our manufacturing industry.

    Against this backdrop of solid growth and a strong labor market, inflation has been low and stable. In fact, inflation has continued to run below the 2 percent rate that the FOMC judges to be most consistent over the longer run with our congressional mandate. Overall consumer prices, as measured by the price index for personal consumption expenditures (PCE), increased 1.7 percent in the 12 months ending in December, about the same as in 2016. The core PCE price index, which excludes the prices of energy and food items and is a better indicator of future inflation, rose 1.5 percent over the same period, somewhat less than in the previous year. We continue to view some of the shortfall in inflation last year as likely reflecting transitory influences that we do not expect will repeat; consistent with this view, the monthly readings were a little higher toward the end of the year than in earlier months.

    After easing substantially during 2017, financial conditions in the United States have reversed some of that easing. At this point, we do not see these developments as weighing heavily on the outlook for economic activity, the labor market, and inflation. Indeed, the economic outlook remains strong. The robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment. Moreover, fiscal policy is becoming more stimulative. In this environment, we anticipate that inflation on a 12-month basis will move up this year and stabilize around the FOMC’s 2 percent objective over the medium term. Wages should increase at a faster pace as well. The Committee views the near-term risks to the economic outlook as roughly balanced but will continue to monitor inflation developments closely.

  • Morning News: February 27, 2018
    , February 27th, 2018 at 7:05 am

    Dalio Says Central Banks Face Challenge After ‘Goldilocks’ Phase

    After Anbang Takeover, China’s Deal Money, Already Ebbing, Could Slow Further

    German Court Rules Cities Can Ban Vehicles to Tackle Air Pollution

    In a Blow to AT&T, Federal Judges Have Rejected ‘The Loophole That Could’ve Swallowed the Internet’

    5 Key Questions for New Fed Chair Powell That Will Be Crucial for Stocks

    California Scraps Safety Driver Rules for Self-Driving Cars

    Comcast Just Bid $31 Billion to Buy Sky Out From Under Rupert Murdoch and Fox

    Guns: The Investment Journey

    Warren Buffett Offers His ‘Strongest Argument’ Against a Practice Investors are Doing in Record Numbers

    This Big Cryptocurrency Acquisition Could Create a Wall Street-Style Financial Giant

    Qualcomm, Broadcom Drama Enters New Act

    Sam’s Club Jumps Into Same-Day Grocery Delivery With Instacart’s Help

    Ben Carlson: Now & Then

    Howard Lindzon: The Market Does Not Care

    Roger Nusbaum: Did Dennis Gartman Really Get Blown Up? & Hedging; Are You Doing It Wrong?

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  • Morning News: February 26, 2018
    , February 26th, 2018 at 7:06 am

    Lower Oil Prices Force Saudis to Widen Their Circle of Friends

    How Today’s Big Supreme Court Case on Public-Sector Unions Could Lead to a Fiscal Crisis

    New Fed Chairman Jerome Powell to Testify Before Congress on Capitol Hill

    Supreme Court to Hear Microsoft Case on Emails, Customer Data Stored Overseas

    Bitcoin Regulation: 5 Facts the SEC Wants You to Know

    Warren Buffett: The New GOP Tax Law Benefits Berkshire and Acts as A ‘Huge Tailwind for Businesses’

    Goldman Says Stocks May Dive 25% If 10-Year Yield Hits 4.5%

    Morgan Stanley Takes on Goldman, Buffett With Bullish Bond Call

    How PNB Says It Fell Victim to India’s Biggest Loan Fraud

    Chairman of China’s Geely Has 9.7% Stake in Daimler

    Why Companies Are Abandoning the NRA

    Tortuous Sale Saga to End with Weinstein Company Bankruptcy

    Joshua Brown: Rates, REITs and Utes

    Michael Batnick: Risk & These Are the Goods

    Cullen Roche: WealthFront’s Risk Parity Fund is a Raw Deal & Buffett’s Annual Letter – Some Key Takeaways

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  • National Presto
    , February 25th, 2018 at 1:16 pm

    Check out the 17-year chart of National Presto (NPK):

    This is another great stock with zero analyst coverage. Also, there’s also not much media coverage. I found a Forbes article from 2009. The firm has a rather interesting history:

    Presto started life in 1905 as Northwestern Steel & Iron Works, maker of 50-gallon commercial canners. Ten years later it moved into home canning and in 1939 introduced the first saucepan-style pressure cookers. World War II rationing of aluminum had it cranking out munitions. In 1944 Maryjo’s dad, Melvin S. Cohen, joined as a customer service manager; two years later he married the daughter of a large shareholder and soon shot up the ranks.

    In 1960 Melvin became president just as conglomerators like Harold Geneen and James Ling were gaining admiration. He scooped up nine companies, including a door-to-door vitamin seller, a pipeline operator, a press-and-lathe refurbisher and a trucking business. Melvin’s appetite was matched by his eye for bargains. He earned praise from Benjamin Graham, who touted Presto in his value-investing bible, The Intelligent Investor.

    When leveraged-buyout firms started bidding prices up in 1980s, Melvin put away his wallet and started selling. By the time Maryjo took the corner office in 1993 he had unloaded everything but the kitchen appliance business. By 1999, with the world awash in cheap money, Presto’s cash and securities came to 80% of its assets. The stock was as flat as a pancake on a Presto Tilt ‘n Drain Big Griddle.

    Then things got ugly. A study by the New York Society of Security Analysts in 1999 blasted Presto for inept management. FORBES called the Cohen family rule a “farce.” Melvin took out an ad in Inventor’s Digest requesting ideas for new products into which he could pour some cash–565 came back, all rejected. In 2002 the Securities & Exchange Commission demanded that Presto register as a mutual fund company. When Melvin refused, the agency sued in federal court for violation of the Investment Company Act and won (though it lost on appeal).

    Shareholders’ salvation: two stock market crashes and a menu of suddenly cheap assets that could balance out Presto’s kitchen appliance unit, which not surprisingly had to send production work abroad in order to stay competitive. After exiting the munitions business in 1992, Presto got back into it in early 2001 with the $5.6 million purchase of Amtec, maker of 40mm bullets for mk19 machines guns now used in Iraq and Afghanistan.

  • Warren Buffett’s Shareholder Letter
    , February 24th, 2018 at 12:40 pm

    The latest one is out. You can read the whole thing here.

    The yearly shareholder letter always contains a lot of investing wisdom. Here are some nuggets:

    “Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.”

    “As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.”

    “Performance comes, performance goes. Fees never falter.”

    Letters for the last 40 years are archived here.

  • CWS Market Review – February 23, 2018
    , February 23rd, 2018 at 7:08 am

    “I made my first investment at age eleven. I was wasting my life up until then.”
    – Warren Buffett

    John Maynard Keynes famously described the irrational behavior of financial markets as being the result of “animal spirits.” Given the market’s behavior during much of 2017, the animals in question must have been snails, wombats, turtles and sloths.

    That all changed a few weeks ago when the stock market had one of its sharpest corrections in decades. Since then, things seem to have gotten back to normal. I’m not so sure.

    The S&P 500 is still below its 50-day moving average, and I think there’s a good chance we will soon see more dips. In this week’s CWS Market Review, I’ll explain what I think is really going on. I’ll also highlight some good earnings reports from our Buy List stocks. Smucker beat earnings and raised guidance. Hormel raised guidance as well. Over the last two weeks, Wabtec has given us a very nice rally, and Fiserv just announced a stock split. Before we get to that, let’s look at how higher interest rates are impacting the stock market.

    How the Market Is Stuck in the Middle with You

    Unlike previous market breaks, the recent one was more serious. Not solely because it was steeper and sharper, but because there are more fundamental concerns driving it. Brexit or the election or hurricanes can pass quickly, but rising yields are a more pressing threat. I don’t mean to say that the market is ready to take a plunge, but I want to stress that the investing climate will become more challenging this year.

    Let’s start with the basics. Interest rates are going up. This week, the one-year Treasury broke 2% for the first time in nearly a decade. The 20-year bond recently broke 3%, and the 10-year won’t be far behind. The yield curve is also starting to flatten out at the long end. This means that yields level off after about seven years. Not completely, but it’s a big change from where we’ve been.

    One metric I like to follow is the spread between the 20- and 30-year Treasuries (see below). In June 2016, the spread was 46 basis points. Lately, it’s been as low as 11. What I’m describing is happening at the long end of the curve, but it will soon spread to the short end. Currently, the difference between the three-month Treasury yield and the two-year yield is greater than the difference between the five-year and 30-year.

    If this sounds like mumbo-jumbo, I’ll boil it down. Rates are going up, and that puts the squeeze on stock valuations. This week, the Fed released the minutes from its last meeting, and the members appear quite confident that rates need to go higher.

    The futures market currently sees an 83% chance of a Fed hike next month. There’s a 66% chance of another rate hike in June and a 65% chance of a third hike in December. (There’s also a distant bet of four hikes by December. Yikes!)

    The odd thing about the higher yields is that they’re due to a good thing: the improving economy. The unemployment rate is still low. This has been a very good earnings season for Wall Street. The “beat rate” is the highest since 2006. Economists expect more good numbers for Q1. Americans’ expectations for the economy are the second-highest since 2002.

    What’s happening is that two counteracting forces are at play. The strong economy is boosting profits. In response, the rising economy is lifting interest rates. Stock valuations tend to move in a contrary direction to interest rates. In other words, the P/E Ratio is going lower while the “E” part of the equation is getting bigger. This means the “P” part, the prices, is kinda stuck in the middle.

    It’s hard to fight a market with falling valuations. Those of you who have been with us for a while may remember Medtronic (MDT), which was on our Buy List from 2006 through 2014. While we had it, the company churned out good earnings. We were right about that. The problem was that earnings multiples seemed to sink lower every year which weighed on the stock’s performance. We were right on the big picture, but we got a lousy entry price. Lesson learned.

    I want to be clear that I’m not predicting doom. Hardly. Instead, I’m saying that things are going to be different. The important takeaway for investors is that the stock market has been a lot more willing to shoulder risk. That normally happens with higher yields. If the one-year Treasury pays 0.1%, who cares? But now that it’s at 2%, you have to put in a little more effort at getting profits. I think it’s interesting that safe sectors like Utilities and Consumer Staples have been having a rough time.

    You’ll notice that our Buy List has exposure to safe Consumer Staples along with deep Cyclicals like Wabtec (WAB) and Snap-on (SNA). We also have value plays like Carriage Systems (CSV) plus some more aggressive picks like Cognizant (CTSH). Make sure your portfolio is spread out like that. Now let’s look at our recent earnings reports.

    Smucker Beats and Raises Guidance

    Last Friday, JM Smucker (SJM) released fiscal Q3 earnings and they were quite good. The jelly folks earned $2.50 per share, but 35 cents was due to tax reform. Wall Street had been looking for $2.12 per share, so in real terms, we’re talking about a three-cent beat.

    CEO Mark Smucker said:

    “We had a strong third quarter, with sales growth for key brands in every business and strong earnings per share growth fueled by the benefits of U.S. income tax reform and ongoing cost discipline,” said Mark Smucker, Chief Executive Officer. “These results reflect our commitment to delivering top and bottom line growth and supporting our portfolio of iconic and emerging brands. In addition, the benefits of income tax reform provide incremental fuel to invest in our growth initiatives and support our employees and communities as well as opportunities to increase cash returned to shareholders.”

    Thanks to tax reform, Smucker increased its full-year guidance. The company now sees adjusted EPS for this year ranging between $8.20 and $8.30 per share. That’s a big increase from the previous guidance of $7.75 to $7.90 per share. Smucker also gave a one-time bonus of $1,000 to nearly 5,000 employees. That’s good to see. We should never forget the people who are behind the great results.

    Smucker has four divisions. Here’s a quick rundown. Their coffee group, which is the largest, saw profit growth of 6%. Consumer foods was up 2%. Pet food was down 7%. International was up 16% thanks to forex.

    Initially, the shares dropped below $120 after the earnings report but have since gained ground. SJM closed Thursday at $122.84 per share. Going by the revised guidance, that’s less than 15 times earnings. A lot of these consumer staples are looking cheap. For now, I’m keeping our Buy Below on SJM at $130 per share.

    Wabtec Rallies 16% in Two Weeks

    On Tuesday, Wabtec (WAB) reported Q4 earnings of 90 cents per share. That’s not much of a surprise since that’s what they had told us to expect. For the year, the rail-services company made $3.43 per share.

    Last year was a tough one for Wabtec, but it was also promising considering the integration of Faiveley.

    Raymond T. Betler, Wabtec’s president and chief executive officer, said: “After a year of transition in 2017, during which we made excellent progress on the Faiveley integration and continued to invest in our worldwide growth opportunities, we are confident the company is positioned for improved performance in 2018. We have a record backlog, we’re seeing improvements in the freight aftermarket, and our Wabtec Excellence Program provides the fuel to increase margins over time. We are committed to achieving our 2018 plan and excited about Wabtec’s long-term growth prospects.”

    For 2018, Wabtec expects sales to be about $4.1 billion and adjusted EPS to be about $3.80. They said they expect Q1 to be about the same as Q4, meaning 90 cents per share. Things are looking a lot better for Wabtec. The stock has rallied eight times in the last nine sessions. In the last two weeks, WAB is up 16%. This could be the start of an extended rally.

    On Thursday, Hormel Foods (HRL) reported fiscal Q1 earnings of 56 cents per share. Of that, 12 cents was due to tax reform, so in practical terms, they made 44 cents per share in terms of continuing operations. That matched Wall Street’s consensus.

    Hormel raised its FY 2018 guidance to a range of $1.81 to $1.95 per share. The previous range was $1.62 to $1.72 per share. The company is also raising its starting wage from $13 to $14 per share. In November, Hormel increased its dividend from 17 cents to 18.75 cents per share. That marked their 52nd annual dividend increase. That’s a lot of Spam.

    Hormel has had a tough year so far. It’s our worst-performing stock (-9.3% YTD). As I said, these consumer staples have lagged badly. Still, the outlook for HRL is pretty good. This week, I’m lowering my Buy Below on Hormel to $36 per share.

    Continental Beats and Fiserv Announces a 2-for-1 Split

    Also on Thursday, Continental Building Products (CBPX) reported very good earnings for Q4. I was really impressed by these numbers. Sales rose 11.1% to $131.4 million. Wallboard sales volume increased from 666 to 725 million square feet. Earnings jumped 28% to 41 cents per share. Wall Street had been expecting 33 cents per share (my guess was 35 cents per share). EBITDA increased 10.1% to $37.2 million.

    Like many other Buy List companies, tax reform had a big impact in Q4. For the year, sales were up 6%, and EPS rose 12.7% to $1.33. Continental also expanded its buyback program from $200 million to $300 million. All the numbers are moving in the right direction.

    I know wallboard sounds like the most boring business imaginable, but it can be a profitable one as well. Continental is doing very well at the moment, and I think the shares are undervalued. The company offers guidance on several metrics except earnings, but I think they can hit $1.60 per share this year. Stick with this one.

    We’re now entering the quiet period for Buy List earnings reports. Over the next seven weeks, we’ll only have three earnings reports. Ross Stores (ROST) is due to report on March 6. We then have two Buy List stocks with quarters ending in February; Factset Research Systems (FDS) will probably report in mid-to-late March, and RPM International (RPM) will report sometime in early April. After that, we won’t see anything until Q1 earnings season starts up in mid-April.

    We also had another Buy List stock split. First it was AFLAC; now it’s Fiserv’s turn. Fiserv (FISV) announced on Thursday that it will split its stock 2-for-1. If you own FISV, you’ll get twice as many shares and the stock price will drop in half. Shareholders at the close of business on March 5 will get additional shares on March 19. This is Fiserv’s first split since 2013.

    Before I go, I wanted to clarify a point I didn’t properly make. In the February 2 issue, I mentioned that AFLAC (AFL) raised its quarterly dividend from 45 to 52 cents per share. That’s correct, but I should have added that that’s on top of the two-cent dividend hike from October. AFLAC’s dividend is up 21% from a year ago. I’m lifting my Buy Below on AFLAC to $94 per share.

    That’s all for now. Next Tuesday, we’ll get the latest durable goods report. On Wednesday, the government will update its report on Q4 GDP. Last month, the initial report said the economy grew by 2.6% in the last three months of the year. On Thursday, we’ll get the personal-income and spending data for January. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

    Syndication Partners

    I’ve teamed up with Investors Alley to feature some of their content. I think they have really good stuff. Check it out!

    Sell These Healthcare Middlemen About to Get Amazoned

    A few weeks ago, I told you about the announcement from (Nasdaq: AMZN) that it was joining forces with JPMorgan and Warren Buffett’s Berkshire Hathaway to disrupt the healthcare industry. More specifically, the venture is being aimed at the many middlemen in the U.S. healthcare industry including insurance companies and pharmacy benefit management companies.

    The focus on healthcare supplies is a smart move by Amazon since many hospital systems have been buying up medical practices as they move into the rapidly growing outpatient care market. However, most hospital distribution systems have not kept up and are still focused on just servicing the main hospital. Amazon can modernize their distribution system.

    It’s also a savvy move because it doesn’t involve getting complex regulatory approvals. Many states don’t require a license at all to sell low-tech medical supplies. It’s the lowest-hanging ‘fruit’ in the very big healthcare market.

    And once Amazon understands how to keep the shelves stocked with band aids and gauze, it shouldn’t be much of a stretch that it would move up the supply chain (while obtaining regulatory approvals) and begin to provide healthcare systems with medicines and high-tech medical devices.

    The healthcare supply chain is a huge opportunity for a disruptive company like Amazon. The Wall Street Journal cited a November research report by Citigroup Global Markets Inc. that found fees, administration, marketing and shipping costs account for an estimated 20% to 30% of healthcare supply costs. As Rob Austin of Navigant Consulting said to the WSJ, “There’s a lot of people with fingers in the pie.”

    In other words, more middlemen that are driving up the cost of healthcare for you and me and everyone else in the country. Middlemen that are just begging to be Amazoned. As Jeff Bezos famously said, “Your margin is my opportunity.”

    So what middlemen companies are in the sights of Amazon in the healthcare supply chain? Check out my report.

    3 REIT Dividend Increases Coming in March

    As a dividend focused stock analyst, I put less emphasis on short term share price fluctuations and more on dividend yields and dividend growth prospects. When the market turns volatile, such as what we have experienced in the last several weeks, it is good to go back to the basics of dividend investing, which for me is dividend growth. A growing payout should, over time result in a higher share price. One nice way to get a quick start to capital gains from dividend growth is to buy shares just before an announced dividend increase.

    I maintain a database of about 130 REITs, which I use to track yields and dividend growth. The typical REIT increases its dividend rate once a year, at about the same time each year. Across the REIT universe, the dividend increase announcements come in almost every month of the year. Each month I like to cover the REITs on my list that have historically increased their payouts in the following month. You can use this information to establish longer term positions in stocks with growing dividends or try for the short-term capital gain that often occurs when a dividend increase is announced. Here are three potential REIT dividend increases for March.