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Penny Stocks 101

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Penny Stocks 101

Penny Stocks 101

Microcap stocks, also known as penny stocks, are stocks that are trading at less than $5 each with small market capitalizations typically under $300 million. More specifically, as Doug Casey defines it here, many of these types of stocks are more accurately defined as speculations rather than investments. They have no earnings or predictable cash flow, and can’t be evaluated in the ways that Benjamin Graham or Warren Buffett may value a company.

Casey, a legendary speculator, is also well known for saying that he would rather risk 10% of his portfolio for a potential 100% gain, rather than 100% of his portfolio for a 10% gain. The above infographic covers some of the ins and outs of trading such stocks, and many of the ideas presented can apply to junior mining, energy, and technology stocks.

From a potential downside perspective, many of the companies in this category can be risky, unpredictable, and thinly traded. However, for savvy speculators, these same stocks can provide upside that is hard to match. It is all about the approach.

Microcap stocks are inherently volatile, but for those that can stomach it, there is a big profit opportunity. Furthermore, hidden in the market are companies that do have game changing plans or discoveries that could see their valuations rise more than 10x (a ten-bagger, as industry people call it). The key is being able to put in the time, due diligence, and using the right strategy to discover these companies. Being able to let go of opportunities that did not work out by cutting losses early can also be a key.

Original graphic from: Timothy Sykes

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Technology

The World’s Tech Giants, Compared to the Size of Economies

How do the big tech giants compare to entire countries? Here’s how Apple, Microsoft, and Amazon’s market caps stack up against national GDP.

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Tech Giants Countries GDPs Shareable

It’s no secret that tech giants have exploded in value over the last few years, but the scale can be hard to comprehend.

Through wide-scaling market penetration, smart diversification, and the transformation of products into services, Apple, Microsoft, Amazon, and Google have reached market capitalizations well above $1.5 trillion.

To help us better understand these staggering numbers, a recent study at Mackeeper took the market capitalization of multiple tech giants and compared them with the annual Gross Domestic Product (GDP) of countries.

Editor’s note: While these numbers are interesting to compare, it’s worth noting that they represent different things. Market cap is the total value of shares outstanding in a publicly-traded company and gives an indication of total valuation, and GDP measures the value of all goods and services produced by a country in an entire year.

Companies vs. Countries: Tech Giants

Tech Giants Country GDP Apple

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If Apple’s market capitalization was equal to a country’s annual GDP, it might just be in the G7.

At a market cap of more than $2.1 trillion, Apple’s market capitalization is larger than 96% of country GDPs, a list that includes Italy, Brazil, Canada, and Russia.

In fact, only seven countries in the world have a higher GDP than Apple’s market cap.

Tech Giants Country GDP Microsoft

Further back is Microsoft, which would be the 10th richest country in the world if market cap was equivalent to GDP.

With a market cap of more than $1.9 trillion, Microsoft’s value is larger than the GDP of global powerhouses Brazil, Canada, Russia, and South Korea.

Tech Giants Country GDP Amazon

Though all of the tech giants fared well during the COVID-19 pandemic, perhaps none have stood to benefit as much as Amazon.

With online retail and web services both in high demand, Amazon’s market cap has grown to $1.7 trillion, larger than 92% of country GDPs.

Other Companies “Bigger” Than Countries

Tech giants aren’t the only companies that would give countries a run for their money.

Country/CompanyNominal GDP (country) or Market Cap (company)
United States of America$21,433 B
China$14,343 B
Japan$5,082 B
Germany$3,861 B
India$2,869 B
United Kingdom$2,829 B
France$2,716 B
Apple$2,125 B
Italy$2,004 B
Microsoft$1,942 B
Saudi Aramco$1,888 B
Brazil$1,840 B
Canada$1,736 B
Russia$1700 B
Amazon$1,688 B
Alphabet$1,656 B
South Korea$1,647 B
Australia$1,397 B
Spain$1,393 B
Mexico$1,269 B
Indonesia$1,119 B
Facebook$939 B
Netherlands$907 B
Saudi Arabia$793 B
Turkey$761 B
Tencent$736 B
Switzerland$703 B
Poland$596 B
Market cap data as of June 13, 2021

Saudi Arabia’s state-owned corporation Saudi Aramco also makes the list, boasting a market cap more than double the GDP of its home country.

China’s tech giant Tencent also has a market cap that towers over many country GDPs, such as those of Switzerland or Poland.

Until recently, Tencent was also ahead of fellow tech giant Facebook in market cap, but the social network has climbed ahead and almost reached $1 trillion in market capitalization.

Tech Giants Country GDP Facebook

Of course, the biggest caveat to consider with these comparisons is the difference between market cap and GDP numbers.

A company’s market cap is a proxy of its net worth in the eyes of public markets and changes constantly, while GDP measures the economic output of a country in a given year.

But companies directly and indirectly affect the economies of countries around the world. With international reach, wealth accumulation, and impact, it’s important to consider just how much wealth and power these companies have.

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Markets

Who are the Dividend Aristocrats in 2021?

Dividend Aristocrats are stocks that have grown their dividend for at least 25 years. These stocks carry a stellar reputation in providing steady and predictable returns to shareholders

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The Dividend Aristocrats in 2021

The Dividend Aristocrats in 2021

Legendary investor George Soros once said, “Good investing should be boring”. But an increase in volatile themes today suggests this maxim has gone ignored by at least some market participants.

From a high level, we can view investments on a spectrum. Volatile assets like cryptocurrencies and SPACs are more on the exciting side of things. The boring side is likely where Dividend Aristocrat stocks lie.

The data above, from Sure Dividend, looks at all 65 Dividend Aristocrats, ranking them by their yield, sector, and years of growth.

What are Dividend Aristocrats?

The U.S. Dividend Aristocrats are a basket of 65 stocks in the S&P 500 index. These companies have been growing their dividend per share consecutively, for a minimum of 25 years.

This is easier said than done, since companies often distribute dividends quarterly. To pay and grow a dividend in the long run implies a business model that can withstand varying economic environments, including setbacks like market crashes.

Though dividend stocks may not carry the same excitement as other investments, studies show that dividends represent over 50% of total S&P 500 market returns.

CompanyDividend YieldYears Dividend GrownSector
AT&T, Inc.6.9%36Communication Services
Exxon Mobil Corp.6.1%38Energy
Chevron Corp.5.1%33Energy
International Business Machines Corp.4.9%25Technology
Abbvie Inc4.8%49Healthcare
Realty Income Corp.4.2%26Real Estate
People`s United Financial Inc4.1%28Financial Services
Federal Realty Investment Trust4.0%53Real Estate
Consolidated Edison, Inc.4.0%47Utilities
Amcor Plc3.9%36Consumer Cyclical
Franklin Resources, Inc.3.7%41Financial Services
Walgreens Boots Alliance Inc3.5%45Healthcare
Leggett & Platt, Inc.3.3%47Consumer Cyclical
Kimberly-Clark Corp.3.3%49Consumer Defensive
Cardinal Health, Inc.3.2%33Healthcare
Coca-Cola Co3.1%58Consumer Defensive
PepsiCo Inc3.0%49Consumer Defensive
3M Co.3.0%62Industrials
Essex Property Trust, Inc.2.9%26Real Estate
Genuine Parts Co.2.7%65Consumer Cyclical
General Dynamics Corp.2.6%28Industrials
Procter & Gamble Co.2.5%64Consumer Defensive
Johnson & Johnson2.5%58Healthcare
Archer Daniels Midland Co.2.5%46Consumer Defensive
Aflac Inc.2.5%39Financial Services
Atmos Energy Corp.2.5%37Utilities
Cincinnati Financial Corp.2.4%60Financial Services
Clorox Co.2.3%43Consumer Defensive
VF Corp.2.3%48Consumer Cyclical
Sysco Corp.2.2%51Consumer Defensive
Colgate-Palmolive Co.2.2%57Consumer Defensive
McDonald`s Corp2.2%45Consumer Cyclical
Emerson Electric Co.2.2%64Industrials
Hormel Foods Corp.2.1%55Consumer Defensive
Air Products & Chemicals Inc.2.1%39Basic Materials
Nucor Corp.2.0%47Basic Materials
Illinois Tool Works, Inc.2.0%46Industrials
T. Rowe Price Group Inc.2.0%34Financial Services
Chubb Limited2.0%27Financial Services
Automatic Data Processing Inc.1.9%46Industrials
NextEra Energy Inc1.9%25Utilities
Medtronic Plc1.8%43Healthcare
Caterpillar Inc.1.8%26Industrials
Walmart Inc1.6%48Consumer Defensive
McCormick & Co., Inc.1.5%34Consumer Defensive
A.O. Smith Corp.1.5%27Industrials
W.W. Grainger Inc.1.5%49Industrials
Linde Plc1.5%28Basic Materials
Abbott Laboratories1.4%49Healthcare
Dover Corp.1.4%65Industrials
Stanley Black & Decker Inc1.4%53Industrials
Target Corp1.3%53Consumer Defensive
PPG Industries, Inc.1.3%49Basic Materials
Becton, Dickinson And Co.1.3%49Healthcare
Pentair plc1.3%44Industrials
Lowe`s Cos., Inc.1.2%57Consumer Cyclical
Albemarle Corp.1.0%26Basic Materials
Brown-Forman Corp.1.0%31Consumer Defensive
Expeditors International Of Washington, Inc.1.0%26Industrials
Ecolab, Inc.0.9%35Basic Materials
Cintas Corporation0.9%38Industrials
Sherwin-Williams Co.0.8%42Basic Materials
S&P Global Inc0.8%48Financial Services
Roper Technologies Inc0.5%28Industrials
West Pharmaceutical Services, Inc.0.2%27Healthcare

Numerous companies on this list have brand value that stretches all over the globe—including the likes of McDonald’s, Coca-Cola, and Walmart.

Vast global recognition and branding power is in part why these companies can generate cash flows to pay dividends for decades on end. For instance, 94% of the world population recognizes Coca-Cola’s logo.

Zooming In

Divident Aristocrats Sector Analysis Supplemental 2

The 65 Dividend Aristocrat stocks break down into 11 sectors. Across sectors, Industrials is the most crowded, consisting of 14 companies, with an average yield of 1.6% and a dividend growth duration of 43 years. Popular stocks in this sector include 3M and Caterpillar.

Next is the Consumer Defensive sector, containing 13 companies like Clorox, Target, Pepsi, and Procter & Gamble. The average yield is 2.2%, with an average growing duration of 49 years.

The highest yield by sector belongs to Energy, at 5.5%, but is only made up of only Chevron and Exxon Mobil. Their dividend track record may falter in the years to come, due to transitions away from the oil business. Just last year, Big Oil firms reported record net income losses, and Exxon was booted from the Dow Jones Industrial Average (DJIA).

The Consumer Cyclical sector has been increasing their dividend for an average of 50 years, the longest of any sector. Lowe’s and McDonald’s are involved in this category.

Businesses for Today and Tomorrow

Although the Dividend Aristocrats list is published every year, the companies on the list are a stable bunch, meaning changes are fairly infrequent.

In a market climate in part shaped by low rates and compressed yields in the fixed income space, Dividend Aristocrats might be a particularly attractive alternative for investors with a longer-term outlook.

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