by Travis Johnson, Stock Gumshoe | April 25, 2019 3:13 pm
We have a very specific prediction here from Bryan Tycango, who is pitching this idea that he says could triple your money before the end of the year, so I’m stepping back from overthinking my own portfolio and the crazy gyrations of earnings season to dig into this idea.
The ad is for his Strategic Wealth Confidential, which is priced as an “entry level” newsletter ($49/yr), and it’s all about the “Smart Warehouse Boom” that he says could send his favorite stock in the sector “nearly 3X higher” in 2019.
So… what is it? The hook of the ad is Henry Ford’s assembly line, which he uses to get your attention with the incredible power of automation — specifically the power of the automated conveyor system that moved those Model T’s down the assembly line in the form of the forged rivetless chain conveyor.
I don’t know what that conveyor is or if it was really a key part of the automation world, but the point of the ad is that this automated system revolutionized manufacturing… and he thinks that’s coming to another industry. From the ad:
“Ford’s revolution allows Volkswagen[1]’s Wolfsburg factory (the largest car factory in the world) to crank out 3,800 vehicles a day.
“This one change slashed production time to an eighth of what it was…
“Boosted production by about 6,500%…
“And turned Ford into the global company it is now.
“Today, another industry is screaming out for that same step up in productivity and profits.
“But the amount of money involved this time could dwarf the impact Henry Ford’s factory innovation made.
“It’s about to unleash the potential of an already US$2.8 trillion-a-year industry.
“And it could all come down to a single stock.”
So that’s the rub, of course, that Tycango has his research on this “single stock” to sell you. And he thinks that stock is about to see a “flood of money” this year.
I’m sure I can’t research it as fully as he did in my few minutes available today, but we can at least get you started on a name so you can research it for yourself (and, of course, then you can decide if you feel like subscribing to his letter, maybe you’ll love the idea and decide he’s brilliant — but don’t ever subscribe to a letter just to learn a “secret” stock tip).
So which one is it?
As noted, it’s a “smart warehouse” company…
“… it’s this logistical side to the rapidly expanding e-commerce industry that hands you a huge opportunity right now.
“Not just in China[2], but across the whole world.
“Globally, e-commerce retail sales have been rising nonstop.
“They’re on track to double between 2017 and 2021.
“This rapid growth in e-commerce is putting huge pressure on the warehouses and distribution centers that companies like Alibaba and Amazon use….
“… the global e-commerce industry is desperate for the kind of innovation that Ford’s manufacturing revolution unleashed for the auto industry.
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just click here...“Fortunately, a solution is making its way into the huge warehouses that power the enormous e-commerce industry.
“It’s called the Automated Material Handling (AMH) system.”
So that’s what you’ve probably heard talked about in the robotic Amazon warehouses and elsewhere — the giant box-handling systems that use conveyor belts and robots and barcodes and whatever else to move boxes around and pick and pack items far more quickly and accurately than humans.
And, according to Tycango, it’s taking large leaps forward now as smart warehouses get built out around the world, particularly in Asia[3].
But, of course, the investment idea is all about that one stock — so what are our clues?
“Few outside of the car and logistics industries will have heard of the company I’ll shortly tell you about.
“It’s one of the biggest names in automated handling systems.
“Intel and Amazon rely on these guys to manufacture microchips and move products around cavernous warehouses.
“The world’s biggest airports need them for their advanced baggage handling systems.
“In other words, this company is already a preferred provider for vast, complex, smart systems that allow the world’s biggest companies and facilities to handle their high-demand, high-volume markets.”
We get the clue that they had revenue of $2,924,000 in 2016 and $3,659,000 in 2016 and 2017, making them toe largest “system supplier” in materials handling worldwide…. so that’s a nice clue. What else?
“The company has offices in over 20 countries, as well as 17 manufacturing plants (including five in the U.S. and Canada[4]) worldwide.
“Unless you work in the automotive or logistics business, chances are you’ve never even heard of it before.”
And we get a few examples of their projects, including a 1.8 million square foot distribution center for a shoe company in California that can now process 19,000 pairs of shoes an hour, fleets of smart warehouse carts for Tesla’s Gigafactory, along with simmilar systems for Macy’s and Magna International… and that 500 airports around the world use their systems for baggage handling.
Which ought to be enough, right? Indeed, the Thinkolator sez this is: Daifuku (6383 in Tokyo, DAIUF OTC in the US).
Daifuku is a mid-cap Japanese company, with a market cap near US$8 billion, but it’s not terribly easy to buy in the US — DAIUF has very low trading volume, so if you do decide to get excited about it and don’t want to trade direct in Japan (which is hard for many small investors, though Interactive Brokers does provide access the Tokyo market), do be patient and use limit orders based on the Japanese trading price, and remember that buying illiquid stocks that don’t have a bid in the US is a lot easier than selling them, so think about how committed you are to owning it for a while before you jump in. Daifuku closed yesterday at 6,770 Japanese Yen, so that would be about $60.65 at the current exchange rate (one yen is a bit less than a US penny, about .00896 dollars at the moment).
Or, if you don’t mind mixing in some other ideas, you could just go with an ETF that holds Daifuku and a bunch of its peers — probably the best one for that kind of exposure is the Global X Robotics and Artificial Intelligence ETF (BOTZ), in which Daifuku is the sixth largest holding with about a 6% weighting, but, of course, then you’re dilute it with a bunch of other stocks in robotics and AI — including some that are also at least partially exposed to industrial and warehouse automation and robotics, like Keyence, Mitsubishi, Fanuc, Omron and a few others, but also some that you might not care to own for this reason like Intuitive Surgical (ISRG)[5] and NVIDIA (NVDA). You could also consider the similar Robo Global ETF (ROBO), though that gives less weighting to the big Japanese companies like Daifuku (which is only about 2% of the ROBO ETF).
So what’s the story? Yes, Daifuku is a solid company and a leader in its space, and it is getting a good number of deals in warehouse automation, as teased. You can see some of their information on their products here[6], it’s undoubtedly cool.
And the company has been growing nicely, thanks largely, it appears, to growing business in China… and they’ve also grown a bit more efficient, with margins improving over the past few years. They have also recently been focused on returning cash to shareholders, they’ve paid a dividend for more than a decade but now specifically target a payout ratio of 30% and are committed to dividend growth…. it’s still an underwhelming dividend at just over 1%, and it grew about 15% last year (after almost doubling in the previous year), but over time it could help compound returns. They should report earnings again in about two weeks, so we’ll know more than, but the analysts surveyed by FT[7] expect the big growth of the past couple years to slow down.
The valuation is not shocking, but seems reasonable — they trade at about 20 times earnings, and revenue is expected to grow at close to 10% clip over the next couple years… slower than the last couple years, but still very high, particularly for a large company that doesn’t use much leverage[8] (they have net cash on the books).
And, well, that’s about all I know about them. Japan’s robotics and factory/distribution automation companies lead the world, and Daifuku is an important one of them that has a strong market position in automatic handling systems for warehouses and similar facilities, but if the stock rises by 192% this year I’m sure all the analysts will be a bit shocked (the highest analyst price target is JPY 8,000, which would be a gain of 15-20%) — that doesn’t mean Tycango is wrong, but it does mean his prediction is well outside the mainstream.
So I’ll leave you to it, dear friends — this is the second Japanese company I’ve seen teased in recent months (Curzio was touting one in healthcare[9] a while back), so perhaps with the stretched valuations of US stocks we’re going to see more newsletter folks stepping out of their comfort zone and trying to drag us into overseas markets. Or maybe I’m just thinking more about international stocks, so these ads are catching my eye.
I’m not particularly enthused about betting on Japan at the moment specifically, though if I were to invest in Japan right now it would very likely be in Daifuku or Fanuc or one of the other robotics and automation companies, I just worry that Japan’s market is at least as stretched as ours and arguably more starved for growth (and hugely dependent on China), but I do think we should probably be looking overseas more these days. And if you like the idea, Daifuku is, at least, growing nicely and rationally valued… just don’t go into it expecting the stock to triple this year.
So… interested in investing in robotic warehouses? Think Daifuku is the best bet for that? Have other favorites? Let us know with a comment below.
Disclosure: Of the companies above, I currently have exposure through stock or call options[10] to Amazon, Alibaba and NVIDIA. I won’t trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.
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I have owned Fanuc for awhile, but it is a very long-term investment. And if the doom-and-gloom folks are eventually right in the next few years, I am bailing on Fanuc, and all my stocks, when the debt bubble bursts. Then I will get back in on the upswing to Fanuc and other well-managed robotics firms, such as Swiss powerhouse ABB. I don’t care how well-managed a company is, and how bright its long-term future–when the downturn comes, they will all be coming down for awhile before a snapback.
I appreciate the sentiment, but can only wish you “good luck” with that timing — most people get out after most of the decline and buy back in only after a substantial recovery… which is why the average investor has returns that are much worse than the average mutual fund. It’s very hard to buy back in, as many people remember from 2009 — the best time to buy is when it feels most horrible and you’re sure the world is coming apart at the seams, but most of us are hard-wired to want to stuff our money in a mattress or buy gold coins at times like that (which is part of the reason why gold often does well after a market crash).
I only buy when there is blood in the streets or when I can skim a dividend.
When ever i look at industrial robotics, i look at MIDEA’s acquisition of German industrial robotics firm KUKA that is all ready set up to handle robotic manufacturing but also ware housing and transportation logistics, they paid over 5 billion for it a few years back and are now integrating the asset. great purchase https://chinadeep.info/top-10-appliance-stocks-by-market-cap/
I did not receive Asia Wealth Daily during some weeks and was unable to login at Stansberry Pacific Research. Their Customer Service told me that the company has folded and instead of a refund I will receive True Wealth. Customer Service claims to have sent mails about the situation and claims to have published a final web page about the folding. I never received any warning and their web page appears to be normal even inviting to order Strategic Wealth. Will try to get refund for what I spent on Strategic Wealth. Customer Service does not agree to refund. I have seen earlier numbers in HK and SG and a claim that the company is based in SG. Now only a number in USA has been provided.