Market Monitor: Trip Miller’s Picks

Trip Miller, Gullane Capital Partners

Stocks that will hold up regardless of a trade outcome


·  Being in the crosshairs of the Chinese government is a tremendous headwind and risk for FedEx, however, we believe a trade deal will occur before the election, benefitting FedEx.

·  FedEx continues to deal with the global challenges of a trade war with China, economic challenges in Europe, and a longer than expected integration of the TNT acquisition. However, FedEx seems to be acting prudently with cost reductions, repositioning for expanded e-commerce business, dividend freezes, and aggressive share repurchases at a decade low valuation for the business by the market.

·  The utilization of the ground network and the opportunity they feel that they have with e-commerce to significantly grow is the positive that people are taken out of their most recent earnings report. 

Dollar General

·  We hold a long position in DG and believe it is one of the few retailers that can withstand the Amazon effect as they are less likely to compete with e-commerce giant for customers. The lower ticket price of the average total transaction limits the ability of online retailers to serve that customer at a profit, in addition to the convenience factor for a customer visiting a store two or more times a week for basic product needs. Additionally, they seem to have limited competition, operating between a duopoly with Family Dollar and an oligopoly with smaller regional competitors.

·  Dollar General has a rapidly growing store base, a unique footprint, and laser focus on their customer in small/underserviced markets. The company’s core customer is in a market where Amazon typically isn’t – 70% of their stores are located in areas where there are less than 20,000 people. We think Dollar General can add over 6,000 stores in the next 7 years.

·  We believe that Dollar General is recession-resistant and performs well in all economic climates. The company’s zero-based budgeting strategy, strong management team, stock buybacks-dividends, and efforts to grow their brick and mortar footprint make them a smart value investment.

First Solar

·  Despite a cornucopia of innovative solar technology companies a decade ago, First Solar is one of a handful of remaining US utility-scale solar panel manufacturers, and the only one that is a major player in the solar industry as the rest are nearly bankrupt.

·  First Solar has been able to survive attempts by state-backed and heavily subsidized Chinese competitors to dominate the industry due to the fact that it uses a highly unique technology, essentially allowing it to print solar panels on a single assembly line while competitors spend days across multiple lines to create a single panel.

·  Despite popular belief, solar technology is highly competitive with fossil fuel technologies and solar panel costs continue to decline steadily while battery costs plummet in leaps and bounds.

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