# 671 - 🏆 Costco’s golden opportunity

Good morning. You’ve probably heard of diversifying your stock portfolio, but what about diversifying your passport portfolio? Wealthy Americans are seeking second (or even third or fourth) citizenships due to perceived instability, ensuring they have options if they ever need to leave the country. Popular choices include Portugal, Malta, and Greece — while Chairperson of Palantir Technologies, Peter Thiel, opted for New Zealand, and former Google CEO Eric Schmidt chose Cyprus for their supplemental citizenship.

GLOBAL

To Start 2024, Taiwan Is the World’s Hottest Stock Market — Here’s What To Know

The Magnificent 7 holds a significant chunk of the US stock market, making up nearly one-third of the S&P 500. But in Taiwan, it’s just Taiwan Semiconductor ($TSM) that comprises 30% of the country’s stock market. The world’s largest manufacturer, supplying tech giants like Nvidia ($NVDA) and Apple ($AAPL), has rallied over 40% this year and recently reported its fastest monthly revenue growth since 2022. And it’s soon to pocket $6.6B in federal grants to build a third plant in Phoenix.

An AI market: Despite its outsized global impact, Taiwan’s most valuable stock is hardly the only contributor to Asia’s fastest-growing stock market — hosting an estimated 92% of the world’s advanced chip production. Semiconductor giants like TSMC, MediaTek, and ASE Technology, accounting for 65% of Taiwan’s market, have propelled the Taiex index by 16% year-to-date.

  • Retail investors own ~80% of assets invested in Taiwan equity funds — and have expanded their ETF holdings by 80% year-over-year to USD$50B.

  • While many are chasing the AI boom, the country’s smallest sectors — healthcare, materials, and real estate — have also posted double-digit gains to start 2024 and could continue to grow.

My Arrakis, my Dune

Taiwan’s economy is rising, with GDP expected to clear 3.4% this year. Earnings are forecasted to increase by two digits, and exports are up 19% thanks to AI demand. However, Taiwan stocks are trading at a premium as the country fetches one of the global markets’ higher valuations (20.7x price-to-earnings). But you can’t talk about Taiwan’s boom without addressing the elephant in the room.

  • Despite Taiwan’s self-governance, neighboring China considers it to be a territory — threatening to take the island by force as part of the Chinese reunification.

  • Given Taiwan’s unprecedented importance to the AI boom, such a move would be detrimental, with analysts at Bloomberg estimating a war over Taiwan could cost $10T.

How can I invest in Taiwan? If the threat of invasion or the high concentration of tech stocks don’t make your pockets nervous, one way to gain exposure to the Taiwan boom is through an ETF. The Franklin FTSE Taiwan ETF ($FLTW), which offers investors 123 Taiwanese stocks at a 0.19% expense ratio, is the cheapest and best-performing fund tracking the market. But keep your eyes peeled — as geopolitical risks go, Taiwan is among the biggest.

PARTNERED WITH RYSE

Smart Home Device Shipments Are Booming and Smart Lighting Is Leading the Charge.

With device shipments expecting to double in the next 3 years, Best Buy has made a huge bet on an innovative startup in this category and stocked their product in over 100 retail stores.

This up-and-comer is RYSE, and their automated window shade tech provides BIG energy savings by controlling the amount of lighting that enters homes and commercial buildings.

  • There are A LOT of windows out there, and with only 10% of them being automated, this is a market that’s already worth billions.

  • Best Buy made similar bets on smart home titans Ring and Nest, both of which saw billion-dollar exits at the hands of Amazon and Google.

While those opportunities were limited to a select few, you can still invest in RYSE’s vision of owning the Smart Shades industry.

LARGECAP RECAP

🏆 Costco capitalizes on America’s obsession with gold bullion

While stock markets reach all-time highs, global conflicts and stubborn inflation create uncertainty. Investors have become more defensive on markets, but everyday Americans are buying physical gold — benefiting one unexpected player — Costco ($COST).

  • Last August, Costco began selling 1 oz 24-karat gold bullion — with a modest 2% markup, the bars would retail around $2.4K.

  • Wells Fargo estimates monthly sales of $100-200M for the retail giant, marking a significant but “very low profit business.”

Golden opportunity: Rising anxiety prompts Americans to invest in physical gold — turning the once-fringe, pessimistic practice of buying and storing gold into a mainstay for long-term investment. However, an exchange-traded fund (ETF) like the iShares Gold Trust ($IAU) could be more suitable for investors looking to capitalize on the gold rush, given the option to sell quickly. Regardless, gold has already surged to all-time highs — with futures up 13% year-to-date to over $2.3K.

🛍️ Beyond Inc. hopes the relaunch of Overstock.com will offer a boost

Following Bed Bath & Beyond’s bankruptcy last year, e-commerce giant Overstock.com swooped in to purchase its brand and IP assets, rebranding itself as Beyond Inc. ($BYON). With its new name, Overstock inherited brand recognition among speculative retail investors. In the year since its discount buy, $BYON has rallied 48% — despite a 19% revenue decline. And now, it’s looking to turn its revenues around with a simple fix.

  • After acquiring Beyond’s assets, the company sunset its Overstock.com website — which executives say helped amplify order values but has been called “a fatal mistake.”

  • As a result, the company is returning to its roots, relaunching Overstock.com in a bid to generate a 20% increase to $2B in total revenues this year.

Home furnishing freefall: To maintain its rich valuation and popularity among investors, Beyond will also have to turn a profit, especially as home furnishing sales dipped 9.1% in January and February compared to the previous year. The company reported a net loss of $308M amid a tough retail and e-commerce environment in 2023. And though the return of its namesake brand will help, the real costs to this high-flying stock could be big if customers don’t spend more.

Read: What were the critical missteps that led to the downfall of Bed Bath & Beyond? Uncover how grasping these business errors can influence your investment strategies.

JOE’S MARKET PULSE

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Markets & Economy

Can the NYSE attract Japanese companies? They’re hoping to, and the exchange’s leadership teased talks with a pipeline of promising Japanese companies across different industries and growth stages — with similar plans for Korean, Singaporean, and Indonesian companies. [Read]

USPS to raise stamp prices to $0.73: Projecting $160B in losses over the next decade, it’s no wonder stamp prices have risen 36% since 2019. The new pricing, coupled with funding from the Biden admin, could help matters at least a little. [Read]

Consumer Price Index (CPI) rises more than expected: The key inflation gauge jumped 0.4%, mostly driven by increasing energy and shelter costs. It’s the third straight month of prices refusing to ease, with many analysts reconsidering June rate cut predictions. [Read]

Business & Wealth

The ten fastest-growing chains in the US: Cava ($CAVA), fresh off last year’s IPO, leads the list thanks to their popular Mediterranean fare, while Scooter’s Coffee and LongHorn Steakhouse rounded out the top three. Meanwhile, old favorite Olive Garden landed at number nine, with 20 new locations opening last year. [Read]

Bytedance posts 60% profit jump in 2023: A potential TikTok ban in its largest market wasn’t a problem for the Beijing-based company, which generated $40B in earnings, up from $25B the year before. [Read]

NYCB ($NYCB) offers country’s highest interest rate: The embattled regional lender raised its annual percentage yield to 5.55% — which some analysts see as a sign that the bank is desperate to attract deposits after losing 7% amid funding woes earlier this year. [Read]

*Thanks to our sponsors for keeping the newsletter free.

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Us too. But with the Goodnewsletter, consuming news doesn’t have to be draining; in fact, it can be hopeful!

Every day, the Goodnewsletter sends out an easy-to-read, engaging email filled with good news from all around the world, action steps to do your own bit of good, and more.

CHART

DIGIT OF THE DAY

Investors Injected $126.5B Into ETFs In March, But The Tech Sector Barely Contributed

March Madness wasn't just for basketball — it was for stocks, too. Exchange-traded funds (ETFs) scored big and witnessed an exceptional rise in demand, with over $126.5B in inflows — the third strongest showing since 2021. Despite steep tech sector valuations, investors display an appetite for new trading avenues.

  • ETFs tracking the industrials, materials, and energy sectors led the inflows and contributed $1.4B, $1.3B, and $600M, respectively.

  • Over the same period, $600M was pulled out of the technology sector — and healthcare ETFs saw outflows of $700M.

Is the ETF (Exceptional Trading Frenzy) going to continue? According to FactSet, the materials, energy, and industrial sectors have seen the largest volume of earnings downgrades. Investors might be hoping that analysts are wrong — or looking for a safer place to put their cash. With tech valuations sitting above historic levels and megacaps representing the majority of index gains so far in 2024, a shift towards more cyclical, value-oriented stocks could be the contrarian trade investors need.

EXTRA JOE

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