MAY 2018

The FED Continues QT, BITCOIN UPDATE

This month we recommend readers buy 5 companies: Duke Energy (DUK), China Mobile (CHL), AT&T (T), Verizon (VZ), and Altria (MO). Readers can read all about them in updated 2018 Industry Leader Portfolio Review available in that section of the website.

UPDATE ON THE FED

The FED continues selling its balance sheet of bonds at $10 billion a month as of 2018, AKA QT. We believe the new FED chairman, Jerome Powell, will continue the hawkish policy of Janet Yellen and continue to raise the benchmark interest rate 3 more times in 2018. This would put the overnight lending rate at around 2.25% to 2.5% by the end of 2018, if the FED continues raising the rate at .25%. If anything changes with our forecast though we will let our readers know.

The FED's bond selling QT program and it policy of raising rates in 2018 means that the supply of base money that the FED flooded the banking system since 2009 will decrease substantially over the next few months and years.  With that said this is a substantial amount of money being pulled from Treasury bond purchases. This will continue causing bond prices to decrease and bond interest rates to increase throughout 2018, as far as we can see at this time. If circumstances change we will alert our readers. Indeed, this is just the beginning of a credit tightening cycle and a rising interest rate environment.

Of course, a rising rate environment will eventually cause a recession and a market sell-off, once interest rates and credit tightening reach a level that overwhelms the existing high levels of debt within the economy. We are not there yet, but we may be in the 7th inning of this economic recovery. We will let our readers know when we believe the economy is close to a recession that will cause a market correction.

Debt levels worldwide are at record levels though, relative to GDP. The FED held interest rates close to zero for 6 years after the recession of 2008 but has slowly been raising interest rates over the last two years as economic data has improved in the U.S. Although economic growth has been anemic compared to past recoveries, at barely 2% annual  GDP growth, the FED is forced to continue raising rates in order to provide the FED with monetary policy tools to fight a recession when the next one hits. When a recession does eventually hit it will provide an excellent environment for our readers to buy shares in the Industry Leader Portfolio companies at excellent valuations, once they hit our price targets. We will keep readers updated.

UPDATE ON BITCOIN & ETHEREUM

We sold our positions in Bitcoin and Ethereum in February but got back in on April 23, 2018 after their 20-day EMAs crossed back above their 50-day EMAs, giving us a golden cross signal. BTC and ETH are now back into longer-term bullish terrritory.

We do believe that Bitcoin (BTC) and Ethereum (ETH) will be excellent inflation hedges for the long-term. The Blockchain technology behind Bitcoin and Ethereum, aka Decentralized Distributed  Ledger Technology, is changing the world & will change the way every company does business going forward. But we are not concerned with the fundamentals behind Bitcoin & Ethereum here. We are only concerned with making money for our readers and ourselves. We focus only on the technicals and whether or not Bitcoin & Ethereum is in bullish or bearish territory. When they are in bullish territory we buy and when they hit a bearish technical signal we sell. Thats it.

We look at Bitcoin as an inflation hedge because we consider it digital gold. There will only be 21 million coins in circulation by 2140 and the de-centralized blockchain technology behind Bitcoin makes bitcoin unhackable. Every transaction of a Bitcoin is recorded on the blockchain ledger of every other Bitcoin. Also, Bitcoin is very very difficult to mine much like Gold. This makes Bitcoin the ultimate store of currency value. All of the other digital crypto currencies are linked to Bitcoin's original protocol. Indeed, we consider Bitcoin to be the reserve currency of all crypto currencies.

We consider Ethereum (ETH) to be a great inflation hedge for some of the same reasons we consider Bitcoin to be a great inflation hedge. As Bitcoin is a platform for the developement of all other digital crypto currencies, so is Ethereum. But Ethereum goes one step further. Ethereum's blockchain platform is not only used for anonymous peer to peer transactions but also used for anonymous smart contracts. More and more companies are using the Ethereum platforms for their smart contract transacations and to develop their own digital crypto currencies using Ethereum's blockchain platform. Ethereum has become a central platform for developing smart contract systems by developers worldwide, and Ethereum's coin supply is capped at 94 million coins. This make Ethereum and its platform very very valuable. We believe that eventually companies worldwide will eventually be forced to use Ethereum's blockchain platform in they want to compete with other companies in the future.

UPDATE ON GLOBAL MONETARY POLICY

Here are the details of what is happening with monetary policy around the world from February's newletter:

Monetary policy worldwide will be very interesting in 2018. There are still many debt problems worldwide that must be resolved. Europe, Japan, and the U.S. hold very high levels of debt relative to GDP. Public plus private debt to GDP in most developed nations is between 350% and about 650 % in the case of Japan. We strongly believe that a rising interest rate environment will eventually cause a debt de-leveraging process worldwide, where companies and governments start paying down debt as interest costs go up, and thus creating a drag effect on economic growth. This could cause a big sell-off in markets worldwide. This will eventually happen, we just don't know exactly when. When this happens it will provide us with an excellent opportunity to buy companies within the Industry Leader portfolio at excellent valuations. 

The U.S. stock market continues hitting record highs. A big reason this will most likely continue is because of the excellent tax reform bill that was passed by the House and Senate, and signed by the President. Key parts of the tax reform bill that will boost the economy and the markets are the lowered tax rates for each tax bracket, the doubling of a the standardized deduction, and the lowereing of corporate tax rates to 15%. These are really big changes and are extremely bullish for economic growth. Another big part of the bill that will really boost the economy is the lowering on taxes for corporations' income earned overseas. Now corporations can repatriate the income overseas and only pay a 15% tax rate. This is huge. Apple has already stated that they plan to repatriate over $200 billion back to the U.S. This will boost economic growth substantially if more and more corporations do this in 2018.

We also see worldwide economic growth to be robust for 2018. There is also still plenty of liquidity being provided by the European Central Bank and the BOJ. They continue purchasing bonds every month through their QE programs and keeping their interest rates at record low levels. We believe worldwide economic growth will be very strong in 2018. If anything changes in our analysis we will let our readers know. 

The Dow Jones index is hovering near the 25000 level. The markets briefly touched their 200 day moving averages in February but bounced off. If the markets trade below that level we will let readers know, because it could be a bearish technical signal if markets do not hold above support at the 200 day moving average.

The volatility index (VIX) is up some but still at relatively low, trading between 12 to 209 during the beginning of 2018. Now that tax reform has been passed by the Trump administration economic growth looks very strong for 2018. We will let our readers know if anything changes with our analysis.

We recommend that readers protect all of their investments with a 25% hard stop loss on all investments we recommend each month from the Industry Leader Portfolio. The biggest reason we analyze economic conditions thoroughly each month is mainly so that we will always be prepared for a possible market sell-off. With that said our readers never have to be worried. We provide our readers with monthly or weekly updates on what companies are excellent to buy at any given time.

We keep it simple and ignore all of the media and market noise. We stick with focusing on the best companies in each industry for our readers to invest in for the long-term. This has worked for us wonderfully over the long-term. The companies we have recommended investing in at the right prices, based on our buy signals over the last few years, have provided us with steady average returns of 15% to 20% a year with very minimal risk.

UPDATE ON INFLATION

The money that has been loaned out by the FED and central banks around the world has so far mainly caused inflation in equity markets. A large amount of this money is slowly being invested in gold or silver by investors and central banks around the world as an inflation hedge, and as a hedge against market uncertainty. As interest rates increase and bond buying programs by central banks decrease it is possible that inflation will start increasing, because companies and people actually start borrowing more as interest rates go up in order to lock in a low rate. This causes the money supply to leave the banking system and flood the economy. With that said, we believe 2018 will be the year inflation starts increasing at a higher rate.

We recommend readers put at least 5% of their capital in SPDR Gold Shares ETF (GLD) and in silver bullion through the iShare Silver Trust ETF (SLV) as an inflation hedge, as well as a hedge against market uncertainty. Gold and silver prices are back on the move now, so this is a good time to start buying more to prepare for the start of a renewed precious metal bull market. Gold and silver sold off a little during July. Gold is trading around $1350 an ounce and silver is around $16.50 an ounce. This is a good time to load up on gold and silver. Gold and silver prices will probably pull back after each Fed interest rate increase, but after that we believe gold and silver prices will continue this bull market, which started in 2015 for gold but silver has been pretty flat. Anytime throughout history when the FED started an interest rate hike cycle, inflation always picked up its pace and precious metal prices go up during the whole interest rate hike cycle.

Another excellent inflation hedge to protect our readers is the companies we invest in from the Industry Leader portfolio. They are excellent long term hedges against inflation because these companies' premium brands allow them to easily raise their product's prices with inflation. Also, a lot of investors invest massive amounts of capital in industry leading companies during times of market uncertainty or increasing inflation.

CONCLUSION

Our conclusion for this month's letter? No matter what the economic environment we are in, here at Building Wealth we will always focus on investing in the best companies in each industry at the right price. Indeed, this is the basis of Building Wealth's investment philosophy.

Without further ado here are the companies from the Industy Leader Portfolio we recommend investing in this month. They are all trading way below our target of 8 times cash flow. The companies we recommend readers invest in this month are  AT&T (T), Verizon (VZ), Altria Group and China Mobile (CHL). Our list of recommended companies from the Industry Leader portfolio to invest in this month is getting shorter which is a sign that the markets are getting pricey. We explain our reasons for investing in them this month and their fundmentals at this time. The prices and dividend levels change from day to day so if you want a daily list of our buy recommendations check out our daily Industry Leader Portfolio analysis videos in the video section of the website or at our Building Wealth Goldindicator.com Youtube channel. Hit the subscribe button if you are interested in our daily analysis and want to keep up with our trades for each day.

Altria Group (MO) is trading at an excellent valuation this month. It is not trading at or below our preferred entry price of 8 times cash flow, but it is close enough and we believe that Altria Group will get a boost in growth going forward because of its excellent position to become a leader in the massive growth in the Recreational Marijuana industry going forward. While growth in cigarette usage in the U.S. and Canada has been decreasing during the last few years Altria has been slowly replacing the decrease in cigarette usage with the fast growing e-cigarette industry that they have become a leader in. We believe that Altria Group will take advantage of the opportunity in the fast growing Recreational Marijuana industry, as more and more states in the U.S. legalize recreational marijuana usage, by producing marijuana based e-cigarette liquids going forward, as well as marketing their market leading cigarette brands, such as Marlboro, as marijuana based cigarettes. For example, marketing a marijuana cigarette brand called Marlboro Greens to replace Marlboro Reds. Altria Group can easily dominate these two recreational marijuana markets, cigarettes & e-cigarettes, because they already have the distribution network, the marketing network, and leading brand recognition throughout the U.S.

The illegal Recreational Marijuana is estimated to be worth about $60 billion in sales each year in the U.S. but will probably be worth much more once it is fully legalized. Altria Group has a market share of about 50% in the U.S. cigarette industry, so if the Marijuana Recreational industry is fully legalized in the U.S. Altria Group has the potential to add an extra $30 to $40 billion to their yearly revenue each year.

But even if Altria Group doesn't take full advantage of the fast growing Recreational Marijuana industry they will continue gaining market share in the fast growing E-cigarette industry going forward. We explain this in the profile of Altria Group at the end of this month's newsletter.

Altria Group's stock price is still in bullish mode this month, based on its technicals. We recommend readers buy shares in MO this month to take advantage of the massive growth potential in the Recreational Marijuana industry going forward. Place a 25% hard stop loss on your investment, based on your buy price, and put no more than 5% of your portfolio in the stock. We explain more about the massive growth in the Recreational Marijuana industry going forward at the end of this month's newsletter. 

 AT&T (T) is trading at only 5.9 times cash flow and sporting a dividend yield of 5.3% this month. AT&T's profit margin is still strong at almost 8% and its gross margin is steady at 53% this month. AT&T has increased its dividend steadily every year by 5% since 1984. AT&T has increased its dividend by nearly 3% per year over the last 5 years. AT&T's earnings have increased substantially as a result of their recent Direct TV aquistion. AT&T has also stated that they will now provide all of their T.V. streaming services through the Direct TV app. AT&T will continue to experience massive growth due to its Telecom infrastructure investments and Direct TV aquistion. AT&T has set itself up as a leader in streamlining internet and mobile together with television programmming. Consumers now want internet and programming anywhere and everywhere on their mobile devices. Increasing amounts of data usage will  require massive amounts of internet/mobile infrastructure, to handle the massive amount of increasing data traffic. This will require massive internet and telecom infrastructure spending by the leaders in the telecom industry: AT&T, Verizon, and China Mobile. AT&T, along with VZ & CHL, already dominate and will continue to dominate the Telecom Infrastructure industry. This is all explained in the report I wrote called Building Wealth From the Coming Tech Revolution, which I put at the bottom of this month's newsletter. AT&T and Verizon together have a market share in the US telecom infrastructure of roughly 65% (Verizon at 37% and AT&T at 28%) and will increase their market share in the coming years as they consolidate telecom infrastructure. You can read more about AT&T'S excellent growth prospects going forward and why AT&T will be an excellent long term investment for the next 20 to 30 years in AT&T'S profile at the end of this month's newsletter.

We recommend readers buy shares in AT&T this month. Put no more 5% of your portfolio in AT&T and place a 25% hard stop loss of the stock. 

Verizon is still very cheap this month, trading at 6.2 times cash flow this month and sporting a dividend yield of 5.31%. Verizon's profit margin is steady at 11% and its gross margin is steady at 60%. Verizon's Return on Equity is still very strong at 58%. Verizon has increased its dividend steadily by roughly 4% every year since 1984 and by 3% per year over the last 5 years. Verizon's earnings have increased at good rate for 2016 too, increasing by 47% year over year. Verizon is truly an industry leader and passes our Industry Leader Indicator checklist with flying colors. Verizon will continue consolidating market share within the telecom industry along with AT&T. We discuss Verizon's excellent fundmentals going forward in the profile at the end of this month's newsletter.

Verizon is trading below its 50 day and 200 day moving averages, but above its 20 day moving average. So we are buying Verizon's stock at am excellent valuation this month, while investing in Verizon at the beginning of a new uptrend. We recommend readers buy Verizon shares this month, putting no more than 5% of your overall portfolio in the stock and placing a 25% stop loss on the stock to protect your investment from any massive market sell-off.

China Mobile (CHL) is also very cheap this month, trading at 5.8 times cash flow and is sporting a dividend yield of 3.4% this month, which will be much larger relative to our principle investment after holding the stock for many years as they increase their dividend year after year. China Mobile's profit margin is excellent at 16% and its gross margin is steady at 80%. China Mobile has increased its dividend every year by 14.8% since 2003. This comes out to a total dividend growth of 385% in a little over 10 years. This is excellent dividend growth and shows that China Mobile is truly an industry leader. China Mobile has a total market share of over 60% in the China telecom industry and will continue to consolidate market share in China just like AT&T and Verizon will do in America.

With nearly 1 billion mobile subscribers in China, CHL truly dominates with the largest number of mobile users in China's Telecom industry and is the largest mobile service provider in the world, based on the number of mobile service subscribers. We discuss CHL's excellent fundamentals and growth prospects going forward in the profile at the end of this newsletter. 

We recommend readers buy shares in CHL this month. Put no more 5% of your overall portfolio in the stock and place a 25% hard stop loss on the stock to protect your investment from any massive market sell-off. 

 *We recommend not putting anymore than 5% of your portfolio in any one position, which is one reason why our Industry Leader Portfolio has 20 companies in it. That is a good number of companies for the Industry Leader Portfolio which allows us to invest no more than 5% of our portfolio of any one company. If new readers are only presented with a small number if investment opportunities, based on the number of companies from the Industry Leader Portfolio that are recommended as buy, start putting no more than 5% of your overall portfolio (cash + investments) in each company. For example, if a new reader this month starts with a $100,000 cash balance this month and starts investing 5% of his cash balance in the companies we recommend this month then the remainder of his cash balance he would hold in cash until presented with future investments. This method of investing prevents investors from putting too much of their portfolio in stocks in markets are overvalued or expensive, while at the same time allowing investors to hold a lot of their portfolio in cash when markets are expensive so that they can load up on stocks when the markets are cheap after a market sell-off.

Until next month,

CC Walker

The Massive Growth Ahead in the Marijuana Industry

The U.S. and Canada Marijuana Industry are in the early stages of massive growth in the coming years. In the U.S. 35 states have passed legislation to legalize medical marijuana and 8 states along with the District of Colombia have passed legislation legalizing recreational marijuana, as of 2017. Also, 11 more states are considering bills for fully legalizing marijuana in 2017. In Canada the federal government is close to passing legislation in 2017 that will fully legalize marijuana throughout Canada. The U.S. isn't far behind. We believe that the U.S. Federal government will soon pass legislation that leaves all decisions on legalizing marijuana up to the states and prohibits the federal government from having any jurisdiction over states' rights to legalizing marijuana. We also believe that the U.S. Federal government will de-list marijuana as a schedule 1 drug, which would eliminate its association with other illegal deadly drugs such as cocaine or heroin. The Marijuana industry will be one of the fastest growing industries over the coming years. Industry insiders have stated that growth could be as high as 800% or more over the next decade.

The U.S. legal marijuana market was worth about $6 billion in 2016 but the illegal marijuana market was worth about $60 billion. So the potential growth in the Marijuana Industry is massive, as more and more revenue will move from the illegal market to thr legal market. We believe that the growth is much higher than measured by these numbers though, because there will be a much larger number of people using marijuana when it is fully legalized. With that said, the potential growth on the Marijuana industry is much higher than can be measured at this time and will probably be much higher than anyone can imagine at this time.

In this month's Building Wealth Monthly newsletter we recommended readers buy shares of Altria Group (MO) to take advantage of the massive growth we see ahead in the Recreational Marijuana industry. Indeed, growth in the Recreational Marijuana industry is about to get supercharged. Bipartisan legislation was just introduced in Congress by representatives Tom Garrett (R-VA) and Tulsa Gabbana (D-HI) to exclude cannabis from the federal Controlled Substances Act (CSA), which list marijuana as a Schedule 1 substance - which list a drug or substance as having no medicinal value and being a danger to the public. The bill is called "Ending Marijuana Prohibition Act of 2017." If this legislation was passed it would give the states the power to regulate marijuana as their governing body sees fit. This would give state governments enormous relief because they would no longer worry about their citizens being threatened by the federal government if they use marijuana or own a marijuana business. If the legislation is passed the Marijuana Industry would be placed in the same category as the Alcohol and Tobacco industries. We believe Altria Group's growth in the Marijuana Industry will really take off after the "Ending Marijuana Prohibition Act of 2017" is passed.  

 BUILDING WEALTH FROM THE COMING TECH REVOLUTION

A new technology revolution is taking place right now and this tech revolution will accelerate in 2017. I call this revolution the "Web Central Tech Revolution." Basically, what this tech revolution means is that all media services and communications will use the internet as a pathway to end users. Cell phones as we know them today will be obsolete. Telephones as we know them today will be obsolete. Cable channel packages for television will be obsolete because all television and movies will be streamed or downloaded over the internet. Televisions as we know them today will be obsolete. DVD players will be obsolete. During the coming "Web Central Tech Revolution" all media and communications will be brought to end users through the internet. All media and communications will be centralized through the internet. And it will all be brought to people instantaneously starting in 2017at a rate 10,000 times faster than it is all brought to people now. That is why the speed of this tech revolution will accelerate starting this year.

This will require massive amounts of internet infrastructure to be built in the coming years. Intel Corporation, AT&T, Verizon, and China mobile will be at the center of this internet infrastructure build-up with their dominant positions in internet infrastructure. Intel has a 90% market share in the server processor industry. AT&T and Verizon have a combined mobile market share of 75% in the United States, as of 2014. China Mobile is the largest mobile provider in China and has the largest number of subscribers of any mobile provider in the world, with over 800 million subscribers as of 2014. These companies will be the toll collectors of the internet highway as the internet infrastructure grows massively for many years.

And most importantly, these companies have a good history of dividend growth. AT&T has increased its dividend by an average of 5% per year since it paid its first dividend on September 24, 1994. China Mobile has increased its dividend by an average of 17% since it paid its first dividend on March 28, 2003. Verizon has increased its dividend by 4% since it paid its first dividend on March 26, 1984. This is what we look for in all investments, steadily increasing income from the companies paid directly to the shareholders. This is steadily increasing cash payments that are put directly into our pockets. Increasing amounts of cash put directly into the hands of the real owners of the companies, the shareholders.



Altria Group (MO), Profile from the 2017 Industry Leader Portfolio Review

1. Does Altira have a moat around its business protecting it from competition? Yes, Altria spun off its international tobacco business a few years ago as Phillip Morris International (PM) so Altria is a leader in the U.S tobacco industry. With that said, Altria leads in tobacco product sales in the U.S. with $18.9 billion in revenue for 2015. Its closest competitor in revenue is Reynolds American with $9.8 billion in revenue in 2015. Altria leads in cigarette brands in the U.S. with the top selling cigarette brand being Marlboro for 2015, which produced nearly 45% of Altria's sales in 2015. Marlboro continues to be the top selling cigarette brand in the world as of 2016. Altria continues to lead in profitability in the tobacco industry, with a 21% profit margin in 2016 which is still growing every year. Altia's return on equity (ROE) of 140% continues to be the highest in the tobacco industry also, as of 2016. With that said, Altria's customers rarely change cigarette or smokeless tobacco brands once they start using one of Altria's brands. This gives Altria strong pricing power because of it powerful brand names. So Altria's ability to raise prices with inflation or expenses, along with its leading position in revenues, provides Altria with a massive moat around its business protecting the company from any competition.

2. Does Altria have the largest market share in its industry? Yes. Altria has a U.S. market share of 50% in the U.S. tobacco industry. Its closest competitor, Reynolds American, comes in at 28% as of 2016. 

3. Does Altra have a long history of steadily increasing its dividends, revenue, earnings, and cash flow year after year? Yes, Altria has grown its dividend by 12.5% per year since it paid its first dividend in 1970. Altria has grown its dividend in-line with its revenue, earnings and cash flow during that time period. Altria paid its first quarterly dividend of $0.0026 per share to its shareholders on June 10, 1970 and Altria's recent quarterly dividend of $0.565 was paid to its shareholders on December 22, 2015. That is total dividend growth of 21,631% from 1970 to 2015. Altria's dividend and earnings have grown by about 8.7% per year over the last five years, as of 2016. Altria's revenue growth has slowed down over the last couple of years mainly due to decreasing cigarette sales in the U.S. which decreased about 7% in 2015. But Altria's e-cigarette sales and smokeless tobacco sales have been increasing by double digits over the last couple of years. So Altria is now focusing more and more on these two categories going forward. Altria has stated that its top selling e-cigarette, Mark Ten, will be a focus of large growth opportunity going forward. Smokers in the U.S. are becoming more and more health conscious, so more smokers are vowing to quit smoking traditional cigarettes and switch to healthier alternatives such as e-cigs. This will provide enormous growth opportunities for Altria's leading e-cig brands such as Mark Ten.

4. Does Altria have little to no competition in its industry? Yes. As was stated: Altria does have a strong competitor in Reynolds American but Altria dominates the U.S. tobacco industry, with a 50% market share relative to Reynold's 28% market share. With that said, we believe Altria will continue to dominate the U.S. tobacco industry going forward. Altria's strong brands such as Marlboro and Mark Ten will help Altria dominate market share in the U.S. tobacco industry.

5. Is Altria the lowest-cost producer in its industry? Yes. With an increasing net profit margin of 21%, gross margins of 43%, and a return on equity (ROE) of 140% Altria is indeed the most profitable and lowest costs producer in its industry. Altria's closest competitor, Reynolds American, is also a very profitable low-cost producer in the U.S. tobacco industry with a profit margin of nearly 32% and a return on equity of 40%. But Altria still continues to sell the top selling brands in the U.S. tobacco industry and continues to dominate the tobacco industry in revenue. This gives Altria an economy-of-scale that any of its competitors will have a hard time competing with on costs.

6. Does Altria have a strong brand name? Yes indeed. Altria's Marlboro brand was named the top selling cigarette brand in the world in 2015 and continues to dominate U.S. cigarette sales, representing nearly 45% of all cigarettes sold in the U.S. during 2015. Altria's e-cigarette brand Mark Ten represented 48% of e-cig sales in Arizona in 2015 and became the 4th most popular e-cig brand in the U.S. in 2015. With that said, if Altira can gain the same market share with its e-cig brand Mark Ten as it did in Arizona then Altria will dominate the e-cig industry in the U.S. just like it did in the cigarette industry. Indeed, we believe that Altria's e-cig brand Mark Ten will become the popular e-cig brand in the U.S. and dominate e-cig sales in the U.S. going forward.

7. Does Altria have little to no debt and is its debt manageable? Yes. Altria had $12.9 billion of total debt and total cash of $2.4 billion on its books at the beginning of 2016. With total annual  revenue of $18.9 billion, total annual earnings of $5.3 billion, and total annual interest expenses of $800 million in 2015 Altria should have no problem servicing its debt going forward. 

8. Does Altria always hold a substantial amount of cash on it books? Yes. Altria held about $2.4 billion in cash on its books at the beginning of 2016. This is about half the amount of its yearly earnings and enough cash for Altria to service its debt for 3 to 4 years. This amount of cash provides Altria with a good margin of safety if Altria wanted to pay off a substantial amount of its debt.

9. Is Altria expanding worldwide? Yes and no, because Altria spun off its international business a few years ago as Phillip Morris International (PM). When Phillip Morris International is sells all Phillip Morris tobacco products outside of the U.S. while Altria group sells all Phillip Morris products with the U.S. I will discuss Phillip Morris International in the next section because it is also included in our Industry Leader Portfolio. 

10. Altria easily passes all of the criteria on the Industry Leader Portfolio Criteria list. Altria is most likely to grow its earnings, revenue, and dividends by about 9% to 12% going forward over the next 10 to 20 years. Altria is truly an industry leader and will provide its shareholders with steady returns of 10% to 15% going forward. 

Wal-Mart Corporation (WMT), Profile from 2017 Industry Leader Portfolio Review.

1. Does Wal-Mart have a competitive moat around its business? Yes, Wal-Mart's revenues were about $480 billion in 2014. Wal-Mart operates at low profit margins of about 3% to 4% so Wal-Mart's main competitive advantage is its sales volumes and economy-of-scale. Wal-Mart can purchase supplies in such large quantities from whole-salers and sell them at the cheapest price of any retailer in the world. Indeed, because of Wal-Mart's massive economy-of-scale operations there are no other retailers that can compete with Wal-Mart on pricing. Wal-Mart's thin profit margins and massive economy-of-scale retail operations give them a competitive moat around their business that no other brick-and-mortar retailer can compete with on pricing. 

2. Does Wal-Mart have the largest share in its industry? Yes, Wal-Mart has a  retail industry market share of 13.5% as of 2015 and recorded sales of nearly $480 billion in 2015. This gives Wal-Mart massive scale in pricing power due to its massive economy-of-scale operations, which none of its closest competitors can compete with. 

3. Does Wal-Mart have a long history of increasing revenues, earnings, and dividend payments to its shareholders year after year? Yes, Wal-Mart has increased its dividend by 22.5% per year since it paid its first quarterly dividend of $0.0001 in 1974. Wal-Mart has paid 166 dividends in total as of 2016, and paid quarterly dividends of $0.49 in 2015. Wal-Mart has increased its dividend by 12% per year during the last 5 years, which is phenomenal for an industry leader like Wal-Mart. Any information regarding Wal-Mart's dividend growth history can be found at www.buyupside.com using the dividend growth calculator.  

4. Does Wal-Mart have little to no competition in its industry? Yes, Wal-Mart's closest retail competitors recorded sales that were not even close to Wal-Mart's sales of nearly $500 billion in 2015. Costco came in first with nearly $120 billion in sales Kroger came in second with $110 billion in sales for 2015. So Wal-Mart's closest competitors don't even come close to matching Wal-Mart's massive economy-of-scale operations that provide Wal-Mart a defensive moat around its business. 

5. Is Wal-Mart the lowest costs producer in its industry? Yes, the reason being Wal-Mart's massive economy-of-scale operation that gives it the power to purchase the largest volumes of manufactured goods at the lowest prices available and then sell these manufactured goods at much lower prices than its competitors. 

6. Does Wal-Mart have a strong brand name? Yes, Wal-Mart's name is known and recognized by every person in America and most people throughout the world. Indeed, when most people in America and many other parts of the world want to buy a lot of goods at low prices they first think of Wal-Mart.

7. Is Wal-Mart's total debt manageable? Yes. Wal-Mart's total debt is about $60 billion as of 2016, and its debt to equity ratio is 0.6 as of 2016. With annual interest expense of $3 billion in 2016, yearly revenues of nearly $500 billion in 2015, and total earnings of nearly $30 billion in 2015 Wal-Mart should have no problem servicing its debt payments going forward. 

8. Does Wal-Mart always hold a substantial amount of cash on its balance sheet? Yes, Wal-Mart holds enough cash for emergencies and operations. Wal-Mart held about $7 billion on its books at the beginning of 2016. This is plenty of cash to hold for an industry leader that produces revenues of nearly $500 billion, and earnings of nearly $30 billion in 2015.

9. Is Wal-Mart steadily expanding its operations every year? Yes, as of 2016 Wal-Mart operates over 11,500 units under 65 banners in 28 countries and continues expanding in Europe, Asia, Africa, South America, Mexico, and Canada. Wal-Mart also has international expansion plans and national expansion plans for its Neighborhood Market subsidiary. So being that Wal-Mart already operates in 28 countries with plans to expand in many other countries, and is still expanding its Neighborhood Market subsidiary, Wal-Mart still has massive growth opportunities. 

10. Wal-Mart passes all of the criteria of the Industry Leader Portfolio checklist with flying colors and immeasurably passes two of the most important criteria on the checklist: A massive competitive moat around its business that protects its business from its closest competitors, and a long history of increasing its dividends to its shareholders.

*We are also putting Wal-Mart on our list of top investment opportunities for 2017. We are recommending to our readers to buy shares of Wal-Mart in 2016. Wal-Mart is very cheap at this time, as of the beginning of 2017. Wal-Mart is trading at 8 times cash flow. We recommend that readers purchase shares of Wal-Mart unde 8 times cash flow anytime during 2016. If markets experience a sell-off or stay flat during 2016 Wal-Mart should trade below 8 times cash flow for most of 2016, providing our readers with many opportunities to purchase shares of Wal-Mart. 

AT&T (T), Profile from 2017 Industry Portfolio Review 

1. Does AT&T have a moat around its business protecting it from competition? Yes. AT&T operates in an industry that has a high costs-to-entry, just like all other Utility companies do. It takes a massive amount of capital to build large-scale telecom infrastructure. Once a company builds a large-scale nationwide telecom network like AT&T has that company will dominate the telecom industry because of the very high capital required to build it. With that said, AT&T has the largest revenue in the Telecom Services industry. AT&T produced yearly revenue of $147 billion as of 2016.  AT&T's is the largest company by market cap with a market cap of $240 billion as of 2016. AT&T's infrastructure is massive, with total assets of nearly $403 billion as of 2016. AT&T's massive economy-of-scale in the Telecom industry provides AT&T with a very large moat around its business that makes it difficult for competitors to compete with.

2. Does AT&T have the largest market share in its industry? Yes. According to Statista.com AT&T's U.S. market share of wireless telecommunication 34.1% and its U.S. market share in mobile cellular services is nearly 45%. Verizon is AT&T's closest competitor with a wireless telecommunications U.S. market share of 33% followed T-Mobile with a U.S. market share of 16%. Verizon has a similar market share as AT&T, which is why we added Verizon to the Industry Leader Portfolio when it was started. AT&T will continue to dominate the U.S. market share in the Telecom Services industry going forward though.

3. Does AT&T have a long history of increasing its dividends, cash flow, revenue, and earnings every year? Yes. AT&T has grown its dividend by 4.62% per year since 1984. AT&T's first quarterly dividend was $0.11667 per share paid to shareholders on September 9, 1984. As of 2016 AT&T paid a quarterly dividend of $0.48. That is total dividend growth of 312% over 32 years. AT&T's dividend growth was in line with its earnings & revenue growth. Indeed, because of AT&T's dividend growth, earnings, and revenue growth its shareholders experienced total gains of 8% to 10% a year (dividend plus capital gains) since 1984. 

4. Does AT&T have little to no competition in its industry? Yes. As was stated, Verizon is AT&T's closest competition with a similar market share in the Telecom Services industry but compliments AT&T because of high barriers-to-entry in the Telecom industry. They will both continue to dominate the U.S. Telecom Services industry going forward. 

5. Is AT&T the lowest-cost producer in its industry? Yes. AT&T has an economy-of-scale in Telecom & Internet Services that can be brought to its customers in an efficient and costs effective manner few telecom companies could ever compete with. Indeed, with its recent purchase of Direct TV AT&T can combine TV services with its existing telecom services thus attracting more subscribers and advertising. Direct TV has a very large satellite TV subscriber base, with nearly 50 million subscribers across the Americas. Also, AT&T's $48 billion purchase of Direct TV has made AT&T the largest Pay-TV operator in the world as of 2016. AT&T continues to have very strong profitability in 2016, with gross margins of 54% and a net profit margin of nearly 10%. AT&T's Return on Equity (ROE) continues to be strong at nearly 13%. AT&T's efficiency and economy-of-scale in the in the Telecom Services industry gives AT&T a competitive position in regards to operating costs. 

6. Does AT&T have a strong brand name? Yes, because of its dominant market share in the Telecom Services industry AT&T has a brand name many can easily recognize. Indeed, AT&T was one of the original telephone & telecom networks spun off from MaBell. With that said, AT&T has built & dominated the Telecom Infrastructure industry for a long time, compounding its brand name through its massive subscriber base which has nearly 140 million wireless customers in the U.S. and Mexico as of 2016. AT&T also has about 320 million people that access its 4G LTE network as of 2016. 

7. Does AT&T have little to no debt and is its debt easily manageable? Yes. AT&T's debt is a little high relative to its earnings as of 2016 because of its recent $48 billion aquisition of Direct TV, at $129 billion. But AT&T's yearly interest expense was $4.1 billion in 2015. With revenue of $149 billion, cash flow of $80 dollars, and total earnings in 2015 of nearly $14 billion AT&T can easily service its debt going forward. AT&T also had total cash on its balance sheet of nearly $6 billion, so technically AT&T could retain all of its earnings for nearly 2 years and use its cash to service its debt.

8. Does AT&T always carry a substantial amount of cash on its balance sheet? Yes, as was stated, AT&T carried nearly $6 billion in cash on its balance sheet as of 2016. This is enough cash to service its debt for nearly 2 years. This is also plenty of cash for a company like AT&T, which dominates in a fast growing sector as I will show in the next section. 

9. Is AT&T expanding worldwide? Yes. Through AT&T World Connect Value plans subscribers can connect to telecom & Internet services in 225 countries. As more & more customers in the Americas stream more & more data through the AT&T national & World Connect service AT&T will collect more telecom service fees, slowly providing strong/steady revenue & earnings growth going forward. Also, with AT&T's purchase of DirecTV AT&T can package its DirecTV services with its domestic World Connect Telecom services thus providing more and more telecom data traffic on AT&T's telecom network which means massive telecom service fees going forward. Indeed, the DirecTV service will provide massive amounts of TV subscription fees, telecom service fees, and advertising fees. 

10. AT&T is truly a leader in the Telecom Services industry. AT&T, along with Verizon, dominates the Telecom Services industry. In the coming years everything we do will be done through Internet service networks: from watching TV, to operating a business, to operating appliances. This is all being done more & more on-the-go with the use of tablets & smart phones, which means massive growth opportunities for a company like AT&T that provides the infrastructure to facilitate this increasing traffic on the internet. We see yearly growth of 8% to 10% for AT&T over the next 10 to 20 years, possibly more if AT&T dominates TV services going forward. Now is a good time to buy shares of AT&T because AT&T is selling for about 7 times cash flow in 2016. We recommend buying shares of AT&T anytime its stock trades for less than 8 times cash flow during 2017. 

Verizon (VZ), Profile from 2017 Industry Leader Portfolio Review 

1. Does Verizon have a moat around its business protecting it from competition? Yes, as with AT&T, Verizon now has a market share of nearly 35% in the Wireless and Telecommunications industry. The Wireless & Telecommunications industry has a very high barrier-to-entry because of the massive amount of capital investment required to build and maintain the industry's infrastructure. Verizon and AT&T now dominate the Wireless Telecommunications industry with a nearly 70% market share nationwide as of 2016. So it is very difficult for the majority of Telecom companies to compete with Verizon's massive Wireless & Telecommunications infrastructure. 

2. Does Verizon have the largest market share in its industry? Yes. As was stated, Verizon along with AT&T dominate the Wireless and Telecommunications industry with a 70% market share nationwide.

3. Does Verizon have a long history of increasing its dividends, cash flow, revenue, and earnings every year? Yes. Verizon has increased it dividend by nearly 4% a year since they paid their first dividend on March 26, 1984. Verizon's earnings and revenues have grown by nearly 5% every year during the same time period. Verizon's revenues have increased by 4.3% per year over the last five years Verizon has increased its dividend by 3% per year over the last 5 years. 

4. Does Verizon have little to no competition in its industry? Yes.  As was stated, AT&T is Verizon's closest competitor, with roughly the same market share in the Telecommunication industry. We continue to believe that AT&T and Verizon will continue to dominate the Wireless/Telecommunication industry, which is why both of them were added to the Industry Leader Portfolio. 

5. Is Verizon the lowest-costs producer in its industry? Yes. Being that Verizon, along with AT&T, dominates such a capital intensive industry enables Verizon to sell their wireless & telecommunications at an excellent profit margin of 15% as well as produce gross margins of 60%. Verizon is also able to sell their telecommunication services at very competitive prices while still producing excellent profits because its massive telecommunications infrastructure give Verizon an economy-of-scale that no other companies within its industry can compete with on pricing, other than AT&T. 

6. Does Verizon have a strong brand name? Yes. As with AT&T, nearly every person in the U.S. is familiar with Verizon's name. With a total number of 140.1 million wireless subscribers as of 2016 Verizon has become the largest telecom company in the U.S. based on number of subscribers. 

7. Does Verizon have little to no debt and is its existing debt easily manageable? Verizon's debt to equity ratio is a little high at 5.6 (560%) but high debt levels are normal in capital intensive industries such as the Telecom industry. Verizon has about $116 billion in total debt outstanding as of 2016. Verizon produced yearly cash flow of nearly $35 billion and had total cash on its balance sheet of $6 billion as of 2016. Verizon's yearly interest is only $5 billion as of 2016, being that the majority of Verizon's debt outstanding is long-term debt. So Verizon can easily service it's debt going forward.   8. Does Verizon carry a substantial amount of cash on its balance sheet? Yes. Verizon had about $6 billion on its balance sheet as of 2016, which is enough to service its outstanding debt for nearly 2 years. This is plenty of cash for a dominant company like Verizon that produced $35 billion in cash flow in 2015, which grows steadily year after year after year. 

9. Is Verizon expanding worldwide? Yes. Verizon is steadily growing services throughout the world through partnerships or roaming services with telecom service providers throughout the world. Verizon continues growing its subscribers of its international mobile service plans, which bring in more revenue per subscriber than national service plans. Another service that will help Verizon grow its services throughout the world is its recent purchase of AOL. This provides Verizon with a major web portal that will connect AOL users throughout the with advertising. AOL provides Verizon with a major web portal that will help Verizon grow its cash flow though web advertising and various services to AOL users throughout the world.

10. Verizon is truly an industry leader in the Wireless and Telecom Industry, and Verizon now dominates the industry in the U.S. with 140 million subscribers, and growing. Verizon will also see added growth in media and advertising through its  recent purchase of AOL. Also, Verizon will get more growth in advertising and media through its decision to purchase Complex Media in 2016 through a joint venture with Hearst Media Partners. Verizon will continue to be a great investment in the Industry Leader Portfolio. Verizon shareholders will continue to see dividend and capital gains growth of about 10% over the next 20 to 30 years. Now is an excellent time to buy more stock in Verizon  because Verizon is trading for 6 times cash flow as of 2016. 

China Mobile (CHL)

1. Does China Mobile have a moat around its business protecting it from competition? Yes. Telecom & Mobile Communications companies in China have a built in monopoly in China, being that half of the shares of Telecom & Mobile Communications are owned by the Chinese Government. With that said China Mobile has the largest market share in Telecommunications infrastructure in China, handling nearly 70% of Internet & Telecom Mobile data traffic each year. China Mobile's only competitors are China Telecom and China Unicom. These two companies handle the majority of the remaining Internet & Telecom/Mobile data traffic in China. China Unicom as a market share in the Mobile Operator industry of nearly 20% and China Telecom has a market share of nearly 15% as of 2016. China Mobile has the largest economy-of-scale in the China Telecom & Mobile Industry, with a market cap of nearly $260 billion, compared to China Unicom's $28 billion market cap and China Telecom's $42 billion market cap. China Mobile has a total subscriber base of nearly 900 million users, making it the largest mobile operator in the world. This economy-of-scale provides a massive moat around China Mobile's business that will provide them with excellent growth in one of the fastest growing economies in the world as ever increasing amounts of mobile/internet data travel over China Mobile's massive Internet & telecom/mobile networks.

2. Does China Mobile have the largest market share in its industry? Yes. As was stated China Mobile has the largest market share in China's Mobile Operator industry, with a market share of almost 70% and a total mobile subscriber base of 900 million subscribers in China. This not only makes China Mobile the largest Telecom Mobile company in China but also the largest Mobile Operator in the world. 

3. Does China Mobile have a long history of increasing its dividends, revenue, cash flow, and earnings every year? Yes. China Mobile has increased its dividends and cash flow by about 12% per year since they paid their first dividend in 2003. This is excellent dividend growth and we expect China Mobile to continue increasing its dividend by at least 12 a year going forward, possibly more since mobile data traffic is expected to increase 50% a year worldwide through 2020. Revenue growth has slowed over the past five years for China Mobile but has still been excellent at 7% per year. China Mobile will continue to record excellent earnings and cash flow growth being that they are the leader in an industry that has excellent and guaranteed growth over the coming years.

4. Does China Mobile have little to no competition in its industry? Yes. China Mobile's two closest competitors, China Telecom & China Unicom, will have a hard time competing with China Mobile's massive mobile network in the Mobile Operator industry. With a total mobile subscriber base of nearly 900 million in 2016 China Mobile will continue to dominate the mobile Internet data traffic in China and provide the majority of the mobile infrastructure needed to enable this increasing amount of mobile internet data traffic to function efficiently in China.

5. Is China Mobile the lowest costs producer in its industry? Yes. Because of China Mobile's massive economy-of-scale in the Mobile Operator industry it can provide mobile and Internet services at competitive prices more efficiently and profitably than its competitors. This shows in its gross margins, return on equity, and its net profit margin. China Mobile has gross margins of 89%, net profit margins of nearly 17%, and a return on equity of 12% as of 2016. China Mobile's closest competitors don't come close to China Mobile's profitability. China Telecom's gross margin is 73%,  its net profit margin is 6%, and its return on equity is 7% as of 2016. China Unicom's gross margin is 63%, its net profit margin is 2%, and its return on equity is 2% as of 2016. These numbers prove that China Mobile can provide China's mobile services the most efficiently at the lowest costs in the industry, providing them with leading profit margins in the Mobile Operator industry.

6. Does China Mobile have a strong brand name? Yes. China Mobile has the strongest brand name in China's Mobile Operator industry, being that they have a nearly 70% market share in China's Mobile Operator industry. Also, with nearly 900 million mobile subscribers China Mobile has the largest number of mobile users in the world. This gives China Mobile a very strong brand name by default. China Mobile was ranked as China's most valuable brand in 2015 by the British brand valuation consultancy British Finance. China Mobile was ranked 13th on the World's Most Valuable Brands list by British Finance. 

7. Does China Mobile have little to no debt and can it easily manage its total debt? Yes, very easily in fact. China Mobile has nearly $800 million in total debt but has total cash on its books of nearly $63 billion. So China Mobile could pay off all of its debt with cash and still have about $62 billion in cash on its books as of 2016. Also, China Mobile's total yearly earnings are nearly $17 billion as of 2016 so China Mobile could pay off its debt with only 6% of earnings. China Mobile's debt is easily manageable and hardly puts a dent in its cash flow.

8. Does China Mobile hold a substantial amount of cash on its books? Yes. China Mobile holds a massive amount of cash relative to its total debt and earnings. China Mobile has total cash on its books of $70 billion as of 2016, which is equal to over 3 times its yearly earnings and nearly 70 times its total debt. This puts China Mobile in a very safe financial position, making China Mobile one of the safest companies in the world with excellent growth prospects for investors. 

9. Is China Mobile expanding worldwide? Yes. China Mobile's core Mobile Operator telecom mobile networks are in China. So China Mobile's core mobile network of 900 million subscribers as of 2016 will ride the fast growth in mobile data growth in China. But China Mobile will also grow internationally through mergers & acquisitions in other countries or through partnerships. One such investment was China Mobile's 2014 purchase of a nearly 20% stake in Thai Telecom's group True Corp for nearly $1 billion. China Mobile produces massive amounts of cash year after year, and will continue to do so being that it has a monopoly in China's Mobile Operator industry. China Mobile can strategically acquire assets outside of China that streamline with its business. Indeed, with its massive cash flow and its growing massive cash balance China Mobile can easily acquire or invest in any opportunities outside of China when an opportunity presents itself.

10. China Mobile is truly an industry leader in China's Mobile Operator industry and will become an international leader as worldwide expansion opportunities present themselves. Indeed, China Mobile is already a world leader in the Mobile Operator industry because they now have the largest number of subscribers in the world at 900 million and growing. The majority of China Mobile growth will come from growing mobile data growth, as mobile users increase the amount of data they use on China Mobile's mobile network. Indeed, mobile data is expected to grow by 50% a year through 2020. It may grow at a faster rate in China being that China's economy is one of the fastest growing economies in the world. China Mobile is the most profitable Mobile and Telecom company in China, and one of the most profitable companies in the world. China Mobile's profit margin was nearly 17% and they produced total earnings of nearly $20 billion in 2016. We believe China Mobile will continue to produce total returns for its investors of roughly 15% over the next 20 years, possibly more being that it has a monopoly position in one of the fastest growing industries going forward. This is excellent time for readers to buy CHL stock because CHL is only trading for 6.8 times cash flow in 2016.