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Afternoon Note

Chip Play

By Charles Payne, CEO & Principal Analyst
1/3/2020 1:26 PM

Once again, a chip play is the number one winner in the market.  But this time, it’s not a semiconductor, rather the company that’s perfected not only chips, but every other product made from potatoes.   Lamb Weston (LW) shares are erupting higher more than 11% today.

I don’t think I have even been in the stock, but I love the story.  The company, founded in 1950, began to take off after inventing the water gun knife to slice French fires.

Other innovations include curly fries. The stock isn’t sexy, but it’s a quintessential American success story.  The company is proud to say it’s perfected the potato, and I suspect there is a lot of pride in the shares today.

What makes a potato perfect?

Crispy golden fries don't come from ordinary potatoes. They come from potatoes grown in rich, fertile soil, in an ideal climate, by dedicated farmers. When all the elements come together, the results are nothing short of delicious.

https://lwprodnastorage.blob.core.windows.net/assets/shared/images/origin/potatoes.png

Potatoes do best in full sun, requiring at least 6 hours each day during the growing season.

Potatoes like a controlled and consistent source of water — about 1-2 inches per week.

Potatoes prefer rich, sandy soil that’s well drained.

Warm, sun-filled days and cool, clear nights keep potatoes happy. They prefer temperatures between 50°F and 85°F.

Heck, it seems like I might actually be a potato because I thrive nicely with the right combination of the items above.

Home Sweet Home

November US home construction numbers came in very strong climbing, +1.9% month to month and +2.7% year to year.  It’s the fifth consecutive monthly increase.   In addition, the 30-year fixed mortgage is now 3.72% (the street was looking for 3.74%), down from 4.51% a year ago.

Part of my investment thesis for 2020 is the return of household formation and residential interments.  I’m feeling more confident that’s happening.   Meanwhile, homebuilders look good today.

Middlle East

We aren’t panicking or changing any thing in our approach due to the successful strike on two of the most vicoius thugs in the world.  Obviously, the world is bracing for retaliation, but nobody is shedding tears or cowering in fear.


 

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