www.banyanhill.com February 2017

Inside This Issue

Paul Mampilly’s

ProfPut This Rocket in

Your Portfolio

BUYING your first house is scary.

There are so many things you need to understand about money and property law,

not to mention the conventions and procedures of the real estate market.

I still remember how incredibly difficult it was to handle all the details of my first home purchase years ago.

First came the challenge of searching for the right property. It’s exhausting. As a first-time buyer, you have no idea what to look for.

Next, there is the array of professionals you need to find. A good real estate agent is invaluable. So is having a reputable mortgage broker or banker and a good real estate lawyer. If you pick one who’s incompetent or shady, you can suddenly find yourself in a world of trouble.

For my first house, my agent recommended a crooked banker. He stole my first mortgage payment. Suddenly, I was getting calls from the mortgage servicing company’s collections department.

Even with a good banker, there’s an incredible amount of bureaucracy and red tape. If you want a loan, you’ll need…

• Three years of tax returns.

• Three months’ worth of pay stubs.

• Credit score documentation.

• Bank and brokerage statements.

• Appraisals of your other real estate assets.

And you’d better have a good explanation and backup documentation of any credit or loan problems that show up on your record.

In short, the process of getting a mortgage is absolutely overwhelming.

And it’s completely unnecessary.

You see, every single one of these documents exists in digital form already on a computer server. In theory, all you need is a way to gather them up, organize them and submit the whole package to your banker electronically.

However, the reality is that even then, these documents are often misread and misunderstood. Your banker will come back with questions day after day, struggling to connect all the dots of your financial life.

The process would work a lot better if these documents were scanned and stored in a central place where they can be evaluated using artificial intelligence.

6 | Portfolio Update

4 | Robots & IoT

2 | Mortgages for a Digital Age

2February 2017 www.banyanhill.com

You see, the reality of getting approved for a mortgage loan is generally about three pieces of information: your credit score, personal income and level of indebtedness.

Everything else is mostly BS ... a leftover from decades ago, when a home buyer sat down with a real banker, who made an individualized decision on whether you should get a loan. As we all know, that world is long gone. But cultural tradition (and government regulations) still require all that paperwork for the foreseeable future.

But imagine if someone figured out a way to streamline the whole process for our 21st-century digital world?

What if they could remove the craziness of having to gather all those paper documents?

Suppose they could eliminate the possibility of that information being misread or misunderstood (because knowing the right answer requires a piece of information buried elsewhere inside a stack of documents)?

Think of the possibilities for a company that took all that paper gobbledygook — and found a way to automate it all.

Instead of painfully slogging through a mortgage application for your dream home, you’d just put in a few details on a website or smartphone app.

And because it’s all based on artificial intelligence, everything happens at lightning speed.

Instead of your mortgage banker saying, “You’ll know the status of your loan approval in 10 days,” the app will let you know in less than 10 minutes!

Mortgages for the Digital AgeHere’s the shocking thing: All of this exists, right

now, today.

And I believe that the stock of the company that owns this patented, proprietary system — to get you a mortgage in less than 10 minutes — is about to skyrocket by 500% or even more.

The company is Intuit (Nasdaq: INTU).

You probably know Intuit already. The company’s TurboTax platform dominates the arena for tax-

preparation software, controlling 40% of the market. Millions of people use Intuit’s Quicken personal finance platform to track their spending and saving. And if you’re a small-business owner, you know how great QuickBooks is for maintaining your financial records.

These three products have already made Intuit an incredible stock to own. Since its IPO in 1993, the stock has gained nearly 5,300%, and doubled in price just since 2012.

However, that’s peanuts compared to what I believe is going to happen in the next few years, as Intuit’s mortgage products and services business takes off.

I believe it will completely dominate the processing of home loans. The market opportunity is enormous. According to RealtyTrac estimates, Americans took out nearly 7 million residential mortgages just in the past year alone.

Intuit’s software platform is called Rocket Mortgage.

And it achieves everything I mentioned earlier — eliminating all the hassles and pain that come with applying for a home loan.

But that’s not the only reason I believe Intuit will become a stock market superstar, jetting its investment returns into the stratosphere.

Rocket Mortgage is an absolutely genius product because it works for any kind of loan.

It doesn’t matter whether we’re talking about an auto or boat loan, a business loan or a personal loan.

Intuit's Rally Still Has Room to Run$120

$110

$100

$90

$80

$70

$60

$50

$402012 2013 2014 2015 2016 2017

SOURCE: Yahoo! Finance

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competitor. Because of its other businesses —Turbotax, Quicken, and Quickbooks, Intuit already stores a huge chunk of the critical data people need for a loan approval. That's a huge advantage in speed, which is why, in ads for Rocket Mortgage, Intuit says they can get you a mortgage as fast as 8 minutes!

Think of what that will mean as the millennial generation comes of age. They’ll need mortgages for their homes and loans for their cars, boats and personal needs. Many of them are going to end up using the Rocket software platform.

And each time they do ... it means cash for Intuit.

If you look at the estimates for Intuit from Wall Street’s analysts, they expect the company’s earnings to rise 15% this year and at a 17% annual clip for the next five years.

However, I believe these estimates are too low. These analysts aren’t giving Intuit enough credit for just how big and dominant the Rocket loan platform will be.

I can understand why analysts are reluctant. Rocket is a new product. Millennials are just starting to get serious about buying houses.

And I know from my days as a Wall Street insider that stock analysts are cowards at heart. Even when they see a company with an incredible breakout product, they wait until other analysts increase their estimates before doing likewise.

It’s the kind of groupthink I look for. I use it to identify stocks destined to soar before the herd of big buyers comes in.

So, this is our opportunity to buy Intuit on the cheap — before everyone figures out what I’ve told you here.

When you buy Intuit you take no financial risk, by my reckoning. By that, I mean there’s no chance of Intuit going bankrupt — because Intuit generates so much money as free cash flow, year in and year out.

Also, Intuit now generates as much as 73% of its revenue from its “connected” services (people who use one of its products through a website or app). And this model is a subscription-based business, which

Rising Trend: Intuit’s Free Cash Flow

$1.2B

$1B

$800M

$600M

$400M

$200M

$02007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SOURCE: CapitalIQ

But I’m expecting Intuit’s cash flow to soar even higher now and in the years to come. Why? Because the mortgage and loan processing industry is bigger than all of Intuit’s current businesses put together!

The Product No Millennial Can Do Without

And no one else has anything like Intuit’s Rocket mortgage/loan system.

Intuit has an incredible advantage over any

Intuit’s software platform can process all of these lending products.

Here’s why this is so important: When you build a technology platform like Rocket Mortgage, it’s for all practical purposes a one-time cost. In other words, once the cost of creating the platform is paid for — each additional dollar that comes in is pure profit.

This is a familiar topic if you read our January issue, where I recommended shares of PayPal (Nasdaq: PYPL).

PayPal’s payments software uses the same “platform” business model. I told you that it’s a license to print money. (And it’s no surprise that the shares are up 5% since we published that edition of the newsletter.)

We can say the same for Intuit, with each of its three existing franchises — TurboTax, Quicken and QuickBooks. They’re licenses to print money too. That’s why Intuit generated an astonishing $5.6 billion in cash flow over the last five years.

4February 2017 www.banyanhill.com

means it’s more profitable. Customers have to commit to the use of its products and keep paying to use them.

Once a customer makes that commitment, they store all their information and data on Intuit’s system. This fact alone makes it very hard for a customer to move over to one of Intuit’s competitors. Doing so is a time-consuming hassle.

Also, a subscription model means Intuit does not have to hound customers every three years to buy a new software package. Once a customer is won over, he or she remains so for years, taking advantage of constantly upgraded products and services.

If you want to know an incredible measure of Intuit’s profitability, keep this fact in mind:

Intuit generates a 20% profit for every dollar it takes in as revenue. That’s why the company generates so much cash.

Also, Intuit is a smart manager of its cash. It buys back stock opportunistically ... which is why its shares outstanding have shrunk by nearly 13% over the last five years. It’s the very definition of ScarceAbility — one of the critical aspects of my GoingUpness stock-picking system.

Ultimately, this is the perfect time to buy shares of Intuit, before the rest of the Wall Street crowd starts bidding up the stock.

Action to take: Buy Intuit (Nasdaq: INTU) up to $130.

Mega Trend Update: Robots & IoT

The world is slowly waking up to the Internet of Things (IoT); robots are one of the most promising elements of the IoT mega trend.

There were plenty of robots at the Consumer Electronics Show in Las Vegas last month, with names like Cozmo, Kuri, Einstein, NAO and Pepper. They’re quickly becoming the face of the IoT mega trend for the general public. And so far, the reception is good. People think of them as safe, well-designed, capable and friendly.

Back in 2015, I attended the RoboBusiness

conference in San Jose, a leading business-development event for the robotics industry. After getting a close-up look at numerous prototypes on the event floor, I knew that the robotics side of the Internet of Things mega trend was well on its way.

It’s the reason we already have one robotics stock, Teradyne (NYSE: TER) in our portfolio. The company owns Universal Robotics, which is one of the leading companies in making cobots — a new form of industrial robots specifically designed to work alongside humans.

But that’s just the start. From here on, we’ll see the introduction of wave after wave of new robots. Over time, we’ll see new stock market winners as the most successful of these robot manufacturers go public. Here are some still-private robotics firms to keep an eye on:

Rethink Robotics: This is one company that made a big impression on me at that RoboBusiness event in 2015. Founded by entrepreneur and robotics genius Rodney Brooks, Rethink makes “Baxter” and “Sawyer” — two models of cobots I believe will soon

Rethink Robotic’s Baxter

be found by the thousands on factory floors and assembly lines around the world.

You don’t need a programmer to put Baxter to work. The cobot is “manually trainable” — a line worker shows the cobot where to pick up an object and where to put it down — and Baxter’s system handles the rest.

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Savioke: Robots are coming to the hotel industry too. Savioke makes a robot named Relay, which delivers snacks, drinks and toothbrushes to guests’ rooms; it’s already at work in a small but growing number of California hotels. Relay rides the elevator by itself, delivers the item and then parks itself back in its dock.

Fellow Robots: Lowe’s, the big home improvement chain, is trying out 11 of Fellow Robots’ machines in its San Francisco area stores. Need help finding a particular product on the shelves? The “LoweBot” can show you. It can also make sure there’s enough inventory on the shelf when supplies run low.

Aethon: Based in Pittsburgh, Aethon is best known for “TUG” — an autonomous robot already in use at nearly three dozen Veterans Administration hospitals as well as UCSF’s Mission Bay Medical Center. It hauls carts full of garbage, dirty bed linens and fresh laundry through hallways and elevators.

As new robotics companies like these go public, we’ll consider them for our Profits Unlimited portfolio. However, it’s likely that many of them may still be too small in terms of their market size. If that’s the case, we’re launching a new service called Extreme Fortunes later this month. It’s specifically designed to capitalize on fast-growing microcap opportunities.

Millennials/Dow 50,000 Mega Trend Update

“Do you know anything about getting a mortgage?”

The question was from my friend, whom I’ll call “M” to protect his privacy. M is 34 years old, an engineer at an energy company, and she is ready to buy a house for the first time.

M is also a millennial, the largest generation of its kind in U.S. history, numbering 92 million strong. The oldest members of this generation turned 34 last year. Based on my research, that’s a typical “coming of age” year for young Americans.

For the first time, many of them finally have enough income to be able to buy a house, new cars or take vacations without financial help from their parents. Generally, this is the moment when they

have enough disposable income to make a big impact on our economy through their spending habits.

And right now, the place you’re going to see the millennials really begin to show their strength is in the housing market. We can see that already, because in many markets there simply aren’t enough houses to meet the demand.

Realtors have been tracking this anecdotally in many markets around the country, but you can easily see the trend in the accompanying chart on vacant housing units, compiled by the Federal Reserve. Vacant homes are being bought up left and right. (And this is happening at a time when hedge funds — which purchased thousands of foreclosed homes in the wake of the real estate crisis — have largely stepped back from the market.)

In short, you’d have to go back to 2006 to find a point when there were so few vacant housing units.

To put that in context, in 2006, the U.S. had a population of 298 million people, according to the U.S. Census Bureau. Since then, the population has swelled 8%. The Census estimates the U.S. population at 323 million people today.

So there are a lot more people who want to buy homes. And yet homebuilders have mostly concentrated on upscale single-family homes and apartment construction over the last decade.

That means in many places, you’re going to see home construction boom and the sales of starter homes rocket much higher.

Vacant Homes: Lowest Since 2006

19,500

19,000

18,500

18,000

17,500

17,000

16,5002006 2008 2010 2012 2014 2016

SOURCE: FRED

6February 2017 www.banyanhill.com

I don’t need to tell you that it’s great news for Intuit, this month’s recommendation, and why owning this company is absolutely critical right now if you want to get in early on the emerging millennial housing boom.

You might ask, are higher interest rates going to be a problem for millennials?

I can tell you from personally talking to M and my other millennial friends that this is not going to stop them from buying houses.

These young people don’t look at a home purchase like a trader or investment banker might. Millennials aren’t in it for speculation and profit. They’re buying a house because they are ready to settle down somewhere and have a family.

Take my friend M for example…

She wants to get married and have kids. As long as her monthly mortgage payment is affordable, based on her income, she’s going to go ahead and buy the house. M isn’t unusual in thinking this way. In fact, until the craziness of the real estate bubble in the mid-2000s, this was how most people thought about houses.

When the baby-boomer generation hit its peak home-buying years in the 1980s and 1990s, high interest rates didn’t faze them either. Remember, mortgage rates were as high as 18% in the early 1980s. They were still around 8% in the 1990s. Today, they’re half again as low.

The bottom line is that even if interest rates go a bit higher, millennials are going to keep buying

houses. You can expect me to keep adding additional “millennial housing ideas” to Profits Unlimited during the rest of this year.

Portfolio UpdateOur stocks are doing great on an individual

basis and as a portfolio. Every single one of the 10 stocks that I’ve recommended since we began Profits Unlimited is up.

If you track the Profits Unlimited portfolio like I do, and invest an equal amount in each of our stocks, our group of stocks is up 15% versus the S&P 500’s 10% gain over the same time period. And that doesn’t count the performance of STMicroelectronics (NYSE: STM), the stock featured in my special report, The Stock Leading the $19 Trillion Revolution.

STMicroelectronics has been an absolute rocket ship for you, going from $5.40 at the time of the report’s publication to a recent $11.50. That’s a gain of 113% in seven months — a fantastic windfall profit that most of you have been able to get all or a piece of. Yes, STMicro is not in our official portfolio. However, it’s a stock that I closely track and update you on from time to time in these pages or in my weekly podcasts.

In the next few weeks, nearly all of our portfolio stocks report their quarterly results. I believe every one of them will indicate continued growth, with 2017 shaping up to be a banner year.

The Games Insiders PlayI want to remind you that market insiders like to

play games with our stocks, both before and after our companies announce earnings. During both periods, you should expect to see big swings in the prices of our shares.

One reason you see this is because there’s a small group of hedge funds, all of which “game” these stocks by buying and selling massive positions at critical moments, aiming for short-term profits.

They’re betting on a company beating the estimates of Wall Street analysts. Often you’ll see the share price of a target stock jump higher just before it announces

Paul Mampilly worked for 25 years with direct, hands-

on money management experience on Wall Street

before retiring in his 40s to spend more time with

his family. Starting in the late 1980s, he worked as

an analyst at Deutsche Asset Management and ING,

before becoming a money manager for the likes of

Royal Bank of Scotland, Bankers Trust, Sears and a

Swiss bank. He has a proven track record of managing

a $5.6 billion hedge fund, being a portfolio manager of

$25 billion asset management company.

ABOUT PAUL MAMPILLY

7www.banyanhill.com February 2017

its quarterly earnings. That’s an indicator these hedge funds are loading up their positions.

If the company beats the Wall Street estimate, these hedge funds sell immediately and pocket quick gains as the shares rally on the news. If the company disappoints, the hedge funds dump the stock — which can easily make it plummet by 10% or more in a day.

So just keep this kind of activity in mind. We’re not in our stocks for these kinds of fly-by-night, in-and-out “scalping” trades, which have a low percentage of winning anyway.

Now, let’s talk specifics on some of our stocks…

PTC (Nasdaq: PTC), our IoT “fixer” stock, reported its earnings on January 18, just as we were putting the finishing touches on this issue. PTC said its IoT business is soaring. Bookings (which represent future sales) were $10 million above what the company expected and sent the stock to a new 52-week high near $52 a share.

We’re up about 5% since I told you to buy PTC. But this is just the beginning. We’ll see much bigger gains in the future. PTC is still below our buy-up-to price of $58 (though I don’t believe it will stay below that level for much longer).

PTC’s latest results will bring big-money buyers out of the woodwork to buy the stock. They’ll quickly bid it beyond our buy-up-to price. So if you don’t own PTC yet, buy it now, before the big-money folks join the party.

Profits UnlimitedTo contact us with a question or comment, please call: 1-888-898-2227 or email us at profitsunlimited@banyanhill.com

Published by Banyan Hill

Editor: Paul Mampilly

Managing Editor: Jocelynn Smith

Editorial Director: JL Yastine

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Qorvo (Nasdaq: QRVO), which makes a critical component for IoT devices, is making a big move higher. As I’ve told you numerous times before, I believe the wild up-and-down volatility of Qorvo’s stock in recent months is a signal that a buyout is coming.

A buyout of Qorvo by a larger company would be great for us. It means you would get a sudden, instantaneous gain when the announcement is made. Judging from Qorvo’s recent price action, it looks as if an announcement will happen soon. I believe Qorvo’s buyout will come in at $80 to $85 — a gain of 30% to 40% from the current price.

Qorvo is up 6% since I recommended the stock. But it’s still well below our buy-up-to price of $70. So, this is a great time to get into Qorvo stock if you don’t own it.

I’ll keep a close eye on our portfolio companies as they report their quarterly results. So make sure to listen to my weekly podcasts to get my latest advice. And be on the lookout for alerts from me instructing you to make a trade, if I find that the outlook has changed for any of our companies.

Getting Ready for Next Month…

I’ve already begun my work on stocks for the March issue of Profits Unlimited. I’m still weighing my options, but I’m thinking about doing a bonus

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NOTES

The Profits Unlimited Portfolio is an equally-weighted strategy and does not include dealing charges to purchase or sell securities, if any. Taxes are not included in total return calculations. “Total return” includes gains from price appreciation, dividend payments, interest payments, and stock splits. The Purchase Price is based on the first closing price after the recommendation’s release. Sources for price data: Capital IQ, and websites maintained by securities issuers. Dividend yield is calculated based on trailing 12-month distributions.

Date Price On Purchase Dividend Total Investment Added 1/20/2017 Price Yield Returns Advice

Intuit (INTU) NEW BUY - Up to $130

International Business Machines (IBM) 6/1/16 $168.29 $152.51 3.33 12.18% Hold

Qorvo, Inc. (QRVO) 6/20/16 $54.78 $55.98 0.00 -2.14% BUY - Up to $70

General Electric (GE) 7/26/16 $31.74 $31.47 3.02 1.59% BUY - Up to $38

Rockwell Automation (ROK) 8/22/16 $137.07 $118.15 2.22 16.66% Hold

Autodesk (ADSK) 9/28/16 $79.67 $72.65 0.00 9.66% Hold

Sprint (S) 10/26/16 $8.28 $6.36 0.00 30.19% BUY - Up to $10

Phillips (PHG) 10/26/16 $29.86 $30.05 0.00 -0.63% BUY - Up to $35

Teradyne (TER) 10/26/16 $25.67 $22.02 0.93 16.85% BUY - Up to $30

PTC, Inc. (PTC) 11/21/16 $48.22 $48.53 0.00 -0.64% BUY - Up to $58

PayPal Inc 12/15/16 $41.27 $39.55 0.00 4.35% BUY - UP to $50

NEW RECOMMENDATIONS

CURRENT PORTFOLIO

Profits Unlimited Portfolio

issue where I recommend two companies instead of the usual single stock.

The fact is, I see a lot of opportunity right now. I’m eyeing an absolutely incredible stock that could serve as a great entrée into the area of self-driving cars — yet another element of our IoT mega trend. And as a bonus, I’m also looking to add a company in our millennials mega trend that could give us exposure to their desire for healthy eating.

Just a note that the last time I issued a bonus edition, in November 2016, I wound up

recommending three stocks — Sprint (NYSE: S), Teradyne and Philips (NYSE: PHG) — all of which are up 40%, 20% and 1% respectively. So this is going to be an unbelievably exciting issue and something to mark on your calendar in March.

Paul MampillyJanuary 20, 2017