The Surprising Secret Behind America’s Success

by Nicholas Vardy
Statue_of_Liberty

"We will make America strong again. We will make America proud again. We will make America safe again. And we will make America great again."

- President Donald Trump

The conventional wisdom is that America's best days are behind it.

Back in the good old days, the U.S. economy ensured broad-based prosperity throughout the land.

Washington politicians reached across the aisle and got things done.

And the world's best and brightest flocked to America's shores for a better life.

Today, the U.S. economy is sharply divided between the "haves" and the "have-nots."

Political vitriol has reached unprecedented levels.

And illegal immigrants have become scapegoats for crime and taking jobs from Americans.

No wonder President Trump was elected on the slogan of "Make America Great Again."

I've lived abroad for most of my adult life. So it's no surprise that my perspective on the United States has changed much from when I grew up in the Midwest.

I've learned that America has some remarkable - and underappreciated - achievements.

But I also see a real danger: President Trump's policies and rhetoric threaten to undercut the source of much of America's past and current successes.

Celebrating America's Successes

First, let's celebrate America's successes in ways you may not have thought of.

Let's start with brains...

Since World War II, the U.S. has dominated the Nobel Prizes in medicine, chemistry, physics and economics.

Many of today's leading global thought leaders live in the U.S.

Appearances by the likes of Harvard psychologist Stephen Pinker, British historian and Stanford senior research fellow Niall Ferguson, and financial author and philosopher Nassim Taleb attract intelligent audiences across the planet - whether in New York, London or Beijing.

And brainy U.S.-based tech companies like Facebook, Amazon, Apple, Netflix and Google have woven themselves into the fabric of billions of lives across the planet.

So how about brawn?

The U.S. dominated the medal table at the 2016 Summer Olympics in Brazil, winning a total of 121 medals.

China had 70, the next highest total.

More than 1,000 current and former NCAA student-athletes competed in Brazil, representing 223 NCAA member institutions.

Athletes from Stanford, my alma mater, won 26 Olympic medals alone - 14 of them gold.

If Stanford were a country, it would have ranked 11th for the total number of medals - and an astonishing sixth in the world for gold.

Yes, America Is a Special Place

But perhaps not for the reasons you think.

In 2016, the U.S. claimed six of the nine scholars who shared the four science-based Nobel Prizes.

The surprise?

Not a single one was born in the United States.

So what made these winners "American"?

Each of the six winners worked at a U.S. university and called the U.S. home.

How about those U.S.-based thought leaders?

As it turns out, Harvard psychologist Stephen Pinker was born in Canada. Stanford fellow Niall Ferguson hails from Scotland. And Nassim Taleb grew up in Lebanon.

And what about America's Silicon Valley-based tech giants?

Remarkably, the current CEOs of Microsoft, Adobe and Mastercard all went to the same high school - in India.

And all those Olympic medal-winning NCAA athletes?

Well, just because you are an NCAA athlete does not mean you are "American."

The more than 1,000 NCAA athletes at the Rio Olympics represented an astonishing 107 countries.

These U.S. and foreign NCAA athletes won 232 medals at the Rio Olympics -105 of them gold.

Remarkably, NCAA athletes won more gold, silver and bronze medals alone than the United States and China did together.

The lesson is clear...

You don't need to be American to be the best in the world at what you do.

But if you are world class, there's a good chance you'll end up in America.

And it's America's ability to attract (and keep) this kind of world-class talent that's the secret to some of its greatest successes.

But Here's Why I'm Worried

My American friends and I who live abroad always find ourselves defending the country of our birth.

And frankly, the task is getting harder.

Here are two worrisome trends...

First, President Trump's anti-immigrant rhetoric is discouraging the best and the brightest from flocking to America's shores.

The numbers aren't yet huge...

But there's little doubt that at least a handful of future "American" Nobel Prize winners and Olympic athletes are turning away from studying and working in the U.S.

Second, the U.S. media (and culture) has become schizophrenic.

It is at once both lowbrow trashy... and highbrow intolerant.

The U.S. media lionizes lowbrow cultural icons like rapper Snoop Dogg, reality TV star Kim Kardashian and YouTube sensation Justin Bieber.

In contrast, posters on the streets of London celebrate the U.K.'s Nobel Prize winners. And successful British Olympic athletes are hailed as role models.

Combine this with the oppressive highbrow enforcement of political correctness...

And the "land of the free" seems anything but that.

Yes, it's important to keep perspective...

The good old days when the United States was not gripped by some social or political crisis du jour is a fantasy.

Counterintuitively, it's that ceaseless churning and change that gives America its unique dynamism and resilience.

As the late, great author and motivational speaker Jim Rohn observed, "People aren't building rafts to escape to Cuba."

That won't change anytime soon.

Still, the world is watching.

And sadly, it's growing less impressed with what it sees.

Good investing,

Nicholas

Thoughts on this article? Leave a comment below.

This Business Is a Wreck... but Not its Stock

On my way to the office yesterday, I caught Trump's new National Economic Council Director Larry Kudlow on the radio. While Trump's rhetoric may be all over the map, Kudlow demonstrated chummy, plain-spoken clarity.

When asked what his top priorities were, he replied, "Growth, growth, growth." In fact, he believes 5% GDP growth is totally possible - not forever, but for a period of time - while we make up for lost ground after the Great Recession.

Alexander Green's latest recommendation in The Momentum Alert could not be more on point with Kudlow. While Copart (Nasdaq: CPRT) might not be in a sexy industry, here's why Alex believes the stock is beyond alluring...

I have a new recommendation for you. But to fully appreciate it, you have to get past the prejudiced notion that a great stock represents a glamorous business.

We can all appreciate sexy stories like the ones surrounding Apple (Nasdaq: AAPL), Tesla (Nasdaq: TSLA), Netflix (Nasdaq: NFLX) and Amazon (Nasdaq: AMZN). But there are plenty of companies without the pizazz that have given - and will continue to give - blockbuster returns.

One of them is Copart (Nasdaq: CPRT).

Based in Dallas, Texas - but with more than 200 facilities in North America, Europe, South America, the Middle East and India - Copart is a global leader in online vehicle auctions.

In fact, it offers more than 125,000 vehicles every day. Most of it happens through its Virtual Bidding Third Generation sales technology.

Copart sells vehicles for finance companies, banks, dealers, rental car companies and individuals. But the big money is in helping insurance companies process and sell salvage vehicles. Buyers are primarily dismantlers, rebuilders and used-vehicle dealers.

Copart sells all kinds of vehicles - including forklifts, ATVs, trailers and boats - but the salvage items Copart handles are mostly cars and trucks that have been deemed a total loss for insurance purposes. Or they may be recovered stolen vehicles where an insurance settlement has already been made.

In each case, Copart provides a full range of services that streamline the auction process and minimize costs for insurance companies and buyers. These services include online supplier access, salvage estimation services, transportation services and inspection stations.

It may sound like a pedestrian business, but the numbers should get your attention. For starters, annual sales top $1.6 billion. The company enjoys a 37% operating margin. And management is earning an impressive 31% return on equity.

In the most recent quarter, earnings jumped 56% on a 31% increase in sales. And I estimate that net income will rise from $1.76 a share this year to nearly $2.30 in 2019.

It's also worth noting that even though the company has a market cap of $11.9 billion, insiders own 13% of the outstanding shares.

How have all these figures translated into stock performance? Quite well.

While the market is essentially flat for 2018, Copart is up 18% year to date and 64% over the past year. It has risen nearly sixfold over the last 10 years. And you might recall there was a little something called the Great Recession in the middle of it.

It shows you how well this business endures in both good times and bad.

Copart's profits beat the Wall Street consensus in each of the last four quarters. And cash waves from institutions indicate it will keep beating them in the weeks ahead.

- Donna DiVenuto-Ball with Alexander Green

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