Over the past six years… I (Dan Ferris) have recommended the stocks of more than a dozen "World Dominators"… that is, I've focused subscribers on buying stocks of the largest, best-run businesses that dominate their fields so thoroughly, competing with them is all but impossible.
Buying these stocks at the right price and holding onto them is perhaps the single-best, safest way to grow your wealth in the stock market. And subscribers who have followed my recommendations have done well…
We've bought companies like AB-InBev, the biggest beermaker in the world (up 101% since May 2010)… Automatic Data Processing, the biggest payroll processor in the U.S. (up 104% since October 2008)... and Constellation Brands, the biggest premium winemaker in the world (up 121% since June 2011).
Investors have been scared, and these big companies were some of the cheapest, safest bets you could make over the last several years. They've all turned out really well. Those that pay dividends have continued raising their dividends every year. They generally did better in the 2008-2009 crisis than other stocks. Wal-Mart returned more than 20% in 2008. McDonald's had a positive return that year, too.
I also recommended ExxonMobil to my Extreme Value subscribers in July 2007. At the time, it was the biggest oil company in the world.
But that's not true anymore. Today, No. 1 Russian oil producer Rosneft announced it will acquire TNK-BP, Russia's No. 3 oil producer. This will make Rosneft the biggest oil company in the world (not including state-owned oil companies).
So... I've spent all these years telling you the biggest company in some industries was the best one to own. But ExxonMobil isn't the biggest anymore… So, what to do?
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Nothing, of course, as far as ExxonMobil goes. ExxonMobil is still run by some of the best capital allocators on the planet. It's been that way for years. Exxon acquired Mobil in December 1998, the same month oil bottomed at a little less than $11 a barrel.
In 2009, it paid about $1 per thousand cubic feet (mcf) of natural gas for XTO Energy, after natural gas prices crashed during the crisis. With natural gas around $4 per mcf today, the XTO deal looks smarter than most people thought when gas was around $2.
So don't worry about ExxonMobil. As long as you get it cheap enough (which I believe we did), you'll make a good return on it. It'll keep gushing cash flow and dividends... even if it is only the No. 2 global oil company now.
But what do I call ExxonMobil now? The Almost World Dominator? The Sub-Dominator? The Co-Dominator?
TNK-BP was, as the name implies, a joint venture with the major oil company BP. The Russians, who owned the TNK half, got $27.73 billion in cash for their share.
The TNK-BP venture was a huge success. BP invested $8 billion in the venture in 2003 and got $19 billion in dividends out of it, plus the current payment of about $27 billion. BP got $16.7 billion in cash and 12.8% of Rosneft's shares (worth about $10 billion) for its half of the company. So BP made almost six times its money. BP bought more shares and now owns about 19.8% of Rosneft. BP CEO Bob Dudley will be on Rosneft's board of directors.
The odds are excellent that BP will keep raising its dividend. It did so for many years before the April 2010 Gulf of Mexico disaster. And it's raised it twice since the dividend resumed in May 2011.
Japanese exports dropped 2.9% in February from a year earlier. Economists were expecting a 1.7% decline. And imports rose 11.9%, leaving Japan a trade deficit of $8.1 billion. This is the eighth straight month of trade deficits in Japan – the longest streak in 30 years.
Boosting exports is one of Prime Minister Shinzo Abe's biggest goals. Abe pledged to fight Japan's decade-long deflation by printing as much money as necessary. He could even cut interest rates to less than zero.
The resulting inflation could send Japanese stocks much higher. Steve Sjuggerud calls this phenomenon "Abe's Revenge." You can read a full write-up about Abe's Revenge here.
Since Abe took power in December, the yen has lost 10% of its value against the dollar (making exports more attractive). The monthly trade deficit has slowly improved. And the Japanese stock market is ripping...
Despite lackluster economic data, the Japanese stock market, the Nikkei, jumped 1.2% to a 4.5-year high. The market knows not to bet against a leader with loose purse strings.
Steve's True Wealth model portfolio holds two positions that will benefit from a rising Nikkei – the WisdomTree Japan SmallCap Dividend Fund (DFJ) and the WisdomTree Japan Hedged Equity Fund (DXJ), which hedges currency risk. Both stocks are trading at new highs. True Wealth subscribers are up 30% on the small-cap fund, DFJ, since Steve recommended it in February 2010. They're up more than 22% on DXJ since December.
In his latest issue of True Wealth, Steve said he's found another country that could enjoy an Abe's-Revenge-like stock boom... While Japan's stock market soared from 9,000 to 12,600 in just six months, Steve thinks the profits in this other country could be even bigger.
This country just got a new central bank head, who will do anything necessary to create growth and inflation. Just like in the U.S. and Japan, we'll see rock-bottom interest rates and major government asset purchases.
Steve believes readers will make 75% on this trade in the next 12 months. If we've learned anything over the past five years, it's to not fight a central banker who's bent on boosting the market. Just take a look at this chart of DXJ...
To learn more about True Wealth and find out which country Steve says will follow in Japan's footsteps, click here...
New 52-week highs (as of 3/20/13): WisdomTree Japan SmallCap Dividend Fund (DFJ), WisdomTree Japan Hedged Equity Fund (DXJ), SPDR International Health Care Fund (IRY), iShares Home Construction Fund (ITB), PowerShares Buyback Achievers Fund (PKW), ProShares Ultra Health Care Fund (RXL), Sequoia Fund (SEQUX), Targa Resources (TRGP), W.R. Berkley (WRB), Utilities Select Sector SPDR Fund (XLU), Johnson & Johnson (JNJ), Prestige Brands Holdings (PBH), RPM International (RPM), Chicago Bridge & Iron (CBI), Consolidated Tomoka (CTO), Calpine (CPN), Dominion Resources (D), Hershey (HSY), American Financial Group (AFG), Travelers (TRV), Becton-Dickinson (BDX), Cheniere Energy (LNG), Chevron (CVX), Procter & Gamble (PG), CVS Caremark (CVS), Walgreens (WAG), Sysco (SYY), and Target (TGT).
In today's mailbag, one subscriber takes us up on Dan's offer to let us know if he's "off base" on Apple… Send your comments to feedback@stansberryresearch.com.
"I don't normally write to you folks, and I think you guys do a fabulous job. However, in your recent Digest, you asked to be told if you are off base re: Phil Shiller's comments. You are.
"It's not at all unusual or a sign of desperation if a marketing VP criticizes a competitor. I spent 30 years in Silicon Valley. Believe me, it happens all the time and is part of the game. And sometimes it's CEOs, not marketing VPs. Remember when Ballmer belittled the iPhone? Remember how Jobs mocked whatever was happening in Microsoft Windows?
"And it's not at all odd that this happened on the eve of the new Galaxy debut. That happens all the time too. Just trying to steal a little thunder from the competitor's announcement.
"More significantly, I think, notice that Shiller was attacking Google, not Samsung. You attribute this to it being 'awkward' to criticize Samsung. That's not it at all. The REAL competitor here is Google, not Samsung. People don't buy a phone because it is made by a certain manufacturer. They don't care who made the chips. They buy a phone based on what it can do for them, just like any other consumer purchase. Price counts, of course, but most of all it's whether the value provided is worth the price (some of the value is intangible – the 'cool' factor – or perhaps the 'I hate that Apple is closed' factor).
"Where is the value in the Galaxy or the iPhone for that matter? It's in the software, meaning both the OS and the Apps. Without the software, it's just a bunch of silicon.
"It's pretty clear that Samsung can't do a reasonable OS by themselves. Look at the user interface of most any Samsung product where Samsung did the software. Clunky menus that are hard to navigate. No real emphasis on the end user experience. When Android beats iPhone, it's because the value provided by Google outstrips that provided by iOS at a given price.
"Sure, the thing the user buys is the phone itself. It's too easy to think that what counts is the physical phone since that's what gets revenue credit. But the real value is in the software, the apps, and the infrastructure that enables the user experience. The hardware is just the means of delivery as is the network. Phone and network generate cash, of course, but the long term battle will be in the software." – Paid-up subscriber Bob Taylor
"Regarding your comments in Digest Premium today, I'm reminded of a comment I once read: Capitalism without bankruptcy is like Christianity without hell. As a former banker, back when we paid something on deposits, it was infuriating to have depositors go down the street over 25 bps, knowing that the guys down the street were making absolutely stupid loans.
"As a nation, I know we'll never get rid of government guarantees but it enables stupidity and incompetency, whether it is in banking with FDIC, small business with SBA, agriculture with FmHA, or student loans with Sallie Mae. David Einhorn's book Fooling Some of the People All of the Time is a great read illustrating this." – Paid-up subscriber Mark J
"What a great business move on your part! You not only give us the opportunity to experience some great work, but also help us realize how you and your team jell to make a great newsletter. Thank you for the experience." – Paid-up subscriber Robert
Goldsmith comment: We're glad you're enjoying our "Open House." As we explained yesterday, we're offering readers a chance to sample everything we publish (including Phase 1 Investor, which normally costs $5,000 a year) for 30 days. We want you to be comfortable with our work before you purchase.
And just for signing up to learn more about the Open House, we're sending you a selection of how-to videos, special reports, and back issues that we handpicked. You can sign up to learn more here... It's completely free.
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon and Miami Beach, Florida
March 21, 2013
My neighbor just put $35 million into his house…
Porter's South Beach (Florida) neighbor recently purchased a house for $8 million… He then put another $35 million into the property. In today's Digest Premium, Porter discusses this and some of the other signs he sees of the coming real estate boom in Miami Beach...
To continue reading, scroll down or click here.
My neighbor just put $35 million into his house…
The guy three doors down from me (Porter) in Miami Beach bought a house for $8 million. He just finished putting $35 million into the property. Miami is one of the few U.S. markets where huge, multimillion-dollar investments aren't out of the ordinary. You can find fantastic properties here… waterfront properties near developed, wealthy urban areas.
You have a busy international airport in Miami. There are great restaurants. You've got international flavor. Miami is a hub for Latin American culture. And it's a second home for many on Wall Street as well. So you've got lots of different groups – all with wealth at their disposal – targeting a relatively small area.
South Beach, which extends south of Miami's 41st Street, is only around 40 blocks long by six blocks wide. It's smaller than Manhattan – maybe 1/10th the size. When you have lots of wealthy folks chasing scarce assets, it tends to produce spectacular price increases (especially when money is cheap and businesses are doing well). I think we're entering this kind of cycle in Miami Beach…
We previously discussed JPMorgan Chase CEO Jamie Dimon saying banks have too much money. A lot of that money will find its way into Miami…
I was recently at my favorite South Beach steakhouse, Prime 112. A very wealthy guy from Pittsburgh was walking around the restaurant having a good time… telling everyone that he wants to buy some property down here because it's a ball. I've been down here on and off since 2000. And it gets more and more expensive. But it also becomes a better and better place to live. The schools are better... the restaurants are better... and the facilities are better. It continues to grow more affluent. And I think that trend will accelerate.
In tomorrow's Digest Premium, I'll discuss one other factor that's playing into South Florida's growth and how high I believe trophy properties in the area will soar.
– Porter Stansberry with Sean Goldsmith